British Airways has given its strongest indication yet that the proposed merger with Iberia, the Spanish flag carrier, is imminent with only one outstanding issue to be resolved before the deal can be agreed.

Willie Walsh, the chief executive of BA, said that early sticking points including the airline’s pension deficit and share of ownership were no longer problems.

The chairman and chief executive roles have also been agreed in principle and an estimated £400 million of synergies identified.

However, Mr Walsh did say that there was still no agreement on how the merged parent company would control the two airlines.

BA and Iberia plan to create a single parent company, Topco, that would own the two airlines, allowing the carriers to operate largely independently and retain their brands.

Mr Walsh said: “The single area of difficulty between us relates to governance and specifically the financial control that Topco can exercise over the two operating companies. The only way you can guarantee the synergies is if Topco can exercise financial control."

Mr Walsh is expected to remain as chief executive of the combined group while Fernando Conte, the head of Iberia, is likely to step up to become chairman.

The proposed merger, which will create one of the world’s largest airlines, had been in danger of collapsing earlier this year as Iberia pushed for an equal split in ownership of the new company.

When the deal was first announced last year, BA’s shareholders would have owned nearly 70 per cent based on market capitalisation. This fell to 50 per cent as BA’s share price collapsed. Speculation in Spain has suggested that the deal will be concluded at a split of 55:45 to BA, although it is unknown whether BA’s shareholders will find that acceptable.

Yesterday, British Airways has raised the possibility of significant job losses in the coming year and warned that its revenue will fall by 5 per cent.

The airline was updating shareholders on its outlook for the year and hinted that it may have to pay for job losses. The company has already cut the headcount in management by about 500 from 1,400 but these costs have been accounted for.

The airline has so far declined to speculate on whether jobs would also be lost from cabin crew and its operations division. BA is negotiating with trade unions to freeze the pay of its 45,000 staff.

In a statement BA said: "A similar operation result for 2009-10 to that forecast for 2008-09 has been targeted, before any severance costs in 2009-10."

BA has said that it expects an operational loss of £150 million in the year to the end of March and the airline's latest guidance suggests that the losses next year will be similar.

The carrier said that revenue would fall from an estimated £9 billion this year by 5 per cent, or around £450 million.

BA will also cut capacity by 2 per cent this summer to reflect the downturn in demand from passengers. It has already cut capacity by 3 per cent.

One positive aspect is that lower oil prices will enable BA to cut its fuel bill by £220 million next year after a £950 million increase this year.

BA said that business and first class passenger numbers had fallen by 20 per cent last month because of the recession and heavy snow. Economy passenger numbers were down 5.5 per cent.

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