Iberia push BA to pension deal
End to black hole by 2026.
|
Jasper Kelly Friday 25 June 2010 |
Not unsurprisingly, the £3.7bn black hole in the British Airways’ pension plan has been seen as a significant threat to the BA-Iberia merger which is at the semi-critical stage with the partners having three months to approve or back out of the deal
Although this merger of rivals is seen by many as an union of desperation, even Iberia saw the deficit as a hurdle to progress. BA’s management seem to have taken heed and their announcement of an agreement with pension trustees provides some reassurance.
One pension fund adviser described the deficit as sky-high with NAPS, the New Airways Pension Scheme showing a shortfall of £2.6bn and the older APS, Airways Pension Scheme about £1.1bn.
The new agreement will see the NAPS deficit cleared by 2026 and APS cleared a few years later. BA say that this is affordable with its contributions remaining essentially static at £330m per annum before inflation.
The pension industry seem to view this as a pretty well balanced solution to a very serious problem. It gets BA off the hook and clears the way for an at least credible deal with Iberia. It will also probably pass muster with the regulators who would have preferred closure within 10 rather than 16 years.
What this does highlight is the way in which this problem has been allowed to drift. The Iberia merger has crystallized the need for resolution but it should not have been that way. The pension regulators must shoulder a lot of the blame for allowing the situation to have become as bad as it evidently was.
| Comments | Post a comment |
|
Simon K, Sevenoaks 25 June 2010, 04:53PM | |
| £3.7bn to cough up, OUCH! They are likely to pay though, the lucrative merger deals with Iberia and AA are the last hope for British Airways. | |
| Rating (0) | |
|
Mary Black, London 25 June 2010, 06:06PM | |
| A lot of credit has to go to Keith Williams who heads up BA's finance team. This must have been a pretty tough set of negotiations. | |
| Rating (0) | |
|
Terry, Bristol 25 June 2010, 06:15PM | |
| I work in a pensions role and I know that the regulator is not going to be too happy. There has been a lot of pressure on my firm to make things happen within the ten year time-frame. This may be a left over from the last Government but it was a pretty firm rule last time I looked.There are some precedents that may help BA as the regulator has the power to grant dispensations. The problem is that these have really only be given to smaller companies. The BA shortfall is massive and so is likely to create some serious flack.The article is right, it should not have been allowed to get this far. I do not know much about EU rules but it is likely that for a merger with a company in another member state, this deficit may cause another set of problems. | |
| Rating (0) | |
|
name withheld, London 25 June 2010, 06:20PM | |
| To make this work, BA had to pledge £250m of assets worth to protect against it going belly up. The staff contributions were also increased to 4.5%.This is one hell of a deal, the guys that worked on it really earned their money. I know one of them and he reckoned that it came close to coming unstuck many times before it was finally agreed. | |
| Rating (0) | |
|
Mervyn Harris, Nottingham 27 June 2010, 11:13AM | |
| So, BA and Iberia get to move forward and create a bigger target for the unions.None of this bodes well for the travelling public. We could well have Islamic terrorists and union terrorists both in competition for who can do the most damage to international aviation. Perhaps the only winners will be the Green Parties and the environment. | |
| Rating (0) | |
