Newspaper article The Evening Standard (London, England)

BA Takes off after Deal over Pensions Gap; MARKET ROUND-UP

Newspaper article The Evening Standard (London, England)

BA Takes off after Deal over Pensions Gap; MARKET ROUND-UP

Article excerpt

Byline: MICKEY CLARK

AT LAST, some positive news for British Airways, which has resolved a potentially damaging dispute with the trade unions and seen its share price celebrate by climbing 71/4p to a record 556p.

The group confirmed today it has reached agreement with the unions about tackling its [pounds sterling]2.1 billion pension deficit. The company is proposing to make a one-off contribution to the fund of [pounds sterling]800 million, subject to the acceptance of benefit changes.

The group will make a one-off employee saving of [pounds sterling]400 million and changes to future benefits, as a result of which the pension deficit will be reduced by more than half to [pounds sterling]900 million. The four unions involved are recommending the proposals and now plan to consult with their members.

BA chief executive Willie Walsh said: "This is great news. Together with the New Airways Pension Scheme (NAPS) Trustees and staff we have found a shared solution that helps secure the pension of our 35,500 NAPS members and removes a major blocker to future investment in British Airways."

The news has also come as a welcome relief the City. Broker Collins Stewart describes BA as a "compelling buy", not least because it remains a prime bid target and the pension deal takes away a major hurdle. Rival broker Citigroup also welcomes news of the settlement but describes talk of a takeover of BA as unwarranted. Foreign ownership laws covering airlines and any US/EU Open Skies deal would make such a takeover difficult to complete. Collins Stewart has a target of 570p on BA, while Citigroup has raised its from 500p to 553p and rates the shares a hold.

Broker ABN says the deal paves the way for BA rating upgrades, aircraft purchases and even a potential resumption of dividend payments.

Shares generally traded within a narrow range, with buyers gaining the upper hand. The FTSE 100 index rose 15.1 to 6235.2.

Broker HSBC is warning the clamour for Real Estate Investment Trusts (Reits) could backfire on investors. …

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