BA pension deficit swells to 3.7 billion pounds

LONDON (Reuters) - British Airways said on Monday that its pension deficit had swelled to 3.7 billion pounds, giving Spain's Iberia a get out clause if it wants to call time on their long-planned merger.

BA BAY.L said an actuarial review had revealed a 1 billion pound deficit at its Airways Pension Scheme (APS) and a further 2.7 billion pound black hole at its New Airways Pension Scheme (NAPS).

That compares with a funding gap of 1.5 billion pounds identified by trustees at the end of March 2008.

"The airline and trustees will now work together to develop a recovery plan, a process which will involve the company consulting with employees and their trade unions," the company said, adding that the deadline for the process was June 30.

British Airways and Iberia IBLA.MC announced in November that they had reached a preliminary agreement for a merger after months of negotiations.

BA's pension deficit was one of the main stumbling blocks in the 16-month merger talks and Iberia has reserved the right to back out of the deal if the funding hole turns out to be bigger than the 3 billion pounds analysts had been expecting.

(Reporting by Paul Hoskins; editing by Paul Hoskins)