The latest actuarial deficit report follows a 2003 report that put the shortfall at 928 million pounds, according to a Sunday Telegraph news report.
Although the air carrier wouldn’t discuss the issue publicly, the company said in May that its own accounting valuation of its main pension scheme showed a deficit of 2.07 billion pounds on March 31, up 101 million pounds on the previous year, the news report said.
Earlier this year, Europe’s third-largest airline announced a series of proposals to come to grips with its pension deficit, including raising the retirement age of its 2,500 pilots to 60 from 55 (See British Airways Makes Proposal to Erase Pension Deficit ). British Airways also said at the time that it wanted to introduce a slower pension accrual rate and put a cap on pension rises. The airline proposed paying 500 million pounds to tackle the deficit.
The Sunday Telegraph said the Watson Wyatt actuaries are finalizing the latest deficit figure but added they already presented a first draft to pension fund trustees this week.
BA will pay £350m into the final salary scheme this year to reduce the deficit and add another £500m when the unions agree to changes. However, that will not offset the increased gap between assets and future liabilities.
As a result, BA wants to reduce the value of future benefits by £450m. This will mean raising retirement ages for staff, including cabin crews, from 55 to 65, although the impact will be softened by limiting the leaving age to 60 for five years, the Telegraph reported.
The Telegraph account asserted that the latest actuarial figures are likely to make the relationship between the company and its unions even more difficult.
BA closed its final salary pension plan to new members in 2003, but 34,000 workers are still making payments, 15,000 former staff are receiving pensions and 20,000 will receive pensions in the future. Employees who began working for the company since 2003 are in a defined contribution program ( BA: DC Plan Not as Rich as DB Offering ).