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Last Updated: Wednesday, 15 November 2006, 15:51 GMT
BA offers pension funding scheme
BA plane
Unions are studying the plan
BA has reached an agreement, in principle, to tackle its 2.1bn pension deficit by substantially increasing its pension payments.

The airline is offering to make a one-off 800m injection into the pension scheme and make annual payments of 50m for the next three years.

BA said the offer would "secure our past and future pensions".

The deal has to be agreed with unions, who have been worried about the erosion of their members' benefits.

News of the offer sent BA shares up 4.7%.

'Significant move'

BA said it had agreed the plan with pension scheme trustees. The airline is now set to meet with unions on Thursday to discuss the offer.

The GMB union has called on it to pay 1bn into the scheme.

BA's proposal - agreed in principle by the trustees of its pension scheme - would see it pay 250m into the scheme by the end of the year and make a further 550m payment in April.

Together with the benefit changes, more than half of the deficit will be tackled immediately
Keith Williams, BA chief financial officer

In addition, BA would make further financial guarantees worth 150m.

However, the deal is contingent on unions agreeing to changes to employee benefits such as the raising of the normal pension age to 65 and pensionable pay increases rising in line with inflation.

"This funding plan will secure our past and future pensions," said Keith Williams, BA's chief financial officer.

"The 800m cash payment is a very significant injection into the fund relative to the company's market capitalisation. Together with the benefit changes, more than half of the deficit will be tackled immediately."

There are more than 33,000 active members of the company's pension scheme, 20,000 deferred members and 15,000 pensioners.

BA paid 235m into the scheme last year and says that without reform of employee benefits, annual payments would have to rise to 497m.

The airline said it had been advised by PricewaterhouseCoopers that it could not afford to raise pension contributions much above current levels.

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