British Airways has deferred pensions payments and reasserted that it would pause dividend payments until the end of 2023, as it continues to ride out the financial toll of the coronavirus crisis on the airline industry.
The company, which is owned by International Airlines Group (IAG.L), released a financial update on Monday, detailing that it had reached agreement with the Trustee of New Airways Pension Scheme (NAPS) to defer £450m ($630m) of pension deficit contributions due between October 2020 and September 2021.
Repayment of £450m accumulated contributions plus interest will be added to the end of the existing recovery plan as monthly payments under a revised recovery plan, which is currently March 2023, it said.
British Airways has agreed to provide property assets as security, which will remain in place until the airline has repaid the deferred contributions.
Alongside these measures, the airline also said that no dividends will be paid by British Airways to IAG before the end of 2023.
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From 2024, any dividends paid will be matched by contributions to NAPS of 50% of the value of dividends paid. Any such payments to NAPS will reduce the outstanding repayment balance and are capped at that level. The requirement to make such payments to NAPS ceases after deferred contributions have been repaid.
The news comes as new data from ADS, the UK trade organisation, shows that orders for new aircrafts had dwindled in January as the industry grapples with the impact of COVID-19.
Only four commercial aircraft orders were placed last month making it the worst January on record for orders. Orders for 296 new planes were placed in January 2020.
There were no new orders for passenger aircraft in January, with all orders placed for widebody vehicles produced by Boeing (BA).
The industry continues to be in dire straits. As the pandemic crimps demand globally, UK airlines and travel companies made pleas for their own roadmap out of crisis.
Organised by travel lobby group, the Association of British Travel Agents (ABTA) in partnership with the Save Future Travel Coalition, it is co-signed by firms such as TUI (TUI.L), easyJet (EZJ.L) holidays and Airlines UK and follows calls from groups last week to relax restrictions ahead of the usually busy summer period.
Travel companies have spent the best part of last year lobbying for government support, as lockdowns battered demand. The most recent sticking point for the sector has been mandatory UK hotel quarantine on arrival, which can cost nearly £2,000 per person for 10 days.
Watch: British Airways boosts cash reserves by £2.45bn to weather COVID turbulence