BA crew to strike over Christmas

LONDON (Reuters) - British Airways cabin crew called a strike on Monday, hours after the airline revealed a 3.7 billion pound ($6 billion) hole in its pension fund that will require deft handling if a proposed merger with Iberia is to stay on track.

"The strike will take place over 12 days from December 22 but we have taken the decision, which will disrupt the travel plans of thousands of people, with a heavy heart," a Unite spokesman told reporters.

"Of the staff balloted 92.5 percent voted in favor of industrial action."

BA shares, which have fallen 9 percent in the past three months, closed down 0.1 percent at 201 pence on Monday, valuing the business at around 2.3 billion pounds.

The Unite union balloted some 13,000 cabin crew members on industrial action as part of a dispute over job losses and changes to working practices.

BA wants three quarters of its crew to accept a pay rise of between 2 and 7 percent this year, which will be frozen next year, and for 3,000 staff to switch to part-time working, along with a reduction in onboard crewing levels from 15 to 14 on long-haul flights from London Heathrow.

"A strike is senseless and we urge Unite to draw back. We will not be reversing our changes to onboard crew numbers. Unite must understand that there can be no return to the old, inefficient ways if we want to ensure long-term survival," said BA's chief executive Willie Walsh.

The strike could cost BA around 50 million pounds in lost revenues and refunds, analysts say.

BA would have expected to fly around 1 million passengers over the strike dates, with the decision likely to boost ticket sales on rival airlines as passengers look for alternatives.

"Unite's decision will damage BA in the short-term and could damage the future viability of the airline," Walsh said.

Walsh has said changes at the airline, which analysts believe is losing 1.5 million pounds a day, are essential to help repair its precarious finances.

The company last month reported a first-half pretax loss of 292 million pounds, and is expected to report a loss of 601.2 million pounds for the full year, according to a Thomson Reuters I/B/E/S poll of 19 analysts.

PENSION WOES

Earlier on Monday BA said its pension deficit more than doubled to 3.7 billion pounds at the end of March, from 1.8 billion a year earlier, at the high end of analyst expectations, but not seen as big enough to derail a merger with Spain's Iberia.

"We're not surprised by this figure. It falls within the expected range," a source at Iberia told Reuters on Monday.

BA denied that the pension funds announcement was timed to coincide with today's meeting, saying once it had reached an agreement with the pension trustees it had to release details to the market.

BA and Iberia announced in November that they had reached an agreement on a merger, which they hope will be concluded by the end of 2010, after months of negotiations.

BA's pension deficit was the main stumbling block in the merger negotiations, and Iberia has reserved the right to back out of the deal if the funding hole turns out to be too big.

"The company may be forced to renegotiate pension benefits with employees if it is to avoid using more shareholders cash. Industrial unrest could therefore worsen over the next few weeks," Deutsche Bank said.

BA said the airline and pension trustees will work together to develop a recovery plan, a process which will involve the company consulting with employees and their trade unions and which must be completed by June 30, 2010.

Independent pensions consultant John Ralfe said the statement appeared to imply that the company would be talking to unions and employees about cutting benefits at a time when industrial relations are already strained.

A spokeswoman for BA said the company could not afford to make any additional contributions to the pension scheme than those already being made, but was looking at all other options for a recovery plan.

(Additional reporting by Tracy Rucinski, Paul Hoskins and Joel Dimmock; Editing by Greg Mahlich and Rupert Winchester)

($1 = 0.6161 pound)