B.A. Bankruptcy advised
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B.A. Bankruptcy advised
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The Times January 12, 2006
Actuary advises BA to go bankrupt
By Patrick Hosking and Angela Jameson
ONE of the City’s leading actuaries lobbed a bombshell into British Airways’ delicate negotiations over its £1.3 billion pension fund deficit by advising the airline to declare itself bankrupt.
Donald Duval, chief actuary at Aon Consulting, said filing for insolvency was the only option for BA if it wanted a permanent solution to its pension deficit.
In a written statement, Mr Duval said: “If Willie Walsh (BA’s new chief executive) is determined to relieve BA of its pension scheme deficit ‘once and for all’, without affecting the firm’s investment back into the business, then the only effective way open to him at present is bankruptcy.”
Delta Airlines and United Airlines in the US had already gone down that route, ridding themselves of pension liabilities by filing for Chapter 11 bankruptcy, and it was “not inconceivable” that BA would consider the same course of action, he said.
BA denounced Mr Duval’s suggestion. “We don’t share Aon’s view and are committed to tackling the pension deficit with our staff,” it said. One source at the airline said the proposal was nonsense because BA was a million miles from insolvency and had cash at the half-year of £1.9 billion.
Last week Mr Walsh told the 35,000 members of the New Airways Pension Scheme that the deficit had to be addressed “once and for all”, so that the airline could achieve its target of 10 per cent operating margins. He made clear that he would not sacrifice investment in the business.
The scale of BA’s pension problems was underlined by a Times analysis, which showed that it was the most vulnerable blue chip with a deficit equivalent to 115.5p per share, more than one-third of its share price. Analysts predict that BA will put £500 million into the fund, with employees bearing the burden of £500 million more through higher contributions and reduced benefits.
Fifteen of the FTSE 100 companies have deficits representing 10 per cent or more of the share price. These include Rexam, Whitbread, ITV and J Sainsbury. The highest proportional deficits after BA are at BAE Systems, British Telecom and ICI.
The Times January 12, 2006
Actuary advises BA to go bankrupt
By Patrick Hosking and Angela Jameson
ONE of the City’s leading actuaries lobbed a bombshell into British Airways’ delicate negotiations over its £1.3 billion pension fund deficit by advising the airline to declare itself bankrupt.
Donald Duval, chief actuary at Aon Consulting, said filing for insolvency was the only option for BA if it wanted a permanent solution to its pension deficit.
In a written statement, Mr Duval said: “If Willie Walsh (BA’s new chief executive) is determined to relieve BA of its pension scheme deficit ‘once and for all’, without affecting the firm’s investment back into the business, then the only effective way open to him at present is bankruptcy.”
Delta Airlines and United Airlines in the US had already gone down that route, ridding themselves of pension liabilities by filing for Chapter 11 bankruptcy, and it was “not inconceivable” that BA would consider the same course of action, he said.
BA denounced Mr Duval’s suggestion. “We don’t share Aon’s view and are committed to tackling the pension deficit with our staff,” it said. One source at the airline said the proposal was nonsense because BA was a million miles from insolvency and had cash at the half-year of £1.9 billion.
Last week Mr Walsh told the 35,000 members of the New Airways Pension Scheme that the deficit had to be addressed “once and for all”, so that the airline could achieve its target of 10 per cent operating margins. He made clear that he would not sacrifice investment in the business.
The scale of BA’s pension problems was underlined by a Times analysis, which showed that it was the most vulnerable blue chip with a deficit equivalent to 115.5p per share, more than one-third of its share price. Analysts predict that BA will put £500 million into the fund, with employees bearing the burden of £500 million more through higher contributions and reduced benefits.
Fifteen of the FTSE 100 companies have deficits representing 10 per cent or more of the share price. These include Rexam, Whitbread, ITV and J Sainsbury. The highest proportional deficits after BA are at BAE Systems, British Telecom and ICI.
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Re: B.A. Bankruptcy advised
Clearly an actuary trying to make a name for himself with a bold quote, a la Warren Buffet's "....should have shot down the Wright Brothers over Kittyhawk..." famous jibe.
