British Airways and Spanish airline Iberia have agreed to merge in a corporate action that is likely to be effective in the 4th quarter of 2010. The merger has not been approved by the European Commission yet.
Assuming that the merger will be agreed by shareholders the new company will be the Worlds third largest airline. Both airlines have been suffering during the credit crunch and it is hoped that the merger will help pull both companies out of the economic doldrums.
This is good news for BA which has experience huge losses in the last year, reporting a 6 month pre-tax loss of £292 million. The old BA will control 55% of the new company.
The merger is likely to lead to huge job cuts in the aviation and airline industries.
BA chief executive Willie Walsh is confident that the merger will result in a much stronger airline that can compete more effectively on the World stage. There are no plans at present to re-brand either airline.
Virgin Atlantic is concerned that the new merged airline will pose a great thread to other airliners.
“The merger will increase BA’s dominance at Heathrow with 44% of take-off and landing slots this winter. It is impossible for any other airline to replicate their scale,” Virgin Atlantic spokesperson.