BA pension deficit may stall merger

BA and Iberia’s merger talks are firming up. However, despite BA’s swaggering bravado, the airline’s pension deficit may cause a turnaround in which of the two is the dominant partner in the negotiations.The merger talks, which have been ongoing for several years now, surged back into life last week. BA made several cautious comments to Iberia’s more enthusiastic ones but the latter’s proviso if BA does not resolve its pension deficit problem then Iberia can still back out.BA has said that it does not see it as a problem. “It is still a matter to be fully resolved but we don’t believe it will be a stumbling block,” said a BA spokesman. “We have taken them [Iberia] through all the issues and they are aware of the details,” he said.However, Iberia said that if discussions between BA and its pension trustees are not “in Iberia’s reasonable opinion, satisfactory because it is materially detrimental to the economic premises of the proposed merger”.BA has two final-salary pension schemes, both of which are closed to new employees. One has a rapidly shrinking surplus of £27 million while the larger has a deficit that has now doubled to £2.7 billion. These figures are estimates though and an evaluation but actuaries will give a more accurate figure on BA’s deficits in the next few months.