BA-Iberia hit turbulence as merger takes off

21st January 2011, Comments 0 comments

A multi-billion-euro merger between British Airways and Iberia of Spain, creating Europe's second biggest airline, was completed Friday, but immediately hit turbulence as BA staff voted to strike.

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

British union Unite later said that BA cabin crew had voted in favour of fresh strikes in a long-running dispute with the airline over pay and other perks, although it did not mention any dates.

The vote was part of a dispute that prompted 22 days of strike action last year.

"For the fourth time in 13 months, British Airways cabin crew have voted overwhelmingly in support of their union and expressed their dissatisfaction with management behaviour," said Unite general secretary-designate Len McCluskey.

BA hit back, insisting in a statement that "Unite does not have the support of the majority of our cabin crew."

Under the terms of the merger, BA and Iberia are retaining their current operations and individual brands, while British Airways boss Willie Walsh is chief executive of the new group.

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

British Airways holds 55 percent of IAG, while Iberia has the remaining 45 percent. 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 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.

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 indicated that IAG is keen on other airlines joining the new group.

© 2011 AFP

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