BA insurance deal reduces pension fund liability
03.07.10
British Airways has announced an agreement with Goldman Sachs to effectively insure £1.3 billion of the company's £3.7 billion pension schemes deficit. Via the agreement with Rothesay Life (a subsidiary of Goldman Sachs), the airline has matched future cash flow requirements in any inflationary and interest rate scenario.
BA has effectively insured a fifth of the liabilities of one of its two main final salary pension schemes. The deal - known as a ‘pension buy in’ - is an insurance policy taken out against the cost of increasing longevity of scheme members. It affects the Airline Pension Scheme (APS), which has a £1bn funding deficit, rather than the New Airline Pension Scheme, which has a £2.7bn funding hole.
It is the latest in a long line of moves by BA to reduce both its pension fund liability and the cost of operating the business, to seek to return it to profitability.
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