British Airways has been given a lift after the trustees of its pension fund agreed to forgo £330 million in guarantees. The bail-out comes on top of last week’s agreement by institutional investors to raise £350 through a convertible bond.

This extra £680 million raises the airline’s cash balance to £2 billion, which would allow it to operate till the end of 2010 under current market conditions. It would also give BA a financial cushion should its 14,000 cabin crew take strike action this summer.

BA is understood to have given guarantees to the pension trustees that they will receive alternative securities later this year, which will help to reduce the fund’s growing deficit.

The pension fund is estimated to be £3 billion in deficit, but the trustees have deemed that their interests are better served by strengthening BA now rather than holding on to funding promises.

The pension fund’s trustees said: “This will serve to improve the financial position and prospects of the company with a view to meeting its obligations to the scheme.”

Under the terms of a 2006 agreement, BA transferred credit lines worth £330 million to the fund – money that would become available in the event of BA’s bankruptcy.

The credit is secured against some of BA’s older aircraft. By relinquishing its rights, the fund has allowed BA to make use of this credit if it needs the extra cash.

BA said yesterday that it had lost about £100 million in the three months to the end of June. It lost £401 million last year.

Willie Walsh, chief executive, said: “The pension fund recognised that the only way to address the deficit is for BA to be a strong business and contribute on an ongoing basis.”

He added: “In simple terms, the more cash the better. It is a critical issue for airlines at the moment and BA is strengthening its position.”