Show Hide image

Iberia board approves BA pension plan

The pension plan was one of the last stumbling blocks for the proposed merger between the airlines.

Spanish airline Iberia has approved a new funding plan for British Airways' staggering pension deficit, thus clearing the decks for the merger of the two airlines.

The decision, made by Iberia after a board meeting, was welcomed by BA which is grappling with staff unrest due to job cuts and changes in working practices. A BA spokesman said the merger plan "is now very much on target."

The $8bn merger deal, expected to be completed by December, will create the world's third largest airline. The combined company will be called International Airlines Group, with BA investors holding 56 per cent share, the rest being held by Iberia shareholders.

Under an agreement reached between the two airlines last year in November, Iberia could walk away from the merger if it did not find satisfactory the outcome of the discussions between BA and its pension trustees.

BA in a statement has now said: "Having reviewed British Airways' pension recovery plan, Iberia's board of directors has confirmed that it will not exercise its right to terminate the merger agreement between the two airlines."

An Iberia spokesman said the decision represents another step forward in the merger process, which will be completed when the shareholders general meeting takes place, expected in November.

Under the 16-year deficit recovery plan, BA would maintain annual contributions of £330m until 2026 for New Airways Pension scheme and 2023 for the Airways Pension Scheme, apart from extra contributions if its year-end cash balance goes over £1.8bn.