Airlines start merger talks

[July 30th 2008]

As the airline crisis deepens, two of Europe’s biggest airlines – British Airways and Iberia – are holding merger talks.

The airlines have had a close relationship for years. BA bought a 9% shareholding in Spanish airline Iberia in 1999 and recently increased its shareholding to 13.15%. Iberia announced at the start of this week that it had recently acquired a 2.99% direct shareholding in BA plus financial exposure to a further 6.99% through ‘contracts for difference’ linked to the BA share price.

"The aviation landscape is changing and airline consolidation is long overdue. The combined balance sheet, anticipated synergies and network fit between the airlines make a merger an attractive proposition, particularly in the current economic environment. We've had a successful relationship with Iberia for a decade and are confident that both companies' shareholders would benefit from the proposed tie-up," comments BA chief executive, Willie Walsh.

His counterpart, Iberia chairman and chief executive, Fernando Conte, adds: "A merger would be good news for our customers and enhance our existing relationship. We've worked together for nearly 10 years and a tie-up would build on that success. It would also strengthen the oneworld alliance and further develop Madrid's position as the European gateway to Latin America".

Both airlines are confident they will get regulatory approval for the merger. The EU has already given approval for them to co-operate widely.

However, it is likely to take several months for BA and Iberia to reach agreement on the terms of the merger and to finalise a joint business and integration plan for the combined airline. The BA and Iberia brands would be retained as part of the combined group.

Written by: Nick Purdom

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