NEWSBRIEF NO. 77


Contents: 4th August 2009
1. Newsflash.
 * STOP PRESS *
2. Update on BA Pensions Bank Guarantee Transfer.
3. Intermediate Scenario on the PPF
4. ABAP Letter to Mr Walsh.
5. Membership Cards 2009/2010
6. Committee Member : Vacancy Update

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1. Newsflash. (as posted on the website 30th July 2009)
“All Members will by now have received a letter from the Chairman of Trustees regarding the release of their £330m. BA Bank Guarantee to assist BA Liquidity and help them ride out the current financial crisis.

The ABAP view is that our association exists to protect the security of the BA pension schemes. Therefore we should on first examination object to the return of the Bank Guarantee to BA. However by that path and preventing it (if that were actually possible) we would reduce the potential cash available to BA and thus hamper its chances of coming through the crisis.

In pursuit of our schemes security ABAP needs BA to survive in order to redress the Deficit in the BA Scheme that is clearly coming when the results of the current scheme Triennial Valuation are announced.

Should BA fail the Pension Protection Fund would step in, which would be potentially worse for BA pensioners than if BA pulls through & survives. For a start any cost of living increases would be non existent under the PPF, except for those who earned their pension or part of pension after 1997(max increase 2.5% p.a.).

Therefore ABAP supports the votes of our five pensioner Trustees to release the Guarantee to BA; but with scheme security provisos:

Firstly, when this crisis is over the Bank Guarantee must be re-established because by no stretch of the imagination is a charge on assets in the same league as a Bank Guarantee. If they are equivalent then why was a Bank Guarantee preferred in 2006?

Secondly, BA survival depends on almost entirely on the quality of BA management. Many loyal pensioners have felt that in this BA crisis, management should encourage a united work force (both past & present) with appositive outgoing attitude. Whatever “austerity” measures are taken should be equal in effect throughout the company from top to bottom.

Thirdly, it will be self evident that by releasing the Guarantee pensioners are taking a risk . Risk must be accompanied by reward. It is to be hoped that BA will recognise this basic principle of fair play and begin to treat ex-employees with more dignity and respect than has been the case in the recent past.
BA is a people business run by people for people. Attitude & morale are vitally important for success. ABAP looks to BA Management to brighten up, show leadership and go out & find the business rather than have a (perceived) in-house Punch & Judy show.”

* STOP PRESS *
BA has announced an Extraordinary Shareholders Meeting for August 6th 2009 to start moves to raise £350m. with a share issue that will close on September 23rd. This is a courageous development and clearly will increase the BA liquidity. In turn this will reduce pressure to use the BA Pensions Bank Guarantee.

ABAP is pleased to report a shaft of light in the gloom.

2. Update on BA Pensions Bank Guarantee Transfer (Dayne Markham)
Since the Newsflash was published there has been some reaction from the ABAP Membership as where exactly we are with the Bank Guarantee transfer. ABAP has learned that the Bank Guarantee is not a letter as such; perhaps more a “book of stamps”, each one being part of the bank guaranteed £330m. So far BA has not needed any “stamps”. With this method of little by little, BA Pensions remain in close control.

Therefore as yet no BA assets have been legally charged for BA Pensions. ABAP has been assured that the value of any potential assets to be offered will be carefully watched and professionally assessed before any part release of the Bank Guarantee letter. So there is no call for the “alternative security” mentioned in Chairman of Trustees letter to pensioners as nothing has as yet happened. We again feel some transparency is due, as Members with long memories recall swathes of BA property being sold off, and in some cases leased back. We summarise by saying the family silver can only be sold once.

A degree of proportion should be maintained about the BA Bank Guarantee for £330m. Taking APS, it is still worth £ several billion. Even if the Guarantee is fully released for BA to draw against; the Pension Scheme will then hold charges on “alternative security.” The Bank Guarantee is still relatively small in comparison to APS, and would not embarrass the scheme even if it takes time to Realise on the Charges on the “alternative security” being offered by BA to the Schemes should BA become insolvent.

Again it must be stressed that the arrangement involves no transfer of monies out of BA Pensions to BA.

ABAP will continue to expect the restoration of the Bank Guarantee for BA Pensions to the 2006 position at the earliest opportunity.

3. Intermediate Scenario on the PPF ( Dayne Markham, John Bennington)
With Mr Walsh the BA CEO issuing dire statements in the national media about the future of BA, it is important that all BA Pensioners are fully aware of the consequences of the financial failure of BA to the BA Pension Schemes APS & NAPS. Currently both schemes are expected to be in deficit for their total liabilities, NAPS by more than APS, at the end of the triennial valuation. Should BA fail then the PPF will assess both schemes in depth. Certainly NAPS would go straight into the PPF procedure as detailed in Newsbrief No76. APS could be assessed by the PPF (not BA Pensions), as being able to survive with restrictions; for example a reduction in the degree of inflation protection available. This again shows in high relief that it is better for BA pensions for BA to pull round. Consequently Pensioners are definitely expecting BA Management to be more nimble as their Schemes are gradually moved closer to the front line of Mr Walsh’s battle for BA survival ( See STOP PRESS above).

The coming Winter months will be critical for the airline if a profit cannot even be made in the Summer.

4. ABAP Letter to Mr Walsh.(Dayne Markham, David Waddington)
Following the BA request to use the BA pensions Bank Guarantee ABAP has written to Mr Walsh requesting a token of thanks to the 47000 strong BA pensioners body for going along with this potentially increased risk without fuss. We will give his reply in due course. The Liaison Council were invited to make it a joint approach but they decided after consultation to write a separate letter in their own time.

5. ABAP Membership cards 2009/2010 (Dayne Markham)
Members are advised that cards will be sent out monthly after subs forms have been received to reduce postage where possible.

It is proposed to revert to AGM admission by membership card only this year, as in the recent past. If your new card has not arrived by 8th October then old one will suffice.

6. ABAP Committee: Member Vacancy (David Waddington)
The ABAP Secretary advises that no candidates have as yet contacted him to express interest. Please contact david.waddington@zen.co.uk

The Committee would like to clarify that a term of 3 years only would be advisable. Chains & padlocks are not now used to restrain Committee Members.

The Committee of ABAP 4th August 2009