British Airways returns to pension deficit as court showdown nears
The combined balance of British Airways' (BA) defined benefit (DB) schemes has returned to a deficit after recording a surplus at the end of last year.
The company, which operates two DB schemes in the UK, saw the funding situation deteriorate by £778m on an IAS 19 accounting basis over the six months to the 30 June.
Overall, the aggregate funding level fell from a £355m surplus to a £423m deficit. The company had last recorded a combined deficit on 31 December 2014, when the shortfall stood at £66m.
The company blamed the reduction of discount rates due to falling corporate bond yields for its worsened position.
The New Airways Pension Scheme's (NAPS) deficit grew by 240% between 31 December and 30 June. The company's interim report, published 27 September, recorded a deficit of £1.2bn on 30 June compared to £338m at the end of last year.
Conversely, the Airways Pension Scheme (APS) saw its funding situation improve. The scheme, which had a £693m surplus on 31 December (also on an IAS 19 basis), recorded a 5% increase to £727m on 30 June.
The APS and NAPS closed to new members in 1984 and 2003 respectively, but both remain open to future accrual.
Triennial valuations for the two schemes were required to be completed by 30 June, but have been delayed due to an ongoing legal dispute with trustees.
BA is currently battling the APS trustees over a proposed 0.2% discretionary increase above the consumer price index for payments in the 2013/14 financial year.
The company said the increase would be inappropriate given the combined deficit of the schemes.
At the last triennial valuation for 31 March 2012 there was a combined deficit of £3.3bn across APS and NAPS, causing the company to commit to £2.8bn of deficit payments by 2026. It expects to make £205m of these payments to the schemes this year.
The increase was put on hold pending the trial, which is due to begin in October.
In the interim report, the company said: "Although discussions have been constructive, further work is required... to finalise the valuation and conclude a satisfactory agreement."
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