UK - British Airways has agreed to pay up to £950m (€1.4bn) to tackle the £2.1bn deficit in its New Airways Pension Scheme in a 10-year funding deal with trustees.

The airline will make a cash injection of £800m - up from the £500m that was previously announced.

And it will also pay up to £50m a year for the next three years, subject to the airline's year end cash balances remaining above £1.8bn.

BA will pay around £250 million by the end of this year and £550m in April next year. In addition the company will provide financial guarantees to NAPS of £150m.

In return, staff had to accept benefit reductions which will help save £250m annually. These cuts include a raise in the normal retirement age to 65, a lower accrual rate, inflation capped pensionable pay increases, capped pension increases on retirement and sharing life expectancy. NAPS will remain a final salary scheme.

"The £800m cash payment into NAPS is a very significant injection into the fund relative to the company's market capitalization," said BA chief financial officer Keith Williams. "Together with the benefits changes, more than half the deficit will be tackled immediately."

"The trustees are pleased to have reached an outline agreement with the company in relation to the recovery plan to fund the NAPS pension deficit," said trustee chairman Roger Maynard.

"We believe that this is the best achievable outcome and will improve security for NAPS members. The recovery plan strikes the appropriate balance between short and long term contributions, fully taking into account the company's current and expected future financial position. 

"Arrangements will be put in place to ensure that the Scheme will benefit from any out-performance, and will be protected against any under-performance, that the company might achieve."

The NAPS actuarial deficit has risen from £928m in 2003 to £2.1bn despite a doubling of BA's contributions and a recovery of the stock market. BA's contribution to NAPS last year was £235m - the equivalent of five times members' contributions.

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