BA and Iberia agree merger deal
BA has been considering a merger with Iberia for some time
British Airways and the Spanish airline Iberia say they have reached a preliminary agreement for a merger that should be formalised early next year.
The two airlines have been discussing the deal at separate board meetings.
Under its terms, Iberia would take a 45% stake and BA, which last week reported a six-month pre-tax loss of £292m, a 55% stake in the company.
Iberia said it would be able to pull out of the deal if BA did not resolve its pensions deficit problems.
"The merger will create a strong European airline well able to compete in the 21st Century," said BA chief executive Willie Walsh.
"Both airlines will retain their brands and heritage while achieving significant synergies as a combined force."
Both airlines have been losing money during the downturn as businesses and individuals cut back on flying.
Mr Walsh has previously said a merger would help both firms cope with the recession.
The firms have considered a tie-up for a number of years and held talks on the issue in July 2008.
BA already owns 13.5% of Iberia and the two carriers have a code-sharing agreement under the One World grouping of airlines, which allows them to sell seats on each other's services.
If a merger is formalised, it would still require regulatory approval from the European Commission.
However, analysts say a deal is likely to be cleared, pointing to Air France's successful merger with Dutch airline KLM in 2004.
The agreement comes a week after BA said it would cut a further 1,200 jobs, as it reported a first-half loss for the first time.
It made a pre-tax loss of £292m in the six months to the end of September.
The half-year results also revealed a growing problem with its two final-salary pension schemes.
In the past six months, the surplus in one scheme fell from £860m to £27m, while the deficit in the other scheme ballooned from £1.2bn to £2.7bn.
Iberia's most recent results showed that it made a loss of 72.8m euros ($109m; £66m) between April and June.
http://news.bbc.co.uk/1/hi/business/8356780.stm
