British Airways will have to overcome union opposition and pension problems if its proposed merger with Spanish carrier Iberia is to go ahead, it was revealed today.
The Unite union, already at loggerheads with BA over current job losses, said it would not back the merger unless commitments were given to avoid compulsory redundancies.
Unite also called for assurances that passenger service standards in a merged airline - which would become the world's third biggest - would be of the highest possible quality.
The other stumbling block to a deal that would create a 419-aircraft group flying to 205 destinations, is the BA pension deficit which amounts to around £2.6bn (€2.91bn).
The agreement signed by the two airlines on Thursday night allows Iberia to terminate the merger deal if it is not satisfied with the outcome of discussions between BA and its pension trustees on how to fund the deficit.
Despite the possible obstacles, BA chief executive Willie Walsh was in bullish mood today, saying the merger would be good for passengers, staff and BA shareholders.
He added that BA and Iberia, which carried a total of 62 million passengers last year, would retain their individual identities and that it was wrong to suggest the deal would take the "British" out of British Airways.
Mr Walsh said the merger, expected to be completed by the end of next year, would create "an airline group that will truly compete on a world level".
Steve Turner, Unite's national officer for civil aviation, said: "We need assurances from the outset from BA and Iberia that compulsory redundancies will be avoided and that the new airline will be the best in the business in terms of passenger service.
"It is imperative that both companies sit down as soon as possible with the unions here and in Spain to discuss how jobs and standards can be safeguarded.
"Our continued support for this project, as well as the stability we are all seeking to bring to BA at this current time, are dependent upon a satisfactory agreement being reached between us and both companies."
Rival airlines expressed opposition to the agreement. Low-fare carrier Ryanair likened the merger to "two drunks trying to prop each other up", while Virgin Atlantic said the deal would increase BA's dominance at Heathrow airport.
The merger is expected to produce annual savings of around £358m (€401m) by the end of the fifth year after the merger's completion.
Both airlines are in need of a boost. Last week, BA announced a record pre-tax loss of £292m (€327.1m) for the six months to the end of September, with Mr Walsh warning that manpower would be reduced by the equivalent of 3,000 roles by March next year.
Today, Iberia announced that it made losses of around £162.4m (€181.9m) in the first nine months of this year - more than three times its losses for the same period last year.