Merger deal with BA and Iberia agreed
April 9th, 2010 by elisa

British Airways has confirmed its merger deal with Spanish flag carrier Iberia creating a holding company called International Consolidated Airlines Group SA, known in short as International Airlines Group. The merger is expected to be completed by the end of the year, creating one of the world’s largest airline groups with 408 aircraft flying to 200 destinations and carrying more than 58 million passengers a year.

The new BA-Iberia group will generate annual “synergies” of approximately €400 million by the fifth year of the merger. This may be a merger, but in terms of their service to the public both airlines will retain their current operations and operate under their individual brands.

The two carriers expect to present the transaction for shareholder approval in November with completion expected approximately one month later. However, completion of the merger is subject to regulatory approval from relevant competition authorities which includes the European Commission and approval by both BA and Iberia shareholders.

Regulatory confirmation has already been received from the UK and Spanish civil aviation authorities to ensure that the ownership and governance structure of both companies would permit the retention of the existing national route licences and traffic rights.

Iberia chairman and chief executive Antonio Vazquez said: “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. We look forward to concluding the deal before the year end.”

BA chief executive Willie Walsh said: “The merged company will provide customers with a larger combined network. 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.”

Response to the news has been less positive from rival airlines, with Michael O’Leary of Ryanair and Sir Stelios Haji-Ioannou of Easyjet both likening the two airlines to two drunks propping each other up believing they can help each other walk. The unfavourable remarks were quoted in a recent article on the Guardian newspaper online.

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