David Robertson, Business Correspondent
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British Airways has begun merger talks with Iberia, the Spanish national carrier, in a deal that will create Europe’s largest airline.
The merger was billed by both as the coming together of equals, but aviation analysts were in no doubt that BA will be the dominant partner. With combined passenger numbers of more than 60 million a year, BA-Iberia would overtake Lufthansa, Air France-KLM and Ryanair to become Europe’s premier airline.
The merger would also create a carrier that is strong on the North and South Atlantic crossings alike, a dominance that reflects the colonial histories of Britain and Spain.
Willie Walsh, the chief executive of BA, said: “We are working together to create a new European airline that can compete with the best globally.” No details of the merger have been given but the brands will remain separate.
BA will retain its British focus and its strong transatlantic ties to the United States, and Iberia will remain based in Madrid. However, there are likely to be some cuts to overlapping routes between Britain and Spain. BA may move some South American flights to Madrid and the number of direct flights to Spain could be cut.
Virgin Atlantic said that it opposed the merger as it would give BA even more control over Heathrow. It also claimed that BA’s fares might rise.
BA controls 42 per cent of landing slots at Heathrow, the world’s busiest international airport, and Iberia would give it a further 2.5 per cent – equivalent to all of Virgin’s slots. A spokesman for Virgin said: “We all know that dominant players offer less choice and push up ticket prices. Passengers will be worse off as the two airlines combine the worst of Spanish practices.”
Mr Walsh and his counterpart, Fernando Conte, are expected to spend the next couple of months negotiating details such as where the airline’s headquarters will be, who will run the company and how the route networks can be combined. If the deal goes ahead, BA will represent more than two thirds of the value of the combined company and is therefore expected to have a greater influence in determining the culture and structure of the airline.
The merger has been triggered by the rapidly rising price of oil, which has put airlines around the world under severe financial pressure. BA has given warning that it may only break even this year and Iberia lost €28.3 million (£22.3 million) in the first three months of this year as its fuel bill rocketed. By merging, the carriers would be able to gain economies of scale from bulk-buy-ing fuel, aircraft and maintenance. There may also be job losses in the combined workforce of 64,000 if the two carriers cut flights between Britain and Spain. BA has wanted to do a deal with Iberia for many years and has been a shareholder in the carrier for almost a decade. It tried to buy the airline last year in partnership with a private equity firm but this fell through.
Iberia’s largest shareholder, the Caja Madrid savings bank, said yesterday that it supported the merger. Iberia’s share price rose 20 per cent yesterday and BA’s rose 6 per cent.
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I've flown MAD-LGW many times, mostly with Easyjet and a couple of times BA. No difference really, just price. An extra £20-30 for BA doesn't justify the sandwich and leather seats (with an annoying headrest makign your head tilt forwards). I will always fly Easyjet on this route, value for money!
Andrew, West Sussex,
Re Steve: great comment!!
Re DA: I know that for a french it is difficult to admit that Spain is in top ten economies(maybe the ten), but relax...and thank you for organise great international sports events to be won by Spanish people.
Hector, Madrid, Spain
British Airways + Iberia will be smaller than both Lufthansa and Air France-KLM in market capitalisation, and smaller than Air France-KLM in revenue passenger kilometres, fleet size and number of destinations.
Sandy, Portsmouth, UK
The BA + IB combined carrier will help further consolidate the European airline industry just as this happens in the US. It could be worse i.e. Alitalia. I still say hands down if you fly between the US and UK, go Virgin. If you travel between USA and Europe, go Air France or Lufthansa.
Thomas Teets, Washington, DC, USA
British Airways + Iberia = "Briberia" Sounds about right.
The perfect match of Spanish punctuality and organisation and British catering skills and customer service.
I just cannot wait not to fly them.
Steve, Stansted, UK
Very good job ! Congratulations. Now the customers need service and price.
Eduardo, SEVILLA, España
Will BA insist that Iberia flight attendants learn to smile and serve instead of sneer and skulk? If so, I'm all for it.
It contains all the key features I need in a route structure: Britain, US, South America and Spain. With LAN at the S. American end and you've got a world beater.
