er340790
12th Jan 2006, 17:30
**Transport
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.