FTSE flat, BA and Iberia consider merger

* BA and Iberia boards consider merger

* BT update sees telecoms rise

* Oils down as crude slips, miners weaker

By David Brett

LONDON, Nov 12 (Reuters) - Britain's FTSE 100 .FTSE index was flat at midday on Thursday, although British Airways soared after news that its board was meeting to consider a merger with Iberia, and defensive stocks were mostly firmer, offsetting weakness in cyclical commodity stocks.

At 1222 GMT the FTSE 100 .FTSE was up 0.09 points at 5,266.84. The index ended 0.7 percent higher on Wednesday, having touched an intraday high at a level not seen since September 2008.

"A combination of Cadbury (CBRY.L)/Kraft, RIO Tinto (RIO.L)/BHP Billiton (BLT.L) and BA/Iberia, all these potential M&A stories are all drivers," said Manus Cranny, senior market commentator at MF Global.

"The newsflow has been reasonably positive. Lloyds (LLOY.L) has seen extra demand for their convertible bonds from their bond holders, which says to me that the market, underlined, is reasonably optimistic," he said.

British Airways (BAY.L) rose 7.2 percent and Iberia (IBLA.MC) climbed 9.2 percent after the airlines confirmed their boards were holding separate board meetings to consider a merger to create the world's third largest airline by revenue. [ID:nLC092017]

Telecoms notched up good gains in the wake of BT Group's (BT.L) second-quarter results. BT added 4.9 percent while Vodafone (VOD.L) added 1.4 percent and Cable & Wireless (CW.L) rose 0.6 percent.

BT increased its revenue and dividend forecast for the full year after stringent cost cuts helped the former telecoms monopoly to beat second quarter core earnings expectations. [ID:nLB181504]

Pharmaceutical giant GlaxoSmithKline (GSK.L) gained 1.8 percent as Barclays Capital initiated coverage with an "equal weight" rating, whileUBS also chipped in by hiking its target price for GSK.

Banks were generally higher as investors bought into Standard Chartered (STAN.L) and Lloyds Banking Group (LLOY.L), which rose 0.3 and 0.6 percent respectively.

Barclays (BARC.L), up 1.5 percent, rebounded from falls seen since its third-quarter trading update on Tuesday, as Morgan Stanley and ING both lifted their price targets for the firm.

But traders took profits on Europe's largest bank HSBC (HSBA.L) down 0.4 percent following its third-quarter update on Wednesday, and state-supported Royal Bank of Scotland (RBS.L) fell 3.8 percent extending losses for the third consecutive day.