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BA and Iberia agree merger plans | BA and Iberia agree merger plans |
(13 minutes later) | |
British Airways and Spanish airline Iberia have reached a preliminary agreement for a merger expected to be completed in late 2010. | British Airways and Spanish airline Iberia have reached a preliminary agreement for a merger expected to be completed in late 2010. |
The merger, which is expected to get regulatory backing, would create the world's third biggest airline. | The merger, which is expected to get regulatory backing, would create the world's third biggest airline. |
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 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 new company. |
Iberia says it can pull out if BA fails to resolve its pension deficit problem. | Iberia says it can pull out if BA fails to resolve its pension deficit problem. |
'Growing dominance' | 'Growing dominance' |
"The merger will create a strong European airline well able to compete in the 21st Century," said BA chief executive Willie Walsh. | "The merger will create a strong European airline well able to compete in the 21st Century," said BA chief executive Willie Walsh. |
I think BA will be pleased with the deal they have got - the headquarters in London, led by Willie Walsh, and BA will be majority shareholder Douglas McNeil, Astaire Securities The long-haul route to the deal | I think BA will be pleased with the deal they have got - the headquarters in London, led by Willie Walsh, and BA will be majority shareholder Douglas McNeil, Astaire Securities The long-haul route to the deal |
"Both airlines will retain their brands and heritage while achieving significant synergies as a combined force." | "Both airlines will retain their brands and heritage while achieving significant synergies as a combined force." |
The deal would create an airline with 419 aircraft flying to 205 separate destinations, and would save the two partners 400m euros ($594m; £358m) in costs a year, the two carriers said. | |
Iberia's chairman Antonio Vazquez will take the same role at the new company, while Mr Walsh will become its chief executive. | |
Aviation analyst Douglas McNeil of Astaire Securities said BA would be "relieved" to have finally got the merger deal in place. | |
"I think BA will be pleased with the deal they have got - the headquarters in London, led by Willie Walsh, and BA will be majority shareholder," he said. | |
Simon Calder, travel editor of the Independent, agreed that the planned merger was a good deal for BA. | |
"British Airways has come out of this pretty well, it will be the dominant partner," he said. | |
"Don't expect any great benefits [after the merger] if you are a passenger, but if you are a shareholder it could be a different story." | |
News of the deal did not go down well with Virgin Atlantic, one of BA's big competitors in the UK, which raised concerns about the new company's market share. | News of the deal did not go down well with Virgin Atlantic, one of BA's big competitors in the UK, which raised concerns about the new company's market share. |
"The merger will increase BA's dominance at Heathrow with 44% of take-off and landing slots this winter. It is impossible for any other airline to replicate their scale," the airline said. | "The merger will increase BA's dominance at Heathrow with 44% of take-off and landing slots this winter. It is impossible for any other airline to replicate their scale," the airline said. |
Big losses | Big losses |
Both BA and Iberia have been losing money during the downturn as businesses and individuals cut back on flying. | Both BA and Iberia have been losing money during the downturn as businesses and individuals cut back on flying. |
BA has been cutting jobs in order to reduce costs | |
Mr Walsh has previously said a merger would help both firms cope with the recession. | 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. | 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. | 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. |
Financial woes | Financial woes |
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. | 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. |
HAVE YOUR SAYWe are in a recession and the member states of the EU must pull together for the good of allJames, East Lothian Send us your comments | HAVE YOUR SAYWe are in a recession and the member states of the EU must pull together for the good of allJames, East Lothian Send us your comments |
It made a pre-tax loss of £292m in the six months to the end of September. | 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. | 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. | 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 revealed on Friday that it had made a net loss of 182m euros in the nine months to the end of September, compared with a profit of 51.1m euros a year ago. | Iberia revealed on Friday that it had made a net loss of 182m euros in the nine months to the end of September, compared with a profit of 51.1m euros a year ago. |
The merger announcement comes as both airlines are also negotiating with staff over strike action. | The merger announcement comes as both airlines are also negotiating with staff over strike action. |
BA cabin crew are being balloted on whether to take action over the company's cost-cutting plans, while Iberia staff have already gone on strike over pay, and plan more disruptions in the run-up to Christmas. | BA cabin crew are being balloted on whether to take action over the company's cost-cutting plans, while Iberia staff have already gone on strike over pay, and plan more disruptions in the run-up to Christmas. |
What is your reaction to the merger between British Airways and Iberia? Do you work for either company? Send us your comments using the form below. | What is your reaction to the merger between British Airways and Iberia? Do you work for either company? Send us your comments using the form below. |
The BBC may edit your comments and not all emails will be published. Your comments may be published on any BBC media worldwide. Terms & Conditions | The BBC may edit your comments and not all emails will be published. Your comments may be published on any BBC media worldwide. Terms & Conditions |