BA & Iberia Deal Moves Closer            

27/09/10

Iberia Approve BA Pension Plans

British Airways has moved a stage nearer to completing its merger with the Spanish airline Iberia, after agreement being reached by the two parties to tackle the 5.8 billion dollar deficit issue.

The pensions situation  was the largest stumbling block, and thought to be the greatest threat to the deal.

The airline endorsed the British flag carrier’s plans at a board meeting in Madrid on Wednesday. BA, which had agreed the measures with pension trustees in June, commented that the proposed merger plans were back on target.

The merger already has European Union clearance and shareholders of both companies should approve the deal  sometime in November. BA investors will control 56 per cent and Iberia shareholders 44 per cent of a new combined company to be called International Airlines Group (IAG).

Willie Walsh, chief executive of  BA, will become the head of IAG and Antonio Vaz­quez – his opposite number at Iberia – will be chairman.The merger will create Europe’s second-largest airline by market capitalisation after Lufthansa, carrying 62m passengers which will in turn create  revenues of around  £12.5bn annually.

British Airways aims to be a main contender in the travel sector and will use the merger as a means  to exploit Iberia’s strength in Latin America as well as BA’s presence in Africa, Asia and North America

The Australian carrier Quantas have said they are no longer interested in any new talks with BA/Iberia following  former merger discussions in 2008.

Under the deal struck with pension trustees in June, the NAPS deficit will be closed in 2026 with APS balancing its books three years earlier. BA’s cash contributions to the funds will remain at £330m, rising with inflation at about 3 per cent a year.