City & finance
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BA/Iberia deal to complete this year
Rob Gill.
THE NAME of British Airways will disappear from the London Stock Exchange by the end of the year under terms of the airline’s agreement to merge with Iberia. BA and Iberia, will form a new company called International Airlines Group (IAG), although both airline brands will continue operating their own fleets and services. IAG will have a combined fleet of more than
400 aircraft, covering 200 worldwide destina- tions and carrying a total of 58 million passengers once the deal agreed last week is completed. The airlines, both members of the oneworld alliance, said the merger should be completed by the end of the year when IAG will be listed on the London Stock Exchange – which will mean the disappearance of BA as a separate listed company. The shares will also be traded on Spanish
stock exchanges. Under the deal, BA shareholders will make
up 55% of the newly-formed IAG. Iberia’s owners will take 45%. BA chief executive Willie Walsh, who will become chief executive of IAG, said the new group would “have greater potential for further growth by optimising the dual hubs of London and Madrid”.
Iberia chairman Antonio Vazquez will take the
role of chairman. BA and Iberia hope to find savings of up to
¤400m a year by 2015 through cutting staff and dropping less lucrative short-haul flights. The merger could still be scuppered if BA does
not reach a suitable deal on its £3.7m pension scheme deficit. EU regulators will also have to clear the merger and it will be put to sharehold- ers for approval in November. BA is forging ahead with plans to form an alliance with fellow oneworld member American Airlines – a move being fiercely contested by Virgin Atlantic boss Sir Richard Branson who said it will be “bad for passengers and bad for competition” and called for the alliance to be blocked.
BA/Iberia: the merger plan
Current airlines
■BRITISH AIRWAYS
Staff: 41,500
■IBERIA
Staff: 20,700
Fleet: 245 Fleet: 174
Destinations: 148 Destinations: 109
Merged airline
■INTERNATIONAL AIRLINES GROUP
Aircraft: 408
Destinations: 200 Passengers per year: 58 million
FURTHER MERGERS IN STORE?.
Iata welcomes consolidation
BRITISH AIRWAYS’ merger with Iberia is likely to be followed by more airline consolidation as United Airlines and US Airways continue talking about a tie-up. The deal between BA and Iberia will create one of the world’s biggest carriers, worth £5bn, and is likely to be followed by a wave of mergers and partnerships. Airline industry body Iata, which is forecasting
a $2.8bn loss for the aviation industry in 2010, said consolidation was essential for the health of the sector. Iata director general Giovanni Bisignani (pictured)said: “Mergers and consolidation are a must. No other industry is so fragmented, so we must consolidate to build more efficiency.” Bisignani also called for regulators around the world, particularly in the US and Europe, to drop ownership restrictions on cross-border mergers to make consolidation easier. Reports in the US said talks between United and US Airways had become “very serious” but chances of a deal are regarded as 50-50. However, there is speculation fellow US carrier
Continental could jump into the fray with a bid for United.
United and Continental discussed a merger
with United two years ago but could not agree a deal.
Analyst Stephen Furlong from Davy Stockbro-
kers said more airline consolidation was inevitable. “The tie-up with American is the next thing on
BA and Iberia’s agenda now, and this agreement brings that closer, but they are probably looking at European and Asian carriers too,” he said.
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16.04.2010
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