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Re: B.A. Bankruptcy advised
According to their website
"Aon Consulting is committed to supporting multinational companies as they build strong, cohesive teams that transcend borders and span cultures"
when in fact they are recommending throwing in the towel, because an inteligent solution is just too much like hard work
"Aon Consulting is committed to supporting multinational companies as they build strong, cohesive teams that transcend borders and span cultures"
when in fact they are recommending throwing in the towel, because an inteligent solution is just too much like hard work
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Re: B.A. Bankruptcy advised
He featured on 'Working Lunch' - BBC2 today. Didn't like the 'cut of his jib' at all. Neither did Mrs G, who has more than a passing interest in all this 
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Re: B.A. Bankruptcy advised
The man is quite simply a fool out for headlines. Just imagine the world's most profitable airline putting itself into insolvency? The many shareholders who see a plainly very viable business taaking the Board to court for wiping out their investments will keep the Courts busy for decades! An outspoken, daft and irrelevant opinion, probably instigated by the Board in their battle against the staff!
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Re: B.A. Bankruptcy advised
You could always make the BA pilot recruitment department bankrupt before anything else! That would take care of a few issues... immagine the cost and time savings
Shags
Shags
Last edited by Shagtastic; 12th Jan 2006 at 22:24.
Re: B.A. Bankruptcy advised
However, it seemed to work for Swissair. It is plausible that Swissair went under for just this reason. However, it would be hard for BA to claim it was bankrupt when it was making so much money.
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Yep he is technically correct. Of course in reality they would probably not head down this route for fear of the legal cases against the board of BA for running a company which is insolvent. Still its a nice threat to hold over peoples heads if they don't fall into line.
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Re: B.A. Bankruptcy advised
quite an easy way out of it - put BA into a prepack administration deal, dump off the pension liability and recapitalise the company.
The other creditors dont lose out, but the pension fund evaporates, along with most of the staff goodwill.
The other creditors dont lose out, but the pension fund evaporates, along with most of the staff goodwill.
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Re: B.A. Bankruptcy advised
Sounds like a good business solution to this difficult problem. It happened in Mexico, why not here? Perhaps they could not justify it at the moment but after a few pilot strikes I imagine it would be fairly easy to go bankrupt.
Dissolve BA, Pension Problems and Union Grip; start up the very next day free of all these burdens and ready to expand and compete on a level playing field.
As a new joiner if these crews had stood up for my pension, I may have considered standing up for them. As it stands it will defiantly be a NO to strike action. My number one interest is keeping BA Safe, Profitable and lots of Expansion. The more airframes we get the shorter the time to Command.
Dissolve BA, Pension Problems and Union Grip; start up the very next day free of all these burdens and ready to expand and compete on a level playing field.
As a new joiner if these crews had stood up for my pension, I may have considered standing up for them. As it stands it will defiantly be a NO to strike action. My number one interest is keeping BA Safe, Profitable and lots of Expansion. The more airframes we get the shorter the time to Command.
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Re: B.A. Bankruptcy advised
Originally Posted by Dan Winterland
However, it seemed to work for Swissair. It is plausible that Swissair went under for just this reason. However, it would be hard for BA to claim it was bankrupt when it was making so much money.
N.B. Swiss International is not Swissair.
Swissair is no more, it has ceased to be.
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Re: B.A. Bankruptcy advised
If BA declared itself bankrupt, then started up the next day, what would happen to the slots?
Without the slots BA is not an Airline.
L337
Without the slots BA is not an Airline.
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Re: B.A. Bankruptcy advised
Wouldnt be one of those same actuaries advising lots of big companies to take near permanent pension holidays (and return pensions 'excess' to themselves)back in the 80s and 90s cos the stock markets were going to return deliver double figure digit returns per chance?.
As someone well and truly shafted over this elsewhere good luck to those affected here.
As someone well and truly shafted over this elsewhere good luck to those affected here.
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Re: B.A. Bankruptcy advised
Donald Duval is not stupid neither does he have zero credibility as one poster says.
He may have zero credibility with the pilot community, but I doubt that would bother him, as he has plenty of credibility with the executive community, who pay his firm the money that keeps them in healthy business.
He may have zero credibility with the pilot community, but I doubt that would bother him, as he has plenty of credibility with the executive community, who pay his firm the money that keeps them in healthy business.