Pilots to fly to 60 and flight attendants 65 in radical move to tackle pensions deficit

British Airways (BA) is raising the retirement age of its pilots and cabin crew and plans to make a payment of £500 million ($875 million) into its pension scheme in moves aimed at clearing a £1 billion pensions deficit.

BA 757

The Oneworld alliance carrier is one of numerous leading UK companies struggling with its future pensions provision and has been consulting staff for the last few months on possible solutions.

It says in a statement that the normal retirement age of pilots will increase to 60 from 55 while for cabin crew it will increase to 65. It adds that if various countries’ restrictions on older pilots flying and overflying are removed then its pilots’ retirement age will increase to 65. Staff will still have the option to retire before normal retirement age but on a smaller pension.

BA will also adjust accrual and contribution rates as part of its plan to cut its “past service actuarial deficit” in its New Airways Pension Scheme of £1 billion. It will also make a payment of £500 million into the scheme “after the changes are accepted”, and says the proposals follow an “extensive staff communications programme”.

“If changes to the scheme are not introduced the deficit and level of future service contributions are expected to grow because people are living longer and long-term interest rates remain low,” says the airline.

CEO Willie Walsh adds: “This is a solution that will provide competitive, affordable pensions for the future. These changes are necessary to clear the past deficit and to contain the amount of future funding needed. It means working longer to get a similar annual pension, but one that is more secure. This should address the pension problem at British Airways once and for all.

“After the changes are accepted, the airline will make a payment of £500 million into the fund. This is on top of the £350 million the company will have paid towards the past deficit by December 2006.

“This package of measures is vital if we are to achieve a competitive cost base, deliver a 10% operating margin, be fit for growth and invest in our future.”

Union responses are expected shortly.

Source: Flight International