The merger that British Airways hopes will go through with Iberia has just recently been given a hurtful blow. This news came just after British Airways announced that its pension deficit had grown by £1.6 billion over the past year.

Apparently British Airways showed that its two largest pension funds have grown to £3.7 billion, up from £2.1 billion last year. This big jump has, of course, raised fears that the struggling airline will no longer be able to make payments to its entire workforce. This was one of the major hurdles that had to be dealt with during merger talks between the two companies.

The Spanish airline can actually walk away from this deal if they feel that British Airways’ pension trustees are not a reasonable option anymore. Of course, British Airways has put together a pension fund recovery plan in order to tie up the merger deal with Iberia by the end of next year. This is very likely going to included a capital injection.

The British Airways director of alliances, Roger Maynard, who had been managing the Iberia tie-up, has just recent resigned as chairman of the pension trustees to avoid any conflict of interest. British Airways did say that they felt the shortfall is not significantly worse than what had been indicated back in September. He went on to say that British Airways was confident that the deal would go ahead depending on negotiations with the regulator. Although, he did admit that Iberia had the right to call off the merger, should they wish to do so. Only time will tell what Iberia plans to do.