British Airways reaches deficit agreement with pension schemes
UK - British Airways (BA) has hammered out a recovery plan with its two pension schemes ahead of the airline's expected merger with Spanish carrier Iberia.
After consulting with trade unions, BA struck a deal with the New Airways Pension Scheme (NAPS) and the Airways Pension Scheme (APS) on a plan that will aim to tackle deficits without closing the schemes.
The plan keeps BA's annual contributions at their current level of roughly £330m, plus agreed annual increases in-line with inflation expectations averaging 3%.
Agreed deficit contributions continue to 2026 for the NAPS and 2023 for the APS.
BA has agreed to make additional deficit contributions if its year-end cash balance comes to more than £1.8bn.
It will also provide the schemes with £250m of additional security over the airline's assets in the event of its insolvency.
Keith Williams, chief financial officer at BA, said the agreement was "significant and positive".
"The trustees understand the airline is unable to increase its contributions in the current financial climate, but we have agreed a recovery plan that avoids closing the pension schemes, gives NAPS members choice over their future pension accruals and increases the prudence of the assumptions employed in managing the scheme," he said.
He added the Pensions Regulator's initial response to the overall package had been positive.
BA pointed out, however, that Iberia could still back out of the expected merger if it found the recovery plan "materially detrimental" to the "economic premises" of the deal.
The Spanish airline now has three months to reach a decision on the plan.