British Airways gets agreement on pension funding

LONDON (AP) - British Airways said Tuesday that it has reached an agreement with pension trustees on a plan to close deficits, a deal designed to resolve a key issue in a proposed merger with Spanish airline Iberia.

BA said Tuesday its annual contributions to the two pension plans would continue at 330 million pounds ($487 million) a year, plus increases of about 3 percent a year.

BA said it will make additional contributions if its year-end cash balance is over 1.8 billion pounds, and it has made additional provisions of 250 million pounds for securing pensions if it becomes insolvent.

All contributions into the British Airways' pension funds will continue to be funded by British Airways and will not be funded by Iberia or the merged holding company, International Airlines Group, BA said.

British Airways shares were fractionally higher at 214 pence in midmorning trading on the London Stock Exchange.

The pension issue was a sticking point in negotiations with Iberia, which can still call off the merger if it is unhappy with the pension deal. The pension agreement also is subject to regulatory approval.

British Airways and Iberia hope to complete the merger this year, the companies said in April when they signed the merger agreement.

The combination would be Europe's third-largest airline.

BA is losing money, and is locked in a protracted dispute with the cabin crew union over other issues including working practices and travel benefits.

"This (pension) agreement is a significant and positive step forward for British Airways and the pension scheme members," said Keith Williams, British Airways' chief financial officer.

"The trustees understand that the airline is unable to increase its contributions in the current financial climate, but we have agreed a recovery plan that avoids closing the pension schemes."