BA, Iberia sign definitive merger agreement

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Web site: http://www.iberia.com/?market=ES
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BA, Iberia sign definitive merger agreement

Unread post by bimjim » Fri Apr 09, 2010

http://www.atwonline.com/news/story.html?storyID=19963

BA, Iberia sign definitive merger agreement
by Cathy Buyck
Friday April 9, 2010

British Airways and Iberia formally signed a definitive merger agreement yesterday, creating a third mega-airline grouping in Europe if all the necessary approvals are granted.

The new entity will be named International Airlines Group and organized under a holding company, International Consolidated Airlines Group, which will be listed on the London and Spanish stock exchanges. "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," Iberia Chairman and CEO Antonio Vazquez said.

British Airways CEO Willie Walsh, who will head IAG, said, "The merged company will provide customers with a larger combined network. It will also have greater potential for further growth by optimizing the dual hubs of London [Heathrow] and Madrid and providing continued investment in new products and services." Both airlines will retain their current operations and individual brands. The combined fleet will total 408 aircraft operating to 200 destinations and carrying more than 58 million passengers per year.

The definitive agreement inked yesterday follows the signing of a binding MOU last November (ATWOnline, Nov. 13, 2009) and is conditional on regulatory approval from the relevant competition authorities including the European Commission and approval by both BA and IB shareholders. BA and IB said they expect to present the transaction for shareholder approval in November with completion of the merger expected to occur approximately one month later.

IB does have an out-clause. As stipulated in the MOU, the Spanish carrier "will be entitled to terminate the merger agreement if the outcome of discussions between British Airways and its pension trustees is not, in Iberia's reasonable opinion, satisfactory." Neither IB nor IAG can fund BA pension schemes under terms of the merger accord.

BA's pension deficit had reached £3.7 billion ($5.58 billion) by the time the airline achieved a deal with unions in March. The unions still require approval from their members, and BA still needs to secure an agreement with pension trustees. The plan must be presented to the UK Pensions Regulator by June 30 (ATWOnline, April 1).

IAG will generate annual synergies of approximately €400 million by the fifth year of the merger, the carriers said in a statement. They did not detail how the savings will be achieved, but said that since signing the MOU they have "refined the synergies and confirmed the principles of how the organization will be structured." BA and IB added that they have received regulatory confirmation from UK and Spanish civil aviation authorities to ensure that the ownership and governance structure of both companies would permit retention of existing national route licenses and traffic rights.

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