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November 13, 2009

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BA and Iberia talk merger

BRITISH Airways Plc and Spanish airline Iberia SA confirmed they held separate board meetings yesterday about a long-awaited merger, responding to feverish speculation that has sent their shares soaring.

BA, the third-largest airline in Europe, said the meetings would consider a "potential transaction" and that no deal has yet been reached. It declined to provide any further information.

The two airlines' shares surged yesterday on speculation that a deal announcement is imminent, possibly today, when Iberia announces financial results that are expected to show an operating loss over the first nine months of the year.

An announcement would end more than a year of difficult negotiations between BA and Iberia. The pair began talks about a possible tie-up back in July 2008 in response to slowing passenger demand, but discussions have faltered over issues including BA's large pension fund deficit and the proposed structure of a merged company.

Iberia also confirmed that the deal currently being discussed would give the Spanish airline 45 percent of the new company, with BA taking the remaining 55 percent.

Analysts view a merger - and a proposed revenue-sharing deal with American Airlines that is still facing antitrust barriers ?? as a positive for BA, which, like other airlines, has been hit by the cost of rising fuel prices and the global slump.


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