Airline consolidation

After more than two years of negotiations, the five billion euro ($6.5 billion) merger of British Airways and Iberia was given the green light by shareholders of both airlines on Monday, creating Europe's second-biggest carrier after Air France-KLM.

The combined company will be called International Airlines Group, but both flag carriers will keep operating under their respective brand names, with dual hubs in London and Madrid.

"We are very happy that the shareholders gave their approval to the merger of Iberia and British Airways," Iberia Chairman Antonio Vazquez, who will also become chairman of the combined group, said in a statement.

"It is certainly to their advantage, since it will bring great value to the business of both airlines and will lead to major synergies," he added.

'Compelling logic'

BA's chairman Martin Broughton said the deal had a "compelling, strategic and financial logic" that would benefit staff, passengers and shareholders alike.

BA chief executive Willie Walsh, who will become CEO of the combined company, said the merger would allow the British airline to compete effectively with low-cost carriers.

BA and Iberia also have very few overlapping routes, meaning the two flag carriers complement each other. Iberia has the biggest share of the Europe-Latin America market and BA is the number-one airline on transatlantic flights and has strong Europe-Asia connections.

The merger is expected to yield cost savings of 400 million euros after the fifth year.

Like many carriers, BA and Iberia were faced with slackening demand and heavy losses due to the global credit crunch and started merger talks roughly two years ago. In June, the tie-up was practically a done deal after BA agreed to a recovery plan for it enormous pension deficit, which had been a major sticking point in the negotiations.

The deal is expected to be finalized in January, when shares in the new, combined company start trading in London and Madrid. BA shareholders will have 56 percent in the new company, while investors in Iberia will hold 44 percent.

Author: Nicole Goebel (Reuters, dpa)
Editor: Martin Kuebler