British Airways announces plans to merge with Spanish airline

British Airways has announced plans to merge with Iberia, a Spanish airline. The deal has not yet been completed but should be made formal in 2010.

Before the deal can be completed it must receive the go-ahead from the European Commission. Once the merger has been made final, the new company will become one of the largest airlines in the world. British Airways (BA) has been struggling due to the recession and other factors. The company recently announced a £292 million loss over the last six months. The merger will mean that a holding company called TopCo is to be set up and BA will retain the biggest share of the business at 55 percent, while Iberia will have a 45 percent share. The two airlines first met for talks back in 2008 to discuss the possibility of a deal. British Airways currently holds a 14 per cent stake in Iberia. The Spanish airline still has the option of backing out of the plans should BA not find a way of addressing the pensions black hole which exists in its company. The merger will mean the company will own a total of 419 planes and flights will go to more than 200 different destinations. Virgin Atlantic, a rival of British Airways, has some reservations over the deal and the market share it will acquire. Both BA and Iberia have announced heavy losses in the past year and both faced the threat of strike action. The Chairman and CEO of Iberia Airlines Antonio Vázque issued a statement on their website which said: “It has been a long process where many people, both at British Airways and Iberia, have worked very hard to reach this agreement. But in the end it was worth it. This agreement is a giant step in the history of both Iberia and British Airways. We are laying the foundations of what will be one of the most important airlines in the world, a real global airline. I believe that, thanks to this transaction, which is the most important in the European airline industry in recent years, we are more prepared than ever to face future challenges." British Airways Chief Executive Willie Walsh said: “The merger will create a strong European airline well able to compete in the 21st century. Both airlines will retain their brands and heritage while achieving significant synergies as a combined force.” Union leaders seem to be in favour of the deal and don't forsee job losses as a result.