13 November 2009
UPDATED: BA-Iberia merger agreed
British Airways and Iberia have agreed to merge to create the world’s third largest airline by revenue.
The merger is expected to be completed in late 2010.
The new group would have 419 aircraft and fly to 205 destinations.
Virgin Atlantic reacted by warning of a heighted stranglehold of take off and landing slots at Heathrow
"The BA/Iberia merger will increase BA's dominance at Heathrow with 44% of take-off and landing slots this winter," the rival said.
"It is impossible for any other airline to replicate their scale.
"Regulators in Europe and the US need to be alert to BA's growing dominance through proposals such as its monster monopoly with American Airlines, proposals which will not be in the consumer interest."
BA and Iberia last year carried 62 million passengers and, in their last financial years, their joint revenues are approximately €15 billion.
"The airlines believe there is a compelling strategic rationale for the transaction, which is expected to generate annual synergies of approximately €400 million, and benefit both companies’ shareholders, customers and employees," a statement said.
BA chief executive Willie Walsh said: "The merger will create a strong European airline well able to compete in the 21st century. Both airlines will retain their brands and heritage while achieving significant synergies as a combined force."
Approximately one third of the savings are expected to be revenue related - joint selling, network and revenue management benefits - with the balance coming from cost synergies in areas such as IT, fleet, maintenance and back office functions.
The combined business will be led by group CEO Walsh and a management team chosen equally from each airline.
The aim of the new group is to combine the two carriers’ leading positions in the UK and Spain and enhance their strong presence in the international long haul markets, while retaining the individual brands and current operations of each airline.
BA passengers will gain access to up to 59 new destinations, of which 13 will be in Latin America, while Iberia’s will gain up to 98 new destinations across the UK airline’s network.
They will also be offered better frequencies and connections, more competitive prices, access to more VIP lounges and enhanced frequent flyer benefits, according to the merger statement.
There will be greater potential for future growth by optimising the dual hubs of London and Madrid.
This enhanced scale and ability to compete with other major airlines and will enable BA-Iberia to participate in future industry consolidation - opening the door for BA’s long-held ambition to forge a partnership with American Airlines.
The Spanish airline’s chairman and CEO Antonio Vzquez said: "It has been a long process where many people, both at British Airways and Iberia, have worked very hard to reach this agreement.
"But in the end it was worth it. This agreement is a giant step in the history of both Iberia and British Airways.
"We are laying the foundations of what will be one of the most important airlines in the world, a real global airline.
"I believe that, thanks to this transaction, which is the most important in the European airline industry in recent years, we are more prepared than ever to face future challenges."
BA said the proposed merger will not be subject to the UK takeover code.
More reaction to follow....
by Phil Davies
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Your Comments (2)
Sorry, two losers don't a winner make. The only worse combination could be BA and the old Italia. Wee Willy and Antonio Vazquez have their work cut-out. BA is essentially bankrupt for if they were required to immediately bring the pension plan current they likely couldn't make it. BA/Iberia is no AF/KLM.
By J Hewson, Monday, November 16, 2009
Mmmmm. Yes, synergy: 2+2=5, is almost always offered as the justification for mergers and take-overs.... but achieving theoretical synergies in practice is another matter. When two edifices with different languages, national cultures, organisational cultures, objectives and strategies, ways of working, systems and management styles are forced together, surprise, surprise, realising the supposed synergies is often found to be more difficult to achieve than first thought. What works on paper before the deal (often to try to find savings and synergies to justify the cost of acquisition/merger to shareholders) can be hard to replicate in future performance. We'll see what we'll see, I guess.
By Tony Jolley, Friday, November 13, 2009