British Airways’s attempts to seal an all-share merger with Spain’s Iberia are running into trouble because of its pension deficit. Shareholders in the Spanish carrier are pushing for a bigger chunk of the combined group to compensate them for British Airway’s massive retirement liabilities.

The deficit in BA’s defined benefit pension plans swelled to £1.74billion as of mid-September – a massive jump on the £400million figure in its full-year accounts. It is likely to have increased further as the stock market plunges. Iberia shareholders are reportedly pushing for at least 40 per cent of the combined group, instead of 35 per cent under BA’s original plans.

A BA spokesman said: ‘Talks continue and Iberia is aware of the pension position of British Airways.’ The scale of the BA deficit is putting Iberia in a more powerful negotiating position. The carrier doesn’t suffer from equivalent pension problems and its shares have held up better since the deal was announced in July.

source: www.dailymail.co.uk