Flight-path towards a merger for BA and Iberia

Will it be blue skies or a bumpy ride as BA and Iberia join forces?

Their preliminary merger deal has got passengers, staff and analysts wondering what the creation of the world’s third largest airline will mean. Within a proposed new holding company, TopCo, the two airlines will carry 61 million passengers a year, with a joint workforce of more than 60,000 staff. The hope is that an enlarged group will be better able to cope with the industry’s most serious downturn in decades. It was in response to slowing passenger demand that the loss-making airlines began discussing the project in 2008. Their five billion euro merger would give British Airways shareholders 55 per cent of the combined firm. Iberia shareholders would get 45 per cent. Aviation analyst Howard Wheeldon said: “It does make a very, very strong airline and one that can, if it plays its cards right, and if it gets its service right, if it gives its customers what they want, it can gain a lot of revenue potential here and, of course, there is a cost synergy benefit as well.” European Commission approval is needed but the firms hope to close the deal by the end of 2010. For now, clouds remain in the sky. Iberia announced its latest losses this morning. But shares in both airlines rose on the merger news.More about: Airlines, Spain, United Kingdom

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