BRITISH Airways has agreed a recovery plan for its £3.7bn pension deficit – removing a final obstacle to its planned merger with Spain's Iberia.
BA said it had reached a deal with the trustees of its Airways Pension Scheme (APS), which last December had a deficit of £1bn and its New Airways Pension Scheme (NAPS), which was £2.7bn in the red.
The airline said the proposals would avoid closing the schemes and maintain BA's annual contributions at the current level of £330m plus agreed annual increases in line with inflation expectations averaging three per cent.
BA will, however, make additional deficit contributions if its year-end cash balance exceeds £1.8bn and the two schemes will also be provided with £250m of additional security over the company's assets which would become payable in the event of British Airways' insolvency.
Iberia has the right to pull out of its planned merger with BA if doesn't deem the pension recovery plan to be satisfactory.
"Iberia has three months to reach a decision on the pension recovery plan," BA said in a statement.