British Airways and Iberia agree to merge

November 13, 2009 British Airways and Spain's Iberia airline have announced plans to merge. The merger is valued at £5.5 billion (US$9 billion dollars), and would create the third largest airline in the world.

The new company will be headed up by BA's Willie Walsh with the board led by Iberia's Antonio Vazquez. Shares are split 55% to 45% respectively, with each BA share being exchanged for a share in the new firm and each Iberia share worth 1.0205 shares in the new firm, to be registered in Spain with head offices in London.

A statement said the deal "is expected to generate annual synergies of approximately 400 million euros, and benefit both companies’ shareholders, customers and employees." It also stated Iberia may yet call off the plan "if the outcome of the discussions between British Airways and its pension trustees is not, in Iberia’s reasonable opinion, satisfactory." Subject to this, as well as shareholder and trustee consent, the merger is planned to be completed by next year.

The European Union is also required to approve. The EU has already warned the duo off from forming a transatlantic flight alliance with American Airlines, saying it would breach antitrust law. The trio still want to win approval for the plan to operate as one unit for flights to Mexico, Canada and the US. The possibility of a merger deal has been public since July, and may result in cost reductions. Iberia's six-month figures are expected tomorrow; BA has already reported a record £217 million loss.

British Airways is the United Kingdom's flag carrier and currently the third-largest carrier in Europe. The largest is Air France-KLM, formed in 2004 when Air France spent 700 million euros to acquire KLM Royal Dutch Airlines. That firm also owns 25% of Italian flag carrier Alitalia. This is followed by Lufthansa, who have acquired Swiss International Air Lines, Austrian Airlines and British Midland Airways. Lufthansa partially owns Belgian flag carrier Brussels Airlines.