SPAIN - Spanish carrier Iberia will not make any injection into the ailing British Airways (BA) pension fund if the companies' planned merger goes ahead, IPE has learnt.

A spokeswoman confirmed to IPE the company had commissioned consultancy firm Mercer to review BA's final salary pension scheme and expects a report later this month. But she added no cash will be injected into the heavily underfunded scheme.

Discussions with Iberia had stumbled on concern about BA's widening pension deficit and the balance of ownership in any combination in a new holding company.

According to the spokeswoman, merger talks between Iberia and Spain have been ongoing since last July and have continued, despite recent talks between Australian airline Quantas and BA.

Last month, Quantas identified problems connected to BA's pension fund as one of the "significant matters" that still need to be resolved before a merger with BA can be achieved. (See earlier IPE story Second BA deal under threat over pension scheme)

British Airways revealed in November the accounting deficit in its New Airways Pension Scheme (NAPS) had increased by another £201m stretching its total deficit to £558m (€690m).

Figures showed the Airways Pension Scheme (APS) had an accounting surplus of just over £1.1bn, of which £307m is recognised on the balance sheet - a £12m increase from March 2008 - while the NAPS reported a deficit of £558m, compared with £357m at the end of the first quarter.

However, the interim report also showed the APS reported a deficit of £245m on an actuarial valuation, and based on figures from March 2008, while the NAPS deficit reported an actuarial deficit of £1.54bn at 31 March 2008.

British Airways chief executive Willie Walsh said earlier this week he is confident the tie ups with American Airlines and Iberia can be concluded, adding there is no danger BA will be left behind as the industry consolidates.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email carolyn.bandel@ipe.com

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