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IAG share price: British Airways confirms new pension scheme

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International Consolidated Airlines Group’s (LON:IAG) British Airways unit has closed its old pension scheme, replacing it with a more flexible alternative, the FTSE 100 company has said. The move is expected to save the company up to £80 million every year.

IAG’s share price has slipped into the red in London in today’s session, having given up 0.62 percent to 605.80p, marginally underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.43 percent lower at 7,000.47 points. The group’s shares have added more than 15 percent to their value over the past year, as compared with about a 4.4-percent dip in the Footsie.

BA replaces pension scheme

IAG announced in a statement yesterday that its British Airways unit had closed its New Airways Pension Scheme (NAPS) to future accrual and its British Airways Retirement Plan (BARP) to future contributions from March 31, 2018. It has replaced the plans by a flexible benefits scheme, incorporating a new defined contribution pension scheme, called the British Airways Pension Plan, which offers a choice of contribution rates and the ability to opt for cash instead of a pension. 

“This is an important step in managing the risk in NAPS and ensuring the airline has an appropriate cost-base for the future,” Steve Gunning, British Airways’ chief financial officer, commented in the statement.

The annual costs for BAPP are expected to be approximately £80 million lower than the equivalent NAPS and BARP costs last year.

Analysts on blue-chip group

Sanford Bernstein, which has a ‘buy’ rating on IAG, set a price target on the shares of 690p last month. According to MarketBeat, the British Airways and Iberia parent currently has a consensus ‘hold’ rating and an average price target of 675.13p.

Credit Suisse reiterated its ‘outperform’ stance on the shares last month.

As of 10:45 BST, Wednesday, 04 April, International Consolidated Airlines Grp share price is 606.40p.

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