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BA and Iberia agree merger deal BA and Iberia agree merger deal
(39 minutes later)
British Airways and the Spanish airline Iberia say they have reached a preliminary agreement for a merger. British Airways and the Spanish airline Iberia say they have reached a preliminary agreement for a merger that should be formalised early next year.
The two airlines have been discussing the deal at separate board meetings throughout the day. The two airlines have been discussing the deal at separate board meetings.
Iberia had earlier said the deal under discussion would give it 45% and BA 55% of the new company. Under its terms, Iberia would take a 45% stake and BA, which last week reported a six-month pre-tax loss of £292m, a 55% stake in the company.
BA chief executive Willie Walsh has previously said that a merger would help both firms cope with the current economic downturn. Iberia said it would be able to pull out of the deal if BA did not resolve its pensions deficit problems.
The firms have considered a tie-up for a number of years, holding talks on the issue in July 2008. "The merger will create a strong European airline well able to compete in the 21st Century," said BA chief executive Willie Walsh.
Co-operation "Both airlines will retain their brands and heritage while achieving significant synergies as a combined force."
BA already owns 13.5% of Iberia, and the two carriers have a code-sharing agreement under the One World grouping of airlines, which allows them to sell seats on each other's services. Both airlines have been losing money during the downturn as businesses and individuals cut back on flying.
Mr Walsh has previously said a merger would help both firms cope with the recession.
The firms have considered a tie-up for a number of years and held talks on the issue in July 2008.
BA already owns 13.5% of Iberia and the two carriers have a code-sharing agreement under the One World grouping of airlines, which allows them to sell seats on each other's services.
If a merger is formalised, it would still require regulatory approval from the European Commission.If a merger is formalised, it would still require regulatory approval from the European Commission.
However, analysts say a deal is likely to be cleared, pointing to Air France's successful merger with Dutch airline KLM in 2004.However, analysts say a deal is likely to be cleared, pointing to Air France's successful merger with Dutch airline KLM in 2004.
BA's announcement comes a week after it said it would cut a further 1,200 jobs, as it reported a first-half loss for the first time. It made a pre-tax loss of £292m in the six months to the end of September. The agreement comes a week after BA said it would cut a further 1,200 jobs, as it reported a first-half loss for the first time.
It made a pre-tax loss of £292m in the six months to the end of September.
The half-year results also revealed a growing problem with its two final-salary pension schemes.
In the past six months, the surplus in one scheme fell from £860m to £27m, while the deficit in the other scheme ballooned from £1.2bn to £2.7bn.
Iberia's most recent results showed that it made a loss of 72.8m euros ($109m; £66m) between April and June.Iberia's most recent results showed that it made a loss of 72.8m euros ($109m; £66m) between April and June.
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