19th May 2006 07:01
British Airways PLC19 May 2006 PENSION DEFICIT TOPS £2 BILLION British Airways' accounting valuation of its main pension scheme, the NewAirways Pension Scheme (NAPS), showed a deficit of £2,070 million at March 312006, up £101 million on the previous year. Keith Williams, the airline's chief financial officer, said, "The accountingdeficit reflects low long-term interest rates and has gone up despite thecompany's increased contributions and strong equity markets." ends Notes to editors • British Airways adopted International Financial Reporting Standards(IFRS) on April 1, 2005. The deficit is now accounted for under IAS19, ratherthan FRS17. • In the company's accounts, of the £2,070 million, £1,587 million isrecognised on the balance sheet and £483 million is unrecognised. Theunrecognised amount occurs as a result of a smoothing mechanism allowed underIAS19 ("the corridor") in respect of changes in estimates in both scheme assetsand liability benefits earned. The variations in estimates for asset returnsand discount rates are the principal factors impacting the deficit. • The company's pre-tax pension liability for all schemes indeficit increased from £2,191 million to £2,290 million. Of the £2,290 million£1,791 million is recognised on the balance sheet (£1,587 millionfor NAPS and £204 million for other schemes in deficit) and £499 million isunrecognised (£483 million for NAPS and £16 million for other schemes indeficit). • At March 31, 2005 the total NAPS IAS19 pre-tax deficit (recognised andunrecognised) was £1,969 million. • The NAPS actuarial deficit at March 2003 was £928 million. • The airline's cash contribution to NAPS in 2005/6 was £246 million. The airline's proposal on pensions announced on March 23, 2006 includes: • Keeping a final salary pension scheme with no changes to past servicepension benefits, no increase in staff contribution rates but changes tomembers' future benefits. • Changes include raising the normal retirement age, a slower accrualrate, pensionable pay increases capped at no more than inflation and pensionincreases on retirement capped at 2.5 per cent each year, with the company andstaff to share impact of changes in life expectancy. • In return, the airline will make a payment of £500 million into NAPSafter the changes are accepted. Certain information included in this statement is forward-looking and involvesrisks and uncertainties that could cause actual results to differ materiallyfrom those expressed or implied by the forward looking statements. Forward-looking statements include, without limitation, projections relating toresults of operations and financial conditions and the Company's plans andobjectives for future operations, including, without limitation, expected futurerevenues, financing plans and expected expenditures and divestments. Allforward-looking statements in this report are based upon information known tothe Company on the date of this report. The Company undertakes no obligation topublicly update or revise any forward-looking statement, whether as a result ofnew information, future events or otherwise. It is not reasonably possible to itemise all of the many factors and specificevents that could cause the Company's forward looking statements to be incorrector that could otherwise have a material adverse effect on the future operationsor results of an airline operating in the global economy. Information on somefactors which could result in material difference to the results is available inthe Company's SEC filings, including, without limitation the Company's Report onForm 20-F for the year ended March 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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