BA hammers out pension deal
UK carrier offers £800m cash injection to address £2.1bn pension fund deficit, after 16 months of talks with unions
Shares in
British
Airways rallied today after the airline came to an accord with unions on
plans to tackle its £2.1bn pensions deficit.
BA announced the breakthrough, following discussions with representative
groups of four unions which cover pilots, cabin crew, check-in staff and other
employees.
In return for the £800m cash boost, which will be paid out of BA’s cash
balances that hit £2.6bn at the end of September 2006, fund members have
accepted a 2.5% cap on future pensionable pay increases. This will provide a
one-off saving of £400m.
Combined, the reforms will cut the pension deficit from an existing £2.1bn to
£900m. BA has also agreed to make annual contributions of £280m a year to its
New Airways Pension Schemes for the next 10 years, as fund members accept other
changes in benefits including a higher retirement age.
BA chief executive Willie Walsh, said: ‘This is great news. Together with the
NAPS trustees and staff, we have found a shared solution that helps secure the
pensions of our 33,500 NAPS members and removes a major blocker to future
investment in British Airways. This brings the NAPS deficit and ongoing
contributions to a level which is affordable by British Airways and effectively
tackles one of the most fundamental issues we face.’
The £800m cash boost will be paid in two installments of £250m this month and
£550m in April in order to glean the greatest amount of tax benefits. The
tax-deductible amount will have a net cost for BA of £560m the
FT reported.
Further reading:
BA backs down in a bid to settle pensions wrangle
ASB vote will cause shake-up for pensions