By NBF News

BA and Iberia hope to agree more tie-ups once their own merger is complete.

The merger between Iberia and British Airways has taken a step closer after the Spanish carrier backed BA's approach to tackling its £3.7bn pension deficit.

Iberia had the right to cancel the tie-up if it felt the hole would be too much of a lag on the merged firm.

But it said it had chosen not to invoke its right to pull out of the deal.

In June, BA set out a recovery plan to address the deficit, putting aside at least £330m a year until 2026.

Observers say that this was the last major hurdle to the tie-up going ahead.

“This decision represents another step forward in the merger process,” Iberia said in a statement after a board meeting on Wednesday.

The BA-Iberia deal was announced in April this year and will create Europe's second-biggest airline by market value after Lufthansa.

The firms have formed the umbrella of International Airlines Group (IAG). Once finalised, BA shareholders will hold 56% of the combined company while Iberia investors will take a 44% stake.

Earlier this month, BA chief executive Willie Walsh said they had drawn up a shortlist of up to 12 airlines which they hope to buy or merge with once their own tie-up has been completed.