Iberia, British Airways agree basis for merger

MADRID: Iberia and British Airways have approved an agreement establishing the basis for a merger, the Spanish carrier said late Thursday.

Iberia called it a ``binding agreement'' aimed at creating one of the world's largest airline groups, with a fleet of 419 aircraft flying to 205 destinations.

The company would take the form of new holding company that owns the two current carriers. Iberia would own 45 percent of the new company, and British Airways 55 percent, Iberia said.

The deal is expected to be signed in the first quarter of 2010 and be approved by shareholders by the end of that year, the Spanish carrier said. The deal would need regulatory and shareholder approval.

Iberia also would be able to pull out of the agreement if any final deal between British Airways and the administrators of its deficit-ridden pension fund is not satisfactory for Iberia. This has been a stumbling point in merger talks that began in July 2008.

The merged company's financial headquarters would be in London, and the chairman would be Antonio Vazquez, who currently is chairman at Iberia. The CEO would be Willie Walsh, now the chief executive officer of British Airways.

The merger could yield synergies of euro400 million ($597 million) a year after the new company's fifth year of operation, the Iberia statement said.