British Airways said it had agreed a recovery plan for its 3.7 billion pound ($5.5 billion) pension deficit, potentially 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 1 billion pounds and its New Airways Pension Scheme (NAPS), which had a 2.7 billion pound black hole.
The airline said on Tuesday the proposals would avoid closing the schemes and maintain BA's annual contributions at the current level of 330 million pounds, plus agreed annual increases in line with inflation expectations averaging 3 percent.
BA will, however, make additional deficit contributions if its year-end cash balance exceeds 1.8 billion pounds and the two schemes will also be provided with 250 million pounds 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.
(Reporting by Matt Scuffham; Editing by Paul Hoskins)