British Airways and Iberia venture looks imminent

A merger between airlines British Airways and Iberia is now looking set to go through, as talks by both groups of companies have been reported to be going well. However, both sides are still currently weighing the deal, and no decision has yet been made public.

The talks began around 16 months ago, when the idea of the merger first became public. British Airways already holds a 13% stake in Iberia airlines. Iberia airlines is based in Spain.

So as not to relinquish their respective landing rights, the companies are expected to retain their individual structure, and are looking to consent to a unified holding structure.

Iberia is set to obtain 45% of the combined firm and British Airways will receive 55%. The Headquarters of the newly-formed group, if the deal does go through, is likely to be housed in Madrid.

Antonio Vazquez Romero of Iberia would be given the title of the chairman and British Airways’ Willie Walsh would be chief executive of the combined firm.

The rate of mergers between airlines all over the world has shot up, as airlines grapple to deal with the effects of recession. Poor passenger traffic numbers and depreciating margins have seen airlines floundering for their very survival, and the last few months have also heralded a change in the whole functioning of mainstream airlines.

Add-on fees, once the exclusive domain of budget airlines like Ryanair and easyJet, now find their way into the pricing options of traditionally mainstream airlines like British Airways, American airlines and more. British airways recently introduced a second-bag check-in fee, and earlier also did away with meals on short-haul flights.

Fluctuating energy prices, high labour costs combined with falling passenger demand has affected airport business worldwide, and mergers are now being suggested that would have only a few months ago seemed unlikely—if not impossible.

British Airways is also close to facing a cabin crew strike, and has reported a significantly larger second quarter loss for this year, when compared with the same period last year.