Separately, The Mail on Sunday can reveal that major hedge funds have turned against the company.
Marshall Wace has more than halved its holding in IAG to 1.3 per cent, down from 3 per cent last October. Meanwhile, US giant Citadel has built up a major short position against IAG since the spring, betting £54million on the share price falling.
IAG’s shares are now 149.5p, down 31 per cent since April.
John Ralfe, an independent pensions consultant, said: ‘The pensions agreement was always a short-term fix and the problem hasn’t gone away.
‘This should be a real worry for shareholders because when you look at the size of the pension liabilities, it’s more than the value of the entire company. So (BA) can’t keep kicking this issue down the road.’ (BA)‘s £25.8billion pension liabilities – the estimated value of payouts it will need to make to retired staff – dwarf IAG’s £7.07billion stock market value.
Its two retirement schemes – the €8.5billion Airways Pension Scheme (APS) and the €22.2billion New Airways Pension Scheme (NAPS) – are among the country’s largest, corporate, defined benefit schemes, with 85,000 members between them. They closed to new members in 1984 and 2018 respectively.
(BA)‘s pension contributions are based on a valuation of its schemes every three years. The latest valuation, in 2018, showed a €2.7billion deficit in its NAPS and a €683million surplus in the APS. The next valuation, due by next June, will be used to calculate the repayment plan for the contributions deferred during the pandemic.
IAG contributed €32million to its pension schemes over the six months to June 2021, compared to €182million in the same period last year, and has committed to paying €1.28billion to NAPS over the next five years.
(BA)‘s pension scheme is run by US investment giant BlackRock. IAG’s latest annual report for 2020 showed assets in the NAPS scheme are invested across classes including private equity, hedge funds, property and derivatives.
IAG has returned almost €4.1billion to shareholders since 2015 but has frozen shareholder payouts since last April. In July, IAG chief executive Luis Gallego said the group is ‘determined’ to resume payouts as soon as possible.
Hedge funds Marshall Wace and Citadel declined to comment.
British Airways faces a setback over its plans to launch a short-haul airline at Gatwick after talks on pilots’ pay broke down.
But last night Balpa said it had withdrawn its support for the deal because (BA) had ‘refused to produce a satisfactory employment contract’ for pilots. (BA) captains at Gatwick typically earn around £100,000 a year and First Officers earn around £50,000.
As part of cost-saving moves by (BA), they are being asked to agree to flexible contracts that are expected to see pilots working part-time or on a seasonal basis. (BA) boss Sean Doyle warned this month that the airline could sell its short-haul take-off and landing slots at Gatwick if it cannot agree a deal with unions.
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