Battle lines drawn on BA pensions

BA has one of the largest pension deficits of top British firms

British Airways has clashed with its main pilots union, following threats of strike action in protest at potential changes to BA's pension scheme.

The British Airline Pilots Association (Balpa) warned of possible action in response to its fears of "sweeping changes" to members' pensions.

BA has said current contribution levels to the scheme - which has a £1.4bn deficit - are unsustainable.

BA described Balpa's comments as "unhelpful".

'Unacceptable changes'

The airline has been informing all its staff in recent months about the size of the deficit - one of the largest in the UK - and the need to address it.

After paying in £250m in 2004, BA contributed £225m into the scheme last year, five times the amount paid in by members.

BA has to honour its pension pledge to its workforce Jim McAuslan, Balpa

BA is due to put forward proposals on potential changes to its pension scheme in the next two to three months.

However, Balpa claimed the airline was preparing the ground for radical and "unacceptable" changes.

"British Airways' massive communications exercise gives the impression that the future of your pension is precarious and major changes are required," Balpa wrote in a letter to its 2,800 BA members.

"We do not accept that."

Jim McAuslan, Balpa's general secretary, said pilots were prepared to launch their first ever strike to safeguard their pensions.

BA boss Willie Walsh says action is needed on its pension contributions

"A time may come when we will need your support for action to protect your pension," he told members.

Balpa has claimed BA is considering ditching its current final salary scheme in favour of an alternative plan calculating benefits on the basis of average career salaries.

The union says pilots, the best-paid of whom earn up to £150,000 a year, could see their benefits shrink by 36% as a result.

'No decision'

BA criticised Balpa's comments, saying they were premature.

"There has been no decision yet as to how pensions will look in the future," a company spokeswoman said.

"Any figure being put out about what pilots could potentially lose is a moot point at this stage."

BA also dismissed claims from one pensions expert that the only way it could restructure its pension liabilities was to declare itself bankrupt.

Several US carriers have gone down this route.

BA said the solution, put forward by Donald Duval from Aon Consulting, was "ludicrous" and was not being considered.

Pension payments are one area in which BA wants to save money as it prepares to consolidate all its Heathrow operations at the new Terminal 5 in 2008.

BA is aiming to reduce employee costs by £300m by 2007.

It recently announced plans to cut 600 management jobs.