BRITISH AIRWAYS (BA) has agreed a plan with its trustees that will see the airline deal with its £3.7bn pension deficit head on.
Under the new agreement, BA will commit to annual contributions of £330m with a three per cent rise every year, at the same time promising that it will make additional contributions should its cash balance exceed £1.8bn.
The deal is crucial for BA because it brings the airline one step closer to completing its merger with Spanish airline Iberia. Chief financial officer Keith Williams said:
“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.”
BA has also committed £250m as a security over its pensions should the airline become insolvent.
BA consulted with trade unions on the new scheme in March and received full backing.
Iberia has three months to decide on BA’s new proposed pension deficit plan and has the power, under the tie-up agreement, to terminate the merger if the plan is not satisfactory.
The Spanish airline’s board will now vote on whether it approves BA’s measures.
Iberia said in a statement: “The agreement between BA and the pension trustees is a positive step forward in the merger process.”