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Giant European airline in the making as British Airways, Iberia announce merger news
29 July 2008

It is now the turn of European carriers to announce giant consolidation moves in step with US carriers. UK flag carrier, British Airways, has ended long-standing speculation and announced its intention to  merge with long-term Spanish partner Iberia. This, effectively, creates a giant new European airline.

Between them, the two airlines will boast of a fleet of nearly 450 aircraft and a route network of more than 250 destinations.

The deal, which will allow both airlines to retain their identities, will have to be approved by shareholders.  It will also likely take several months to conclude.

When queried, BA chief executive, Willie Walsh, said it was "far too early" to say if the deal would result in any job losses, though he felt that it was unlikely that there would be any reduction in the size of the two carriers. 

In the face of a severe industry downturn and galloping costs, as well as moves by American carriers to consolidate, speculation had been mounting over counter moves by BA and  Iberia for a closer alliance. The two airlines already  have a codeshare agreement on 30 flights.

BA's Walsh said the two companies were a good fit and that consolidation in the airline industry was "long overdue". While, BA already owns a 13.15% stake in Iberia, and has been a shareholder in the Spanish carrier since 1999, Iberia recently bought a 2.99% holding in BA.

BA said both airline brands would be retained under the deal as part of a new enlarged group, which would be listed on London's FTSE 100 Index and the Madrid stock exchange.

According to Walsh, "The combined balance sheet, anticipated synergies and network fit between the airlines make a merger an attractive proposition, particularly in the current economic environment. We've had a successful relationship with Iberia for a decade and are confident that both companies' shareholders would benefit from the proposed tie-up."

Iberia's chairman and chief executive Fernando Conte said: "A merger would be good news for our customers and enhance our existing relationship. We've worked together for nearly 10 years and a tie-up would build on that success."

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Giant European airline in the making as British Airways, Iberia announce merger