British Airways has announced a delay of pension deficit contributions worth £450mn as the company, like several in the airlines industry struggles to cope with Covid travel restrictions. The carrier's owner, International Airlines Group (IAG) has also reached a final agreement over a £2bn loan that will provide the company with a financial parachute until travel restrictions are eased.
It has been known that the airline has struck a deal with trustees that will allow it to delay its contributions until September this year. It usually pays a £37.5mn a month into the New Airways Pension Scheme (NAPS). British Airways was allowed to temporarily suspend its payments throughout negotiations, and has not been contributing to the scheme since September last year. The company released a statement saying, “In addition to these arrangements, IAG continues to explore other debt initiatives to improve further its liquidity.”
British Airways intends to repay its pension contributions with interest and has put forward some of its properties as security until the debt has been paid off in full. BA has also agreed not to pay any dividends to its parent company IAG before the end of 2023. After that, it has committed to match dividend payments with a pension contribution worth at least half of what it will pay IAG.
BA has also finalised the terms of a £2bn five-year loan agreed on December 31, underwritten by a syndicate of banks and partially guaranteed by UK Export Finance, which it expects to receive within a week. IAG tapped shareholders for £2.37bn in a rights issue last September, and BA has also obtained £300m from the Bank of England's Covid financing facility.
BA's revenues fell by 90 per cent during last year's peak summer season, having lost 98 per cent of its passengers during the UK's first lockdown. It laid off more than 10,000 staff last year and placed many of its remaining employees on less generous contracts as it retrenched for a fight for survival.
