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Iberia deal sealed as BA says strikes cost up to £45m

Tuesday, 08 Apr, 2010 0

 

 

British Airways has admitted the cost of two strikes by cabin crew will have cost it between £40 million to £45 million in March.
 
The disclosure came as BA confirmed its merger deal with Spanish flag carrier Iberia.
The merger is expected to be completed by the end of the year, creating one of the world’s largest airline groups with 408 aircraft flying to 200 destinations and carrying more than 58 million passengers a year.
 
The deal has been structured so that it can take advantage of further consolidation in the global aviation industry, BA said.  
 
It came as US reports said United Airlines was in merger talks with US Airways to create the second largest US carrier after Delta Air Lines.

The new BA-Iberia group will generate annual “synergies” of approximately €400 million by the fifth year of the merger.

A new holding company called International Consolidated Airlines Group SA is being created, known as International Airlines Group.

 
Both airlines will retain their current operations and operate under their individual brands. 

The two carriers expect to present the transaction for shareholder approval in November with completion expected to occur approximately one month later.

 
But completion of the merger is subject to regulatory approval from relevant competition authorities including the European Commission and approval by both BA and Iberia shareholders. 

Since signing a memorandum of understanding last year, the airlines have refined the synergies and confirmed the principles of how the organisation will be structured, BA said.

 
They have received regulatory confirmation from the UK and Spanish civil aviation authorities to ensure that the ownership and governance structure of both companies would permit the retention of the existing national route licences and traffic rights.

Iberia chairman and chief executive Antonio Vazquez said: “This is an important step in the process towards creating one of the world’s leading global airlines that will be better equipped to compete with other major airlines and participate in future industry consolidation. We look forward to concluding the deal before the year end.”

BA chief executive Willie Walsh said: “The merged company will provide customers with a larger combined network. It will also have greater potential for further growth by optimising the dual hubs of London and Madrid and providing continued investment in new products and services.” 
 

BA said it had see a "modest" underlying year on year improvement in premium traffic last month with economy traffic "stable," excluding the impact of the two strike by Unite cabin crew members.
 
Reacting to the merger, Bob Atkinson, travel expert at travelsupermarket.com, said:  “At the moment its hard to see how this merger, which will create the third biggest airline group in Europe, will benefit travellers, at least in the short to medium term.
 
“Any cost-saving benefits will only be felt by passengers if the businesses integrate quickly. 
 
“But forcing through structural change and efficiency savings is exactly the challenge that has brought BA head-to-head with its staff and Unite in the current dispute; and the situation has the potential to be just as sticky in Spain. 
 
“Even though both brands will be maintained, they are quite different so integrating and learning from each other will take time, we just hope one doesn’t improve at the detriment of the other.
 
“However, if the two airline can integrate well, in the long term the merger looks like good news for travellers as it’s all part of BA’s drive to reduce costs and improve efficiency, allowing them to offer more affordable fares. 
 
“The network of destinations available when booking with BA will increase by around 40% as Iberia’s extensive Latin American, Spanish Caribbean and Spanish routes are integrated into the overall offering. Expect to see better connections, improved timings and more choice of departures to and from Spain and to onward destinations.
 
“Finally, many have argued that the merger will allow BA to increase prices to passengers, however the airline market between the UK and Spain is already one of the most competitive in the world with a rash of low cost carriers operating routes.  
 
“Already one of the fiercest markets in which to operate, higher prices would inevitably lead to customers moving to alternative carriers.”
 

by Phil Davies

 

 
 


 

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Phil Davies



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