BA hopes rise on £3bn-plus pension deal

Airline confident agreement will be reached with trustees over the exact amount of its fund deficit

British Airways hopes a deal can be struck with its pension fund trustees over the airline's £3bn to £4bn estimated pension deficit by Christmas, allowing the merger announced last week with Spain's Iberia to take-off as planned.

BA's chief financial officer, Keith Williams, said on Friday that negotiations between the airline and its pension fund trustees are progressing well, and that both sides are confident that an agreement will be reached before the end of this year.



"By Christmas we should have agreed a valuation for the deficit and also the method of funding, and the amount of cash which BA will contribute to cover the short-fall," Mr Williams said. The airline and the trustees must have all the details agreed by June next year to be cleared by the pensions regulator.



BA is paying £330m a year to cover the deficit at present. This sum may not necessarily increase following the new valuation as the amount it will have to pay out depends on the period, and other terms, over which the sides will agree it should be repaid.



The pension trustees hope to have their triennial review into BA's £10bn staff pension schemes completed over the next few weeks. This review will value the fund at the end of March this year when the FTSE 100 index was at 3,900 compared to 5,286 last week. Since up to 65 per cent of the fund is in equities, this means the deficit will be greater than it would be if valued today. Iberia also has its own actuaries working on a valuation, and central to the merger between BA and Iberia will be that all three parties agree on the value.



As part of the merger terms Iberia can walk away from the £4.4bn deal if BA cannot agree its liabilities. But both sides said on Friday they were determined to drive through the merger, which gives BA 55 per cent of the new company, and is not due to complete until next year.



Cost savings are one of the big factors behind the tie-up and both BA and Iberia have estimated €400m (£358m) could be saved over five years through restructuring. But one analyst close to the deal said this is "a conservative" estimate. The KLM-Air France merger, the most recent precedent, has been much more successful than originally forecast, leading the analyst to suggest that savings could be at least €100m greater than suggested.



Although the union, Unite has said it will not back the merger unless BA promises there will be no compulsory job losses, most of the planned redundancies are likely to be limited to "non-unionised, duplicative" staff, such as those in back office functions and IT.



One source said: "Of course there will be cultural differences between the airlines. But these guys have worked with each other for 10 years, so they have comprehensive due diligence on each other."

PROMOTED VIDEO
News
ebooksNow available in paperback
Sport
Diego Costa, Ross Barkley, Arsene Wenger, Brendan Rodgers, Alan Pardew and Christian Eriksen
footballRodgers is right to be looking over his shoulder, while something must be done about diving
News
i100
Life and Style
gaming
Arts and Entertainment
Carl Barat and Pete Dohrety in an image from the forthcoming Libertines short film
filmsPete Doherty and Carl Barat are busy working on songs for a third album
Arts and Entertainment
films
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: PR, Marketing & Events Executive - Southwark, London - £35,000

£30000 - £35000 per annum + benefits: Ashdown Group: PR Marketing & Events Exe...

Selby Jennings: C++ Developer – Hedge Fund – New York

$80000 - $110000 per annum, Benefits: Bonus and Employee Investment Scheme: Se...

Selby Jennings: Java Developer Enterprise Specialist –Paris,France

€30000 - €50000 per annum, Benefits: Competitive Bonus: Selby Jennings: Java D...

Selby Jennings: QA Engineer Lead – Hedge Fund – Chicago

$60000 - $90000 per annum, Benefits: Competitive Bonus and Employee Investment ...

Day In a Page

In a world of Saudi bullying, right-wing Israeli ministers and the twilight of Obama, Iran is looking like a possible policeman of the Gulf

Iran is shifting from pariah to possible future policeman of the Gulf

Robert Fisk on our crisis with Iran
The young are the new poor: A third of young people pushed into poverty

The young are the new poor

Sharp increase in the number of under-25s living in poverty
Greens on the march: ‘We could be on the edge of something very big’

Greens on the march

‘We could be on the edge of something very big’
Revealed: the case against Bill Cosby - through the stories of his accusers

Revealed: the case against Bill Cosby

Through the stories of his accusers
Why are words like 'mongol' and 'mongoloid' still bandied about as insults?

The Meaning of Mongol

Why are the words 'mongol' and 'mongoloid' still bandied about as insults?
Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible