BA pension deficit stalls merger talks with Iberia

British Airways' increasing pension deficit is reportedly becoming an obstacle in its all-share merger with Spanish carrier Iberia.

The deficit in BA's defined benefit (DB) pension scheme is said to have reached £1.74 billion in September, a huge increase on the £400 million in the latest full year accounts. Stock market plunges may have increased this further.

It has prompted Iberia's shareholders to push for a bigger stake in the combined group, said to be at least 40%, in order to compensate for the huge retirement liabilities. Iberia is said to have no such pensions deficit and its shares have performed better than BA's, leaving the Spanish firm in a strong position in the ongoing negotiations.

A BA spokesperson said: "Iberia is aware of the pension position of British Airways and talks on the proposed merger continue."