BA Iberia merger is good news: British Airways chief Walsh

THE British Airways-Iberia merger will be "good news for passengers and staff", BA chief executive Willie Walsh said today.

He added that BA and Spanish carrier Iberia would retain their individual identities and that it was wrong to suggest the deal would take the "British" out of British Airways.

Mr Walsh said the merger, expected to be completed by the end of next year, would create "an airline group that will truly compete on a world level".

Mr Walsh told BBC Breakfast: "This move is all about the future and I am absolutely delighted that we have reached this stage.

"We are creating a new, strong European airline and this is good news for BA, our customers and our shareholders."

He went on: "We recognise we have strong brands and these will be retained. The BA brand will continue to be a very strong brand.

"By putting these two airlines together we will be able to make savings."

Mr Walsh was speaking following last night’s announcement that the boards of the two carriers had agreed a binding memorandum of understanding setting out the basis for a proposed merger.

The merger will provide annual savings of around £358 million. It would create an airline group with 419 aircraft which would fly to 205 destinations.

The merger would create a new holding company (TopCo) with seven directors from each airline on its board.

Its shareholders would be the current BA and Iberia shareholders.

BA shareholders will receive one new ordinary share in TopCo for every existing ordinary share they hold.

Iberia shareholders will receive 1.0205 new ordinary shares for every existing ordinary share. This will result in BA shareholders holding 55% of TopCo and Iberia’s shareholders holding 45%.

Antonio Vazquez, chairman and chief executive of Iberia, said: "It has been a long process where many people, both at BA and Iberia, have worked very hard to reach this agreement. But in the end it was worth it."

He said the agreement was "a giant step" in the history of both companies who would be "more prepared than ever to face future challenges" as a result.

Aviation consultant John Strickland said the announcement was not unexpected and BA would be keen to follow the example of an earlier deal between Air France and Dutch airline KLM.

He added: "That has been an example where jobs lost were mostly through natural wastage. The airlines have kept a degree of separation but benefited from working together behind the scenes and having a stronger offering in the market place.

"Both BA and Iberia have got their own problems. Both are loss-making and both have industrial issues to deal with. If they can get this in place for when the economy begins its recovery in 2010 or maybe 2011 then it will benefit both."

BA and Iberia carried 62 million passengers last year.

Last week, BA announced a record pre-tax loss of £292 million for the six months to the end of September, with Mr Walsh warning that manpower would be reduced by the equivalent of 3,000 roles by March next year.

He said the airline had already reduced costs by some £400 million after 1,900 jobs were cut through reduced overtime, increased part-time working and voluntary redundancy.

BA is facing possible Christmas industrial action but Mr Walsh said today it was hoped that a meeting with the Unite union could be held next week.

Stephen McNamara, a spokesman for low-far airline Ryanair, said: "Flag carrier airlines throughout Europe are raising the white flag because they can’t compete with Ryanair’s rapid growth, low fares and no fuel surcharge guarantee.

"Consolidation is the only option for these high-fares airlines. The merger of BA and Iberia is like two drunks trying to prop each other up; both have reported large losses, both are facing a winter of industrial action and both charge high fares and fuel surcharges.

"Since consolidation of Europe’s high fares airlines has never led to lower fares, this merger will be great for Ryanair’s growth."

A Virgin Atlantic Airways spokeswoman said: ``The BA/Iberia merger will increase BA's dominance at Heathrow with 44% of take-off and landing slots this winter.

"It is impossible for any other airline to replicate their scale. Regulators in Europe and the US need to be alert to BA’s growing dominance through proposals such as its monster monopoly with American Airlines - proposals which will not be in the consumer interest."