BA talks up pend­ing merger with Ibe­ria

Weekend Argus (Saturday Edition) - - LIFE -

LON­DON: Bri­tish Air­ways PLC be­gan a charm of­fen­sive about its pro­posed merger with Spain’s Ibe­ria SA yes­ter­day, dis­miss­ing sug­ges­tions that the deal would in­crease fares or re­duce stan­dards at Bri­tain’s flag­ship car­rier.

BA chief ex­ec­u­tive Wil­lie Walsh, who will take the same po­si­tion at the com­bined com­pany, stressed that each air­line would keep its in­di­vid­ual iden­tity and brand im­age while al­low­ing for mas­sive cost sav­ings.

BA shares were trad­ing 1.9 per­cent higher at 219 pence, while Ibe­ria’s stock slipped 2.3 per­cent to £2.17 af­ter the two air­lines re­vealed late on Thurs­day that they had reached a pre­lim­i­nary agree­ment on a tie-up.

The com­bined com­pany would con­sol­i­date BA’s rank as Europe’s third largest air­line be­hind Ger­many’s Lufthansa and Air-France KLM with an­tic­i­pated an­nual rev­enues of £15 bil­lion (R184.6bn) at a time that the in­dus­try is strug­gling with fall­ing de­mand.

BA will have a ma­jor­ity 55 per­cent stake in the TopCo com­pany with Ibe­ria hold­ing the re­main­ing 45 per­cent. The group will be in­cor­po­rated in Spain, while the main op­er­a­tional and fi­nan­cial func­tions and the stock mar­ket list­ing will re­main in Bri­tain. Ibe­ria CEO An­to­nio Vazquez will be­come chair­man.

An­a­lysts said the deal – along with a pro­posed tie-up with Amer­i­can Air­lines that is still fac­ing reg­u­la­tory hur­dles – was a pos­i­tive step for the two loss-mak­ing air­lines.

BA is cur­rently strong on North Amer­i­can routes and Ibe­ria on Latin Amer­i­can des­ti­na­tions, while both op­er­ate on Euro­pean routes.

BA and Ibe­ria are also wait­ing on reg­u­la­tory ap­proval for a pro­posed rev­enue-shar­ing deal with AMR Corp.’s Amer­i­can that – if ap­proved by US and Euro­pean au­thor­i­ties – will see the trio set prices to­gether and share seat ca­pac­ity on trans-At­lantic flights.

The deal would for m an al­liance on a com­bined route net­work serv­ing 443 des­ti­na­tions in 106 coun­tries with 6 200 daily de­par­tures.

Trans-At­lantic ri­val Vir­gin At­lantic Air­ways has op­posed that al­liance, with boss Richard Bran­son ar­gu­ing that the union be­tween BA and Amer­i­can would lead to price-fix­ing and force travel agents to send busi­ness to the pair.

BA last week re­ported a net loss of £208 mil­lion (R2.496bn) for the six months end­ing in Septem­ber, its first loss in the pe­riod, as rev­enue fell 13.7 per­cent be­cause of the re­ces­sion.

The air­line has be­gun dras­tic cost-cut­ting and sweep­ing job cuts and pay curbs that have raised the threat of strike action by its 14 000 cabin crew.

Ibe­ria, mean­while, yes­ter­day re­ported a £16.4m loss for the third quar­ter, com­pared to a profit of £30.4m a year ear­lier. The Span­ish car­rier is also strip­ping out costs.

The air­lines ex­pect the merger to save them a to­tal of £400m a year.

PIC­TURE:REUTERS

PART­NERS: A Bri­tish Air­ways jet taxis past an Ibe­ria jet at Heathrow Air­port yes­ter­day.

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