London: British Airways (BA) and Spain's Iberia have signed a merger deal to create one of the world's biggest airline groups, the companies announced yesterday.
They expect the deal, which follows a provisional agreement reached at the end of last year, to be completed by the end of 2010.
The merger will save the airlines $400 million (Dh1.9 billion) a year by the fifth year and will benefit shareholders, customers and employees, the carriers said. Both will continue to operate under their individual brands.
With 408 aircraft flying to 200 destinations, carrying more than 58 million passengers each year, the merged group would become the third largest in Europe and the sixth largest worldwide.
"The merged company will provide customers with a larger combined network," BA Chief Executive Willie Walsh, said.
"It will also have greater potential for further growth by optimising the dual hubs of London and Madrid and providing continued investment in new products and services."
Battle over pay
The announcement of a firm deal comes as loss-making BA fights an acrimonious battle over pay and working conditions with its 13,000 cabin crew.
Staff went on strike twice for a total of 10 days last month, costing the airline some £40 million.
Like other airlines, both BA and Iberia have been hit by a downturn in passenger demand since the global credit squeeze and they acknowledge that more consolidation of the industry is likely.
They said the merger deal, which is subject to regulatory approval from the European Commission and to approval by both BA and Iberia shareholders, is structured to take advantage of that anticipated further consolidation.
Better equipped
"This is an important step in the process towards creating one of the world's leading global airlines that will be better equipped to compete with other major airlines and participate in future industry consolidation," Antonio Vazquez, Iberia's chairman and chief executive said.
Both airlines will retain their current operations and operate under their individual brands.
The transaction will be implemented through the creation of a new holding company called International Consolidated Airlines Group which will be known as International Airlines Group.
BA shareholders will receive one new ordinary share in International Airlines Group for every existing BA ordinary share held and Iberia shareholders will receive 1.0205 new ordinary shares for every existing Iberia ordinary share held.
The treasury shares held by Iberia and the cross-shareholdings held by BA and Iberia in each other will not be eligible for International Airlines Group shares.
International Airlines Group will be listed on the London Stock Exchange.
The pair plan to hold shareholder meetings for approval in November.
