BA seeks to hold down pay and pensions

British Airways has proposed a below-inflation pay rise for its 47,000 staff and is also asking them to increase their pension contributions as part of its £300m cost-cutting plan.

British Airways has proposed a below-inflation pay rise for its 47,000 staff and is also asking them to increase their pension contributions as part of its £300m cost-cutting plan.

The details of the proposals, outlined yesterday by BA's chief executive Rod Eddington, involve a 5 per cent pay offer over three years and a £21m-a-year increase in pension contributions from the workforce.

This would plug 16 per cent of the £133m deficit in the BA pension fund, with the company making up the remaining £112m. Alternatively, staff could maintain current levels of contributions but receive reduced benefits on retirement.

In an editorial in the airline's staff newspaper, BA News, Mr Eddington said: "Nobody is trying to pretend that this is an easy or pleasant choice to have to make, but it's not unique to BA staff - it's a choice that is facing millions of other workers up and down the country whose companies are in exactly the same boat. Indeed, many firms have not only closed their final-salary pension schemes to new members - they have closed them to existing members, too."

The pay offer is worth 1 per cent this year and 2 per cent in each of the following two years. Headline inflation is currently 2.5 per cent.

Earlier this month, BA said it was facing £400m of "headwinds" in the coming financial year in the shape of increased pension, pay, fuel and landing charges.

Mr Eddington said BA thought the increase in pension contributions from staff was fair. "The shortfall we face is a substantial one. Working together both on this vital issue and the annual pay offer, which is also under discussion, is the dual challenge that we now face," he added

However, union officials were cautious. Andrew Dodshon, a spokesman for BA's biggest union the Transport and General Workers, said: "We want to ensure BA is addressing the pension gap in a way that's fair to all concerned and doesn't put a disproportionate burden on members of staff. There's no guarantee that this will be the final outcome."