[ad_1]
British Airways has reached an agreement to delay £ 450 million of contributions to the pension deficit as the company fights through Covid travel restrictions that have left most of its planes grounded during the pandemic.
The airline’s owner, International Airlines Group (IAG), has also reached a final agreement on a £ 2bn loan that will give the company a bigger financial cushion until Covid restrictions are eased.
BA, which typically pays £ 37.5 million a month into the New Airways Pension Scheme (NAPS), has reached an agreement with the trustees that will allow it to delay its contributions until September 2021. The airline was able to temporarily suspend its payments during negotiations, which means you haven’t been contributing to the plan since September of last year.
The formal extension means you will have deferred payments for 12 months in total, which will help preserve £ 450 million in cash.
“In addition to these agreements, IAG continues to explore other debt initiatives to further enhance its liquidity,” the company said in a statement. Shares of IAG rose 1% to 167 pence after the news.
Sign up for the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
The travel and hospitality sectors have been hit hard by the Covid crisis, forcing companies to cut jobs, sell assets and put staff on leave. On Monday, the pub group Mitchells & Butlers said it was also holding back 12.6 million pounds in payments to its staff pension fund to help preserve cash.
BA plans to repay its pension contributions, with interest, and has pledged some of its properties as collateral until the debt has been paid in full. As part of the agreement, BA also agreed not to pay dividends to its parent company IAG before the end of 2023. After that, it agreed to match the dividend payments with a pension contribution worth at least half of what will pay IAG. .
The airline is trying to plug a £ 2.4 billion hole in New Airways’ Pension Plan, which closed new staff in 2003. The shortfall was discovered during a 2018 valuation. BA has paid £ 1.3 billion of that total , including £ 263 million in 2020.
