British Airways’ merger with Spain’s Iberia will give the two loss-making airlines the scale they need to ride out recession and compete with larger European rivals Lufthansa and Air France.
The agreement, which will create a group with a combined market value of $7 billion if it goes through next year, ends the British carrier’s two-year hunt for Iberia, and will allow it to emulate rivals who have successfully acquired smaller peers.
BA shareholders will have 55 percent of the combined firm, to be headquartered in London with 419 aircraft flying to 205 destinations, while Iberia shareholders are to get 45 percent.
BA’s Chief Executive Willie Walsh, who will be CEO of the new group, wants to take on Air France-KLM — formed from a Franco-Dutch merger in 2004 — and Lufthansa, which has successfully combined with Swiss International Airlines and Austrian Airlines in recent years.
“The deal will give them the potential to grow in a tough market that low-cost rivals can’t match without losing money,” Joaquin Garcia-Romanillos, analyst for Portuguese bank BPI said.
