British Airways (BA) has reached an agreement with the trustee of New Airways Pension Scheme (Naps) to defer £450m in pension deficit recovery contributions due between October 2020 and September 2021.

A financing update from the International Airlines Group (IAG) confirmed that the trustee agreed to the temporary deferment of monthly contributions of £37.5m from October 2020 to September 2021, with a total value of £450m.

The agreement includes the monthly contributions from October, November, December and January, which the Naps trustee agreed to defer whilst the negotiations were ongoing.

BA has provided property assets as security as part of the agreement, which will remain in place until the group has repaid the deferred contributions.

In addition to this, it confirmed that no dividends will be paid by British Airways to IAG before the end of 2023, and that any dividends paid from 2024 will be matched by contributions to Naps of 50 per cent of the value of dividends paid.

The repayment of the £450m accumulated contributions plus interest will then be added to the end of the existing recovery plan, currently March 2023, as monthly payments under a revised recovery plan.

The group has also confirmed that a new recovery plan will be based on the triennial valuation as at 31 March 2021.

However, if a new recovery plan is not agreed by 30 September, the default position is that British Airways will return to making payments of £37.5m per month from October 2021.

The deferral was announced alongside the details of a £2bn UK Export Finance guaranteed 5-year loan facility, with the combined projects expected to increase total liquidity of the group by £2.45bn.

Since March 2018, BA has paid £1.34bn in contributions to the scheme, including £263m in 2020, after the most recent triennial valuation on 31 March 2018 showed a technical deficit of £2.4bn.

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