British Airways has missed a regulatory deadline for agreeing a plan to fill its multi-billion pound pension deficit due to a legal dispute over increased payouts for retired staff.
The airline was meant to have agreed a way by June 30 of making good the funding deficit in its two main pension schemes, which stood at £3.3 billion in 2012.
But parent company International Airlines Group revealed yesterday that the deadline had not been met.
IAG said: “International Airline Group’s subsidiary, British Airways, has been in discussions for several months with the trustees of its main UK defined benefit pension schemes, over the schemes’ latest actuarial valuations.
“The discussions, initially focused on British Airways’ largest scheme (the New Airways Pension Scheme), have been constructive. However, further work is required beyond June 30, 2016 to finalise the valuations and conclude a satisfactory agreement.”
IAG denied it was in dispute with the schemes’ trustees over the funding valuation process, which is carried out every three years.
However, in a message to members of the Airways Pension Scheme (APS), the smaller of the two BA schemes, the trustees cited a separate legal dispute with the airline as the reason for the delay, the Financial Times reported.
This dispute stemmed from proceedings BA brought against the trustees of the APS scheme in 2013, over plans to award a 0.2% discretionary increase to pensioners.
A trial date had been set for February this year – but was pushed back to October after BA asked for more time to prepare its case.
According to the APS trustees, the funding valuation cannot be completed until that case is settled.
“Formal agreement with BA concerning certain aspects of the valuation and associated funding agreement … may not be possible until the litigation currently is concluded,” the APS told the FT.
“Until such time as a valuation can be agreed by the parties, BA is obliged to comply with the existing contribution agreements, and to pay contributions in accordance with that agreement,” said the trustees.
BA is currently making contributions of about £300 million a year to plug its scheme deficits. Last year, though, trustees warned that the shortfall on the New Airways Pension Scheme — the larger of the two — could have widened “significantly” because of worsening investment conditions.
A spokesperson for the Pensions Regulator said it was “closely engaging” with BA and the trustees of both pension schemes. “We will only comment in more detail if and when it is appropriate to do so,” said the regulator.
Meanwhile, IAG reported a 13.6% rise in group passenger traffic in June over the same month last year as capacity rose by 13.2%.
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