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Saturday 12th of June 2010
April 8, 2010    

British Airways and Iberia sign merger deal

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by Kay Murchie

It has been confirmed that British Airways (BA) and Spanish airline Iberia have signed a deal to merge their operations.

The merger, which was provisionally agreed last November, will be finalised this year and is set to create one of the world’s largest airline groups, flying to more than 200 destinations

The new company, which will have its headquarters in London, will be called International Airlines Group, but the BA and Iberia brands will continue to operate as normal.

The news comes at a difficult time for BA which has been struggling after cabin crew members took strike action last month in a dispute over cost-cutting measures, which include a pay freeze and a switch to part-time working for thousands of staff.

Furthermore, both airlines are expected to report heavy losses this year, with BA predicted to post its biggest annual loss since privatisation.

However, commenting on today’s deal, BA chief executive Willie Walsh said: “The merged company will provide customers with a larger combined network.”

Meanwhile, Iberia’s chairman and chief executive Antonio Vazquez, added: “This is an important step in the process towards creating one of the world’s leading global airlines that will be better equipped to compete with other major airlines and participate in future industry consolidation.”

The two airlines first began working together over a decade ago following the privatisation of Iberia, in which BA currently has a 13% stake.

Furthermore, the two airlines have a code-sharing agreement under the One World global alliance, which allows them to sell seats on each other’s services.

The airline industry has been battered by the recession, forcing many airlines into widespread consolidation. There is speculation that two US airlines - US Airways and United Airlines - are in talks about a possible merger.

Earlier this year, the International Air Transport Association (IATA) said 2009 saw the biggest decline in air passenger traffic since the aftermath of World War II.

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