Walnut #72
"What I believe we are seeing here is a fundimentially sound company IF it could just divest itself of these huge pension liabilities...so maybe the government should take these liabilities onto its books? The sum involved is tiny compared to the Billions that have been spent on supporting the UK banks."
Two problems with your logic here. Firstly, if the government does this for BA, then it's hard to see how they can refuse to do it for every other underfunded defined benefit pension scheme. The total deficit of all such schemes is around £250-300 billion right now. Secondly, the government already has about £750 billion in unfunded pension scheme liabilities of its own employees (civil servants, NHS workers etc). It's likely that the government will want to cap these in future, ie stop public sector defined benefit pension schemes. I suspect keeping this quiet until after the election is one reason the comprehensive spending review has been shelved until post-election. Anyway, there's no chance of the government taking on additional private sector pension liabilities. The UK would lose its AAA rating within days if the government adopted this approach. Keeping it is more valuable than a few thousand BA staff, I'm afraid, painful though that may be to hear.
BA has got itself into a pension mess which sees its pension schemes valued at approximately 8x that of the company itself, with a deficit equal to 5-6 years of "normal" pre-tax profits. It's BA's problem to get out of it. As pensions are simply deferred income, one way of mitigating the pension problem is to cap, or even reduce, current salary levels and staff numbers entitled to such pensions, thereby also reducing projected pensions payable in future.
Incidentally, the deficit numbers may not be as bad as you think. If long term interest rates rise, and they have been doing in recent weeks, that actually decreases the present value of pension liabilities. As asset values have risen since March, when they hit 10-12 year lows, the pension schemes will have had a double benefit over the last three months. There will still be a (big) deficit, but might not be at the £3 billion level.