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BA and Iberia agree merger plans BA merger 'good for passengers'
(about 1 hour later)
British Airways and Spanish airline Iberia have reached a preliminary agreement for a merger expected to be completed in late 2010. British Airways (BA) boss Willie Walsh has said the planned merger with Iberia is "great news for British Airways, our customers and our shareholders".
The merger, which is expected to get regulatory backing, would create the world's third biggest airline. He also said there was "no question" of the airline's standards of service being cut after its merger.
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. His comments came a day after the two carriers said they had reached a preliminary merger agreement.
Iberia says it can pull out if BA fails to resolve its pension deficit problem. In an interview with the BBC, Mr Walsh reiterated that both firms would retain their separate brand names.
'Growing dominance' The merger, which is expected to get regulatory backing and be concluded by the end of next year, is set to create the world's third largest airline.
"The merger will create a strong European airline well able to compete in the 21st Century," said BA chief executive Willie Walsh. Under the terms of the deal, BA will hold a a 55% stake in the new company with Iberia holding 45%.
The combined firm would have 419 aircraft flying to 205 destinations, and BA and Iberia said it would save them a total of 400m euros ($594m; £358m) in costs a year.
However, Iberia says it can pull out of the deal if BA fails to resolve its pension deficit problem.
Cabin service
"This is all about the future, about creating a strong European airline at which BA will be at the heart," said Mr 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 dealI 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." "The headquarters will be based here [in London], it will be listed in the UK, I will be chief executive."
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. He denied speculation that, following the merger, BA's level of cabin service would be reduced to Iberia's level.
Iberia's chairman Antonio Vazquez will take the same role at the new company, while Mr Walsh will become its chief executive. "There is no question about British Airways' standards. We are working to improve them, and think we are doing a tremendous job," he said.
Responding to the question of whether the planned merger would result in significant job cuts, he said: "I don't think staff will be worried, consolidation is part of our industry."
BA 'dominant'
Aviation analyst Douglas McNeil of Astaire Securities said BA would be "relieved" to have finally got the merger deal in place.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."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.
Union 'optimistic' at BA Iberia mergerUnion 'optimistic' at BA Iberia merger
Simon Calder, travel editor of the Independent, agreed that the planned merger was a good deal for BA.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."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." "Don't expect any great benefits 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. However, Virgin Atlantic, one of BA's big competitors in the UK, raised concerns over 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 Co-operation
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 costsBA 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 woesFinancial 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 and reported a loss in the first half of its financial year for the first time in its history.
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 commentsHAVE 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 also comes with both airlines negotiating with staff to try to prevent 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 & ConditionsThe BBC may edit your comments and not all emails will be published. Your comments may be published on any BBC media worldwide. Terms & Conditions