British Airways has lost a lawsuit it filed against its pension plan trustees for making additional payments to retired airline workers through discretionary contribution increases.
The legal challenge stemmed from a 2011 decision by the board of trustees to unanimously approve an amendment to allow an annual discretionary increase in pension contributions. This was done to compensate for the UK government changing its measure of inflation to the consumer price index (CPI) from the retail price index (RPI). The switch translated to lower increases for pension participants.
The airline initially appeared to accept the amendment as valid, until the board first exercised the new power and granted its participants a 0.2% discretionary increase in 2013. The move spurred British Airways to legally challenge the board’s right to give discretionary increases, and the trial began in October of last year.
The judge ruled that the decision in 2011 to introduce the discretionary increase power was valid.
“We welcome the confirmation from the court that we and our professional advisers acted appropriately in relation to those decisions,” said British Airways Pensions in a statement. “We are analyzing the full implications of the judgment with our professional advisers, and assessing the next steps, albeit the actions that we are able to take in the near term will depend on whether BA decides to appeal.”
There will be a High Court hearing on May 25, when it will likely be known whether British Airways decides to appeal the decision.
The airline will need permission to appeal the decision, which it will have to request from the trial judge or from the Court of Appeal within 21 days of the judgment. Because the Court of Appeal has a heavy caseload, it could take several months before it can consider a request from British Airways to appeal the judgment. And even if the airline is eventually granted approval to appeal, it could take another 18 months from that point to obtain a judgment from the Court of Appeal.
The discretionary increases had been put on hold since 2014 to await the trial’s conclusion, and British Airways Pension said they will stay that way until it is known whether the airline is going to appeal the ruling. However, it added that if the current ruling holds up, there may not necessarily be an increase this year.
“The history of no increases in 2011 and 2012 and the small increase in 2013 shows that the increase decision has been carefully considered every year so far,” said British Airways Pension. “Discretionary increases will only be awarded if and when it is appropriate to do so.”
By Michael Katz