Home News BA-Iberia clinch landmark merger deal

BA-Iberia clinch landmark merger deal

Published on 29/11/2010

British Airways and Iberia sealed a multi-billion-euro merger on Monday as shareholders overwhelmingly backed a deal to create Europe's second biggest airline amid recovery for the sector.

“The shareholders of Iberia and British Airways today voted to approve the merger of the two companies,” Iberia said in a statement.

“The shareholders of the two airlines thus met the final condition for carrying out the merger, which will be officially consummated when shares of the new International Airline Group (IAG) holding company are listed for trading on stock exchanges in late January.”

BA shareholders backed the deal — worth more than 6.0 billion euros (8.0 billion dollars) — with an overwhelming 99-percent majority.

“Without a doubt, it is a historical agreement that will create a global group to lead a future consolidation process in the airline business,” said Iberia chairman Antonio Vazquez, who will become chairman of IAG.

The boards of the British and Spanish airlines agreed a deal in April and EU competition regulators have also given the green light for a full alliance.

A merger allows the two carriers to catch up with rivals such as Air France-KLM and Lufthansa, according to analysts.

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.

BA chairman Martin Broughton told shareholders on Monday that the merger had a “compelling, strategic and financial logic.”

The tie-up, on schedule to be completed in January, will create Europe’s second-biggest airline by market capitalisation after Germany’s Lufthansa, and 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 Iceland’s volcanic ash cloud to post healthy returns to profit, indicating that the sector is on a path to recovery after the deep recession.

In a bitter-sweet day for BA, trade union leaders said the airline also faced further strike action by staff unhappy over pay levels and other working conditions.

The Anglo-Spanish deal will generate annual savings of around 400 million euros by the fifth year of the merger, which will see the creation of a new holding company with a primary share listing in London.

BA will hold 55 percent of the capital of IAG and Iberia 45 percent.

British Airways and Iberia will each retain their current operations and individual brands. Current BA chief executive Willie Walsh will become chief executive of the merged group.

The planned tie-up cleared a significant hurdle when Iberia recently decided not to exercise its right to cancel the deal over a BA employees’ pensions deficit of 3.7 billion pounds (4.4 billion euros, 5.8 billion dollars).