BA Hit By £3bn Pension Gap

British Airways is flying into the "eye of the storm" as its pension blackhole doubles, its staff refuse to accept job cuts and premium travel dries up, boss Willie Walsh has warned.

With the airline battling to ride out the recession, the chief executive told the company's AGM only "fundamental" change would save BA.

Shock pension figures show the company's pension deficit is at least £2.9bn - and worsened by more than £1bn in the last year.

It paid £1.8bn

into its two pension schemes in the last three years - more than its profits, while the company's market capitalisation is only £1.46bn.

BA chairman Martin Broughton said: "The deficits remain huge and, in the current climate, the company will not be able to afford to increase its own contribution."

BA is embroiled in a tense stand-off with staff over proposed job cuts.

Mr Walsh reiterated his aim to shed 3,700 jobs by next March on top of 2,500 which have gone since last summer.

"There is no point trying to skirt around the fact that we need a fundamental and structural change to our employee cost base," he said.

"These changes are essential to our short-term survival and, more importantly, to our long-term viability."

As he spoke, staff paraded boxes of lemmings outside the meeting in protest at what they said was the way the company was being led.

They are refusing to back the cuts, or a change in working conditions, although the pilots' union Balpa on Monday voted to accept a 2.6% pay cut.

A deadline for agreeing job cuts and a pay freeze passed without a deal on June 30 and talks are continuing to try to break the deadlock.

Mr Broughton said the aviation industry was facing the biggest crisis it had ever known and he warned the market for first class and business air travel may never fully recover.

The company wants to cut around 3,700 jobs and freeze pay for two years in what Mr Walsh says is a "fight for survival".

Shareholders lambasted BA bosses during the meeting for their "greed".

One shareholder asked if it was morally acceptable for the "fat cat club" to continue "licking cream" while workers offered to cut their pay and conditions and shareholders saw the value of their investments fall.

Financial News