A WAVE of consolidation swept through the airline sector on both sides of the Atlantic yesterday as British Airways and Iberia reached agreement on their planned tie-up while US Airways resumed talks on a deal with United Airlines.
US airline shares jumped in reaction to United’s approach to US Airways, which surprised investors after the two companies called off talks nearly two years ago. US Airways’ stock rose 13 per cent at one point, while United’s parent was up 9 per cent.
The response to the more advanced BA-Iberia deal was less dramatic, having been factored in after the two carriers announced a memorandum of understanding on the merger last November. The formal agreement yesterday is confirmation that regulators have approved the structure of the deal, which would create the third-largest airline group in Europe.
It would have a fleet of 408 aircraft and carry more than 58 million passengers a year.
The push for consolidation among older carriers has intensified amid the financial crisis and competition from no-frills rivals such as Ryanair.
While BA and Iberia will retain their brands and be run as separate operating companies, they revealed a new holding company for the merged group, which will have BA chief executive Willie Walsh at the helm and will be called International Airlines Group. Antonio Vázquez, Iberia’s chairman, will be its chairman.
BA shareholders will initially hold 55 per cent of the new company, leaving Iberia’s investors with 45 per cent, but each airline would have its own chief executive and operating company in London and Madrid to preserve both brands and existing flying rights.
The carriers said the deal, which is set to be completed by the end of this year, would generate synergies of about €400 million by the fifth year. It requires regulatory clearance from Brussels and shareholder approval. – (Copyright The Financial Times Limited 2010)
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