Spain’s Iberia Lineas Aereas de Espana SA will proceed with its planned merger with British Airways PLC after Iberia’s board of directors reviewed BA’s pension deficit recovery plan, according to a statement from Enrique Dupuy de Lome, Iberia’s financial director.
Removing one of the last obstacles to the merger, the board decided “not to exercise its right to cancel the merger contract with British Airways in relation to the agreement reached between the latter and the trustees of its pension funds,” according to the statement, which was published on Iberia’s website on Wednesday.
“This decision represents another step forward in the merger process,” according to the statement. The deal still needs approval from shareholders of both companies and is expected to be completed as early as November.
When the merger agreement was first announced in April, Iberia officials had reserved the right to terminate the agreement if they were not satisfied with the pension deficit recovery plan. In June, BA agreed with pension trustees to make additional contributions to the £8 billion ($12.5 billion) New Airways Pension Scheme and the £6.4 billion British Airways Pension Scheme, both of London, in the event that the company’s year-end cash balance level rises above £1.8 billion. Employee contributions also would increase under the plan to reduce a deficit of about £3.7 billion.