BA says pension deficit rises to 2.1 bln stg

LONDON, Sep 29 (Reuters) British Airways today said its pension deficit had more than doubled to 2.1 billion pounds (3.93 billion dollars), at the top end of its expectations, as it embarked on negotiations with staff to tackle the hefty shortfall.

The airline said it hoped to reach agreement on a package of measures, including raising the retirement age of pilots, to resolve the problem by November but one union said the proposals were still unacceptable.

BA shares fell as much as 3 per cent before recovering slightly to trade 1.1 per cent weaker at 429-3/4 pence by 1142 GMT after announcing details of the first actuarial valuation of the deficit in three years.

Low interest rates and longer life expectancy have hit the airline's pension deficit, offsetting higher contributions by the airline and a stockmarket recovery.

Actuaries put the deficit at 2.1 billion pounds, up from 928 million pounds in 2003. The figure was higher than the 1.5 billion pounds to 1.8 billion pounds tipped by sources familiar with the situation and reported in UK newspapers.

Chief Executive Willie Walsh said the figure was at the top of end of BA's own expectations.

''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,'' Walsh said.

BA earlier this year proposed raising the retirement age of its 2,500 pilots to 60 from 55 to help tackle the deficit. Other staff would have the retirement age raised to 65.

The airline also said at the time it wanted to introduce a slower accrual rate and a cap on pension rises, and proposed paying in 500 million pounds.

The Transport&General Workers Union which represents many BA employees said the proposals were still unacceptable.

''We have always acknowledged that there is a funding problem but today's news does not change our view that BA's pension cuts are unfair, unacceptable and do not represent a starting point for negotiations,'' Brendan Gold, T&G national secretary for civil aviation, said in a statement.

But Walsh told reporters he was confident the issue would be resolved by November without strike action.

BA said in a statement the trustees confirmed that annual contributions of 497 million pounds would be needed to fund the scheme unless changes to future benefits proposed by the airline earlier this year were introduced.

REUTERS PR KN1805