A planned £5.4bn merger between British Airways and Spanish counterpart Iberia is now awaiting the go-ahead after BA created a rescue package for its gaping £3.7bn pension deficit.
Two retirement schemes have been targeted; the Airways Pension scheme needs £1bn to bring it up to scratch, while New Airways Pension scheme is £2.7bn in the red. Having struck a deal with trustees of both these schemes, BA is optimistic it can inject fresh life into the funds, and have allowed Iberian 3-months to approve. The flag-carrier has also forwarded the plan to the Pensions Regulator for approval.
Should the Spanish company reject these proposals, the proposed merger will be abandoned, but a spokesman for Iberia sees the pension agreement as a positive step forward.
Under the conditions of the deal, current members of BA’s two schemes will need to increase their monthly payment or settle for a lower pension on retirement. For BA’s part, contributions will stay at £330m a year, with extra payments if the cash balance exceeds £1.8bn at the end of the year.