UK - British Airways has reached an agreement with the trustees of the New Airways Pension Scheme and Airways Pension Scheme on a recovery plan to address its £3.7bn (US$5.4bn) funding deficit.
The proposed deal - set to go before the Pensions Regulator on June 30 - maintains annual contributions at the current level of £330m (US$486m), plus agreed annual increases in line with inflation expectations averaging 3%. Deficit contributions will continue until 2026 for NAPS and 2023 for APS.
In addition, BA has committed to top up deficit contributions if its year-end cash balance exceeds £1.8bn (US$2.5bn).
The schemes will also be provided with £250m (US$368m) of additional security over the company's assets which would become payable in the event of British Airways' insolvency.
British Airways chief financial officer Keith Williams said: "This agreement is a significant and positive step forward for British Airways and the pension scheme members.
"The trustees understand that 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 added: "The Pensions Regulator's initial response to the overall package has been positive and we look forward to receiving their confirmation that they have no objections once they have time to analyse the plan fully."
BA added that, following discussions with TPR, the opportunity has been taken to use the recovery in asset markets to increase the margin of prudence in the valuation, rather than lower the contribution commitment required.
However, the regulator said while dialogue with BA and the scheme trustees had been "constructive", it had yet to receive the detailed recovery plan.
The deal also includes a clause which allows Iberia - with whom BA hopes to merge - to terminate the agreement if the pension recovery plan is not deemed satisfactory because it would be "materially detrimental to the economic premises of the proposed merger".
Iberia has three months to reach a decision on the recovery plan.
The airline concluded consultation with its trade unions on the pension changes and a reduction in benefits in March, this year. However, the deal was subsequently labelled a "short-term fix" by industry experts.
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