Paul M, Puerto del Rosario, Spain
I like the one from Richard in Bucharest...I'm French so Iberia and BA allow me to be impartial ! But qualifying Iberia and BA as mediocres why not....but then where does TAROM stand. Better not judge ! Here we now have Romania setting standards ! Ever flown Tarom ? Oh I'm from Toulouse...Airbus!
E. Bee, Toulouse, France
Re: Ricard.
Spain. One of the top ten worls economies ? Surely not.
DA, lyon, france
So - The one time I used the BA / Iberia Code Share - Outward 17 Hrs late into Rio - Iberia cancelled the service - No explanation, but at least a room at Madrid. Return 9Hrs late into Heathrow - BA had a technical hitch - Guess who I would not use again - No prizes for the correct answer!
Ian Elliott, Evercreech, UK
I do not know about BA standards 20 years ago but now (i take about 100 flights with these two per year) they are (except talking cabin attendance) as Iberia. Tons of delays, ground staff really bad, high prices (which will increase with merge), but they don´t mind due to their dominant position.
Hector, Madrid, Spain
Really this is all to do with flight slots, and control of major routes. But they need to offer value for money!
oliver, colchester,
Virgin must be really upset and certifies that this is right path for both companies. Their comments on "the worst of Spanish practices" are a call to past feelings of British "grandeur" and intend to induce a nationalistic response by British/US users against the use of a Spanish-participated firm.
Joe, Cincinnati, USA
May any of you explain me what "Passengers will be worse off as the two airlines combine the worst of Spanish practices" means?
Kico, Granada, Spain
I have flown Iberia several times and they were brilliant so I am amazed at some of the comments here. I won't be flying with them again since I would rather walk than use BA.
Liz, London,
BA has come a cropper over price fixing, as a result of their North American operations and rubbing up against sharp clawed US regulators. IB is attractive to BA because of iSouth American routes where there is zero oversight of these issues.
How will a new unified management cope ? Culture clash
David, Aberdeen, UK
BA/Iberia might become the biggest European airline, but they would do well to look at KLM/Air France to see a slick operation. BA decided not to merge with KLM (twice) and that may have been a serious error.
Pointing to smaller Asian airlines airlines as exemplars is not really valid.
Sandy Fraser, Tayport, Scotland
Will and Keith. Believe me, many things will have been discussed regarding the potential synergies available from this merger, but those affecting customer service and comfort will not have been among them. I do, however, remain charmed by your sense of nostalgic belief in the airline industry.
Steve, Stansted, UK
Just more corporatism - this will be a disaster for the traveller because it will inevitably lead to increases in ticket prices.
Simon, London,
From my experiences of flying (lots) with all the major European carriers I have found BA's on board service to be by far the best (polite and efficient) and Iberia's to be amongst the worst. I hope that BA manages to maintain it's edge after this merger.
Will, Edinburgh, UK
Have used BA often (no choice) and have been shocked by their attitude however that is easily surpassed by Iberia that has to have the worst and most sullen staff of any flag carrier airline.
I think unless major staff training is done very quickly this may well be the demise of both carriers.
keith R. Jefferies, Malaga, Spain
Well I must disagree with those who write here about low srandards in IB and high in BA. I still remember been robed in Heathrow by BA employees in my way to NY during a strike some years ago.
RTF, Jerez de la Frontera, Spain
BA being a quality airline has got to be the joke of the day. For an airline who has its cabin crew telling you to get water yourself has got to have its customer care training programme overhauled. Take a lesson from the various asian carriers, BA- 'quality airline' indeed.
Ethan, Hong Kong,
The argument about BA being too dominant at Hetahrow is nonsense. Just go check the percentage of AF activity at CDG or LH's at Frankfurt. They make BA's usage of LHR look like a marginal player...
Chris, Fleet, Hampshire
BA and Iberia have a virtual monopoly in the London-Madrid route. The two most dynamic cities of two of the top ten world economies dominated by a single company? No, thanks!
Ricard, Reus, Spain
Good idea in principle, however BA are actually a quality airline generally (T5 excluded of course) whilst Iberia are known for appalling service on-board and on the ground. BA will need to make sure all standards go up, not sink to Iberia levels.
tim short, Sydney