Pension deficit tops GBP2bn

British Airways PLC
29 September 2006



PENSION DEFICIT TOPS £2 BILLION


The actuarial deficit in British Airways New Airways Pension Scheme (NAPS) is
set to rise from £928 million to some £2.1 billion, despite a doubling of BA's
contributions and a recovery of the stock market.


The trustees have confirmed that annual contributions of £497 million would be
needed to fund the scheme unless changes to future benefits proposed earlier
this year are introduced.  This means the company's contributions would go up
from five to 12 times members' contributions.


Negotiations between British Airways and the trustees are now underway to agree
a funding plan including proposed benefit changes.  Consultation continues with
the trades unions.

The changes proposed include:


•   Raising the normal retirement age to 65

•   A slower accrual rate

•   Inflation capped pensionable pay increases

•   Capped pension increases on retirement at 2.5 per cent

•   Sharing the impact of changes in life expectancy



The proposal keeps a final salary scheme with no increase in staff contribution
rates and no changes to pension benefits already earned.   Once the changes are
accepted, BA is proposing to make a £500 million one-off payment to the scheme.


Independent financial analysis from Price Waterhouse Coopers for the trustees
led them to conclude that company contributions 'much in excess of the current
levels may not be sustainable'.


In a letter to NAPS members in July, the trustees said BA could not afford to
use all its cash reserves to pay off all the deficit because it would put the 
'long term viability of BA in jeopardy'.  'Reductions to future benefits were
also likely to be required to help reduce the deficit', they added.


Willie Walsh, British Airways' chief executive, said:  ' The deficit is massive
and we must deal with it.  I believe our proposal is a fair solution which
addresses the funding problem and shares the cost of securing the future of our
pensions and BA. The deficit is one of the biggest challenges we face and I am
determined that we will resolve it.'



                                      ends

September 29, 2006
                                101/KG/06

Notes to Editors



•  From January 2004 to the end of 2006 British Airways will have paid
   £350 million off the past deficit.


•  BA's contribution to NAPS in 2005/6 was £235 million.


Under BA's proposal:


•  Normal retirement age (NRA) will rise to 65 to coincide with age
   legislation to be introduced in the UK in October 2006.


•  The current compulsory retirement age for pilots and cabin crew is 55;
   the normal retirement age is also 55.  For cabin crew NRA will rise to 65.  
   To reduce the impact, for the first five years this will rise to 60.


•  For pilots, some countries including France and the USA apply restrictions to 
   flying and overflying as a captain beyond 60.  For this reason
   the normal retirement age will rise to 60.  If the flying restrictions are
   removed in the future, the airline will raise NRA to 65 and adjust accrual 
   and contributions in line with other staff.


•  For those with an NRA of 65 the accrual rate will be reduced from1/56 to 
   1/60 and contribution rates remain unchanged at 5.25 per cent.  For those
   with an NRA of 60 the accrual rate will adjust from 1/52 to 1/56.


•  The option to retire before NRA remains, but on a smaller pension.  Staff
   will have the option to save more through defined contributions or through
   other pension plans.



Other details:


•  NAPS was set up in 1984 and has 33,528 active members, 20,520 deferred and
   15,448 pensioners (total members 69,496). It closed to new members in March
   2003.


•  APS was set up in 1948 and has 2,364 active members, 4,194 deferred and
   26,715 pensioners  (total members 33,273). It closed in 1984.


•  NAPS and APS together have combined assets of some £12 billion (NAPS £5.8b
   /APS £6.7b).


•  The actuarial valuation is carried out every three years and takes into
   account the company and employee contributions, member profiles and
   demographics, likely investment returns from the pension funds and the stock
   market performance and then calculates the funding position.



                      This information is provided by RNS
            The company news service from the London Stock Exchange