BA talks up pending merger with Iberia
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.
PARTNERS: A British Airways jet taxis past an Iberia jet at Heathrow Airport yesterday.