UK - British Airways (BA) and Iberia have signed a merger agreement subject to BA and the trustees agreeing a "satisfactory" deficit recovery plan. Meanwhile Lincolnshire County Council has appointed global equity managers and West Sussex has awarded a global custody mandate.

Elsewhere, workers at the AA motoring services firm have voted to strike over changes to the final salary pension scheme.

BA and Iberia have taken the next step in creating a new European airline group, International Consolidated Airlines Group SA, with the signing of a merger agreement expected to be presented to shareholders in November and completed by the end of the year.

The deal will see BA and Iberia retain their current operations and operate under their existing brands, while the new company will be listed on the UK and Spanish stock exchanges.

However the statement confirmed that Iberia is still entitled to terminate the merger agreement if the pension recovery plan agreed between BA and the trustees to reduce the combined £3.7bn (€4.2bn) deficit in its two pension plans - the Airways Pension Scheme (APS) and New Airways Pension Scheme (NAPS) - is not "satisfactory".

An unsatisfactory proposal would mean that, in Iberia's opinion, the recovery plan would be "materially detrimental to the economic premises of the proposed merger". BA confirmed it had agreed the assumptions of the pension deficit with trustees last month and is working on a recovery plan to be presented to the Pension Regulator by 30 June 2010. (See earlier IPE article: BA proposes benefit changes to aid recovery plan)

Lincolnshire County Council has appointed three global equity managers to run a 20% allocation to global equity in its £1.12bn local government pension fund.

The council initiated a search for global equity managers in August last year following a strategy review of the scheme's investments. Previously, Alliance Bernstein and Threadneedle were responsible for the allocation, but while Threadneedle has been retained to run a global high alpha equity portfolio, the council has appointed two new managers. (See earlier IPE article: Lincoln seeks global equity manager after strategy review)

Neptune Investment management will be responsible for a global equitiy strategy while Schroders Investment Management has been appointed to a global equity alpha strategy. Details from Lincolnshire Council's latest pension committee meeting revealed that searches for a passive and absolute return bond managers are ongoing, while it has recently initiated a search for an alternatives manager to be appointed by September 2010.

West Sussex County Council has awarded Northern Trust the global custody contract for its pension fund.

Northern Trust will be responsible for providing global custody and investment accounting services to the £1.5bn West Sussex Pension Fund. Rachel Wood, pension fund investment strategist at the scheme, said Northern Trust had "designed a cost-effective and technologically efficient solution tailored to our needs".

Elsewhere the Independent Democratic Union (IDU) has confirmed that its AA employee members have voted in favour of strike action over proposed changes to the AA's pension scheme.

The AA pension scheme comprises of two parts, a final salary and a career average section, and the proposals include raising the cap on the final salary part from 1% to 2.5% and increasing staff contributions.

The union balloted its members over the changes in March and of the 87.7% ballot papers returned 57.21% voted in favour of strike action.

But the AA has criticised the union for "jumping the gun" and balloting members before the consultation period closes on 23 April. It also claimed the proposals include a commitment to increase employer contributions by 40% from £13m to £18m and to clear the current deficit estimated at around £190m.

Andrew Strong, chief executive of AA Services, said: "This is not a strong mandate to strike and we would urge the union to think again. When you look at problems that beset Readers Digest and many blue chip companies over their pension deficits we believe that the fact that we want to keep our DB scheme open is good news. In the consultations most staff seem to accept the need for the company to make changes to the scheme and we think the majority of staff will support our proposals."

The IDU stated its national executive would now meet to decide the date and type of strike action if the AA "continues to refuse to enter into meaningful negotiations".

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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