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British Airways and Iberia of Spain have agreed on a US$7 billion merger, ending 16 months of negotiations and creating one of the world's third largest airlines to compete with rivals like Air France-KLM and Lufthansa, reports Logistics Week.
Under the proposal, British Airways would own 55 per cent of the combined company and Iberia would hold the rest, the two companies said in a joint statement. Willie Walsh, chief executive of British Airways, would retain that position at the top of the combined group while Antonio Vazquez, Iberia's chief executive, would become chairman.
Iberia said in a statement that the merger, which still requires shareholder and regulatory approval, was expected to be completed in the first quarter of next year.
A sharp drop in passenger numbers during the recession has forced airlines to consider linking up with competitors through acquisitions or alliances to share profits and employees, coordinate their route systems and even pool resources to buy airplanes.
The combination of British Airways and Iberia would create a company with about US$22 billion in revenue and result in annual cost savings of about nearly $600 million, the airlines said.
The new airline group would fly to 205 destinations with 419 aircraft and would retain their individual brands. The combined company would be incorporated in Spain for tax purposes with the majority of board and shareholder meetings taking place in Madrid. The operating and financial headquarters of the new group would be in London, they said.
British Airways and Iberia said in July 2008 that they were in talks about a merger. Discussions reached a deadlock when the two airlines failed to agree how to solve the British carrier's $4.4 billion pension fund deficit. In the meantime, the economic downturn continued to hurt passenger numbers, forcing airlines across the world to cut prices and the number of flights.
The combination would benefit by linking Iberia's network in Latin America with the top position by British Airways on trans-Atlantic routes and its hub at London Heathrow, the world's second-busiest airport by passenger numbers after Atlanta.
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