UK’s flag carrier airline, British Airways, has reportedly inked an agreement to defer over £450 million worth of pension deficit contributions. The move comes amid the company’s ongoing struggles due to the SARS-CoV-2 travel restrictions that have left most of its planes grounded over the course of the pandemic.
The International Airlines Group (IAG), the parent organization of the carrier, has also reached a final agreement over a £2 billion loan that will provide the organization a larger financial cushion until the easing of COVID restrictions.
Sources cite that the hospitality and travel sectors have been hit hard by the COVID-19 crisis, forcing companies to sell off assets, cut jobs, and put staff on furlough. Given that, British Airways’ plans focus on repaying its pension contributions with interest. The company has also furnished few of its properties as security until the entire payment of its debt.
Furthermore, under the agreement, the company has agreed that it will not be paying any dividends to its owner, IAG, prior to the end of 2023. The carrier has also committed that the dividend payments would match a pension contribution of at least half of the value to be paid to IAG.
It is to be noted that British Airways usually makes a payment of £37.5 million a month to NAPS (New Airways Pension Scheme). The company has reportedly entered into an agreement with trustees that will enable it to defer its contributions till September 2021. The airline was permitted to temporarily suspend its payments after negotiations and has not been contributing to the scheme since September 2020.
As per records, the company is striving to plug a £2.4 billion hole in the NAPS, which was shut to new staff in 2003. While the deficit was found during a valuation in 2018, the carrier has paid £1.3 billion of that total, comprising £263 million in 2020.