City smiles on BA Iberia merger talks
Rising share prices signal the City is happy with British Airways’ revelation yesterday that it plans to merge with Spanish flag carrier Iberia.
The all-share merger, prompted by soaring fuel costs, will see the two brands retain their separate identities with BA likely to be the dominant player. The two already codeshare on 30 flights and the merger will allow for huge savings as purchasing departments merge and build up enough clout to drive down costs and bulk buy fuel.
The move, that will create Europe’s biggest airline, follows Qantas boss Geoff Dixon’s comments last week about the inevitability of airline industry consolidation, a view that BA chief executive Willie Walsh echoed as he announced the merger talks.
He said: “The aviation landscape is changing and airline consolidation is long overdue. The combined balance sheet, anticipated synergies and network fit between the airlines make a merger an attractive proposition, particularly in the current economic environment. We’ve had a successful relationship with Iberia for a decade and are confident that both companies’ shareholders would benefit from the proposed tie-up”.
And with the successful KLM-Air France merger in 2004 providing a precedent for the BA and Iberia’s plans, the road towards creating this mega airline that will service more than 60 million passengers a year looks clear.
BA has been itching to get involved with Iberia for some years. It had a share holding of 9% in the company until earlier this year when it bumped it up to 13.5%. Last year an attempt to buy the airline with the backing of a private equity partner was made but failed.
But a stormy economic landscape has changed attitudes with Iberia making heavy losses – some £22.3m in the first three months of this year – and suffering astronomical fuel bills.
With Iberia’s share price rising 20% and BA’s 6% on the markets yesterday, its clear the money is smiling on the deal.
By Dinah Hatch
Bev
Editor in chief Bev Fearis has been a travel journalist for 25 years. She started her career at Travel Weekly, where she became deputy news editor, before joining Business Traveller as deputy editor and launching the magazine’s website. She has also written travel features, news and expert comment for the Guardian, Observer, Times, Telegraph, Boundless and other consumer titles and was named one of the top 50 UK travel journalists by the Press Gazette.
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