Merged BA Iberia takes off

January 21, 2011

, LONDON, Jan 21, 2011 – A multi-billion-euro merger between British Airways and Iberia of Spain, creating Europe\’s second biggest airline, was completed on Friday, the two companies announced.

"The merger has now become effective," a statement said as shares in the new company, International Airline Group (IAG), prepare to trade for the first time on Monday.

Shareholders of BA and Iberia voted in November to approve the merger which values the pair at a combined $9.6 billion (7.1 billion euros).

British Airways will hold 55 percent of IAG, while Iberia will own the remaining 45 percent.

BA and Iberia will each retain their current operations and individual brands. Current BA boss Willie Walsh will become chief executive of the new group.

A merger allows the two carriers to catch up with rivals such as Air France-KLM and Lufthansa, according to analysts.

"In terms of size, BA-Iberia will be the second biggest carrier in Europe and amongst the top ten in the world," said Saj Ahmad, an analyst at consultants FBE Aerospace.

"This should deliver many operational economies of scale as the businesses integrate over time and allows BA/Iberia to offer a wider global network for their customers," he told AFP on Friday.

BA is set to benefit from Iberia\’s strong presence in Latin America, while the Spanish airline will gain from the British carrier\’s strength in North America and Asia.

The tie-up creates Europe\’s second-biggest airline by market capitalisation after Germany\’s Lufthansa and will fly about 60 million passengers a year.

BA and Iberia sought to merge as the global economic downturn and the rise of low-cost airlines resulted in steep losses for traditional carriers.

Since the tie-up announcement, the pair have had to overcome travel chaos due to strikes and the Iceland volcanic ash cloud to post healthy returns to profit, indicating that the sector is on a path to recovery after the deep recession.

Meanwhile, the result of a ballot of BA cabin crew for fresh strikes in their long-running dispute over pay and other working conditions is due on Friday.

The landmark Anglo-Spanish merger will meanwhile create annual savings of around 400 million euros by the fifth year of the tie-up.

Walsh has previously indicated that the goal was to have other airlines join the new group.

"Our future is a multinational, multibrands airline group. We look forward to welcoming further brands," he said back in November.

"We are excited about future opportunities but we will be patient."


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