BA, Iberia want to lead airline sector consolidation

30th November 2010, Comments 0 comments

British Airways and Iberia want to lead airline sector consolidation with their multi-billion-euro merger, the chief executive of their new holding company, Willie Walsh, said on Tuesday.

"We don't want to be on the sidelines, we want to lead the industry's consolidation," he told a Madrid news conference a day after shareholders of both airlines backed a deal to create Europe's second biggest airline.

BA and Iberia will continue to operate independently under their own brands under a deal worth more than 6.0 billion euros (8.0 billion dollars) that was agreed in April to create the International Airline Group (IAG), the new name for the merged company.

Walsh, who is BA chief executive in addition to the chief executive of IAG, said the goal was to have other airlines join the new group, whose shares will start trading on January 24.

"Our future is a multinational, multibrands airline group. We look forward to welcoming further brands," he said.

"We are excited about future opportunities but we will be patient."

BA and Iberia said recently they had drawn up a list -- which has remained secret -- of 12 firms that could be added to the newly merged group with the aim of creating the world's biggest airline.

Other airlines could join IAG through "alliances, mergers or acquisitions," said Iberia chairman Antonio Vazquez, who is also the group chairman of IAG.

Both men called for legislation on airline tie-up to become more flexible.

"There are very important restrictions in place," said Vazquez.

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 their tie-up announcement, the pair has 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.

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

It will create Europe's second-biggest airline by market capitalisation after Lufthansa and the continent's third-biggest airline by revenues.

The two airlines expect annual synergies worth some 400 million euros (530 million dollars) starting in the fifth year following the merger, with 60 percent coming from cost savings and the rest from larger revenues.

"This is the start of our new and exciting adventure. We have a long history and complement each other with our network strengths and strong brands in different markets," said Walsh.

Iberia is the market leader on flights from Europe to Latin America while BA is the leader on routes to North America.

Together the two airlines serve 205 destinations around the world, operating 406 aircraft and carry 58 million passengers.

British trade union leaders warned Monday that BA faced further strike action by staff unhappy over pay levels and other working conditions but Walsh said he was confident that the issue will be settled.

"Ultimately we will reach an agreement," he said.

For its part Iberia needs to overcome union resistance to plans it unveiled in October 2009 to set up a new low-cost airline for short and medium haul flights.

"This needs to be operating very quickly," said Vazquez.

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

© 2010 AFP

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