BRITISH Airways and Iberia have signed an agreement approving their merger.
BA said it expected the tie-up to be completed by the end of this year in a move that will create one of the world’s largest airline groups, with 408 aircraft carrying more than 58m passengers a year.
The tie-up will create a new holding company called International Airlines Group, but the airlines will retain their current operations and continue to use their individual brands.
The merger agreement follows the memorandum of understanding signed between the two airlines in November.
BA chief executive Willie Walsh said the merged company would provide customers with a larger combined network and would have greater potential for growth by making the most of its “hub” airports in London and Madrid.
The merger is subject to regulatory approval from competition authorities, including the European Commission, and to approval by both British Airways and Iberia shareholders.
Iberia will also be entitled to terminate the merger agreement if the pension recovery plan agreed between BA and its pension trustees is found to be “materially detrimental” to the merger.
Rival airlines have expressed opposition to the agreement, with low-fare carrier Ryanair recently likening the merger to “two drunks trying to prop each other up’’. Virgin Atlantic said the deal would increase BA’s dominance at Heathrow Airport.
The merger is expected to produce annual savings of about £350.9m by the end of the fifth year after the merger’s completion.