BA and Iberia merge airlines
By Jane Wardell |
April 9, 2010, Friday
|
Print Edition
Print Edition
BRITISH Airways Plc and Spain's Iberia SA signed a merger agreement yesterday, moving a step closer to completing a long-awaited deal to create Europe's third-largest airline and secure the two loss-making carriers' future.
The companies plan to finalize the tie-up, forming a carrier with a market value of around US$7 billion, by the end of this year. It would carry more than 58 million passengers a year to some 200 destinations while retaining both individual brand names.
The two had been trying to hammer out a deal since 2008, seeking greater economies of scale to survive the downturn in airlines following the global credit squeeze and growing competition from budget carriers.
Consolidation in the industry is rife, with the BA-Iberia announcement coming a day the news that United Airlines and US Airways are in talks about a combination that would create America's second-biggest airline.
BA and Iberia said their deal, which will create a new holding company majority-owned by BA shareholders, will leave room to capitalize on further industry consolidation. Importantly, the deal will save the airlines some US$530 million a year by the fifth year if approved by European Commission and shareholders.
But the proposed merger has been criticized by rival carriers. Low-fare airline Ryanair Holdings Plc likened it to "two drunks trying to prop each other up," while Virgin Atlantic Airways said the deal would increase BA's dominance at Heathrow Airport.
Consumer groups have also been skeptical, suggesting that fares will rise as a result.
"At the moment, it's hard to see how this merger will benefit travelers, at least in the short term," said Bob Atkinson of travel Website travelsupermarket.com. "Any cost savings will only be felt by passengers if the business integrates quickly."
Stock market listings will be sought in London and Madrid, with the primary listing in London for a new holding company, known as International Airlines Group. Shareholders will vote on the plan in November.
The companies plan to finalize the tie-up, forming a carrier with a market value of around US$7 billion, by the end of this year. It would carry more than 58 million passengers a year to some 200 destinations while retaining both individual brand names.
The two had been trying to hammer out a deal since 2008, seeking greater economies of scale to survive the downturn in airlines following the global credit squeeze and growing competition from budget carriers.
Consolidation in the industry is rife, with the BA-Iberia announcement coming a day the news that United Airlines and US Airways are in talks about a combination that would create America's second-biggest airline.
BA and Iberia said their deal, which will create a new holding company majority-owned by BA shareholders, will leave room to capitalize on further industry consolidation. Importantly, the deal will save the airlines some US$530 million a year by the fifth year if approved by European Commission and shareholders.
But the proposed merger has been criticized by rival carriers. Low-fare airline Ryanair Holdings Plc likened it to "two drunks trying to prop each other up," while Virgin Atlantic Airways said the deal would increase BA's dominance at Heathrow Airport.
Consumer groups have also been skeptical, suggesting that fares will rise as a result.
"At the moment, it's hard to see how this merger will benefit travelers, at least in the short term," said Bob Atkinson of travel Website travelsupermarket.com. "Any cost savings will only be felt by passengers if the business integrates quickly."
Stock market listings will be sought in London and Madrid, with the primary listing in London for a new holding company, known as International Airlines Group. Shareholders will vote on the plan in November.
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