BA's pension deficit hits £3.7 billion

British Airways today admitted its pension deficit had shot up to £3.7 billion and said one of its key directors had stepped down from his post as chairman of the trustees for the retirement fund after a conflict of interest row.

The news came as the airline's cabin staff were deciding whether to strike at Christmas. It was accompanied by an admission that if the funds' investments performed particularly badly, the deficit could be as high as £8 billion.

Roger Maynard will step down despite chief executive Willie Walsh claiming last month that he was happy with having the director of investments and alliances also supposedly guarding the pension interests of the firm's staff.

BA is now working with pension scheme trustees to find a way of funding the huge hole in the fund, which has ballooned from £1.8 billion three years ago. Measures could include extending the 10-year deadline to get rid of the deficit.

The pensions regulator has given it until June to produce a viable plan.

Currently, BA said: "The regulator's provisional view is that the technical provisions may be materially below a level it feels appropriate."

Stephen Furlong, analyst at Davy Stockbrokers, said the huge deficit, which greatly outweighs BA's £2.3 billion stock market value, was not enough to dissuade Iberia from merging with the British flag carrier. More critical will be how tough the regulator decides to be on measures of dealing with it.

There are 100,000 members of the funds, who appoint half of the 12 trustees.