British Airways said today it would pay an extra £133 million sterling (€191 million) a year into its main pension plans after an actuarial valuation, and was talking to unions about funding the increase.
The move makes Europe's biggest airline the latest in a line of companies forced to pay more to make up pension shortfalls that have emerged after investments were hit during the stock market downturn of the past three years.
BA, sometimes referred to as "a pension fund with wings" because its funds' assets dwarf its market capitalisation, warned last week when reporting a halving of second-quarter profit that costs were set to rise.
Its main plans are Airways Pension Scheme (APS) and New Airways Pension Scheme (NAPS). "The actuary has determined that annual contributions of £26 million for APS are required from November 2003. For NAPS, contributions will increase by £107 million a year to £225 million effective January 2004," BA said in a statement.
Credit ratings agency Standard & Poor's Corp said BA's announcement was not a particular cause for concern. "The additional cash contribution required is material, but should be satisfactorily covered by the group's cash generation," S&P said.
Earlier BA shares were down 3.3 per cent at 229 pence, with the FTSE 100 index up 0.5 per cent. Finance director Mr John Rishton told reporters BA remained committed to its pension plans but had started talks with unions about funding the increase.