16 November 2006
British Airways has agreed a funding plan with its pension fund
trustees to tackle a £2.1bn pension deficit within 10 years
by injecting £950m into the fund.
Under the terms of the deal with trustees, BA will make a
one-off cash injection of £800m, up from an earlier offer of
£500m. BA will also inject a further £50m a year for
the next three years, provided BA's cash balance remains above
£1.8bn. The funding plan assumes that BA's annual pension
contributions will be more than £250m and that the funding
gap will disappear by 2016 if the proposals are implemented this
year.
The agreement reached with the trustees increases the pressure
on trade unions to reach agreement over the pensions issue when
they hold talks with BA executives today. Although unions have no
legal power to alter the terms of the agreement, they have
threatened strike action if BA does not compromise on some proposed
benefit changes.
BA wants to raise the retirement age of its pilots from 55 to
60, with cabin crew working until 65 instead of 60. It also plans
to limit increases in pensionable pay to inflation. Union
representatives have warned that limiting payments to inflation
effectively caps the final salary scheme.
Keith Williams, BA's chief financial officer, said: "The cash
injection is the biggest relative to the size of any FTSE100
company. We are putting in a quarter of the company's market
capitalisation."
Mr Williams also indicated that BA is willing to compromise over
the proposed benefit changes: "I have always said we will consult
with the trade unions on how the changes are implemented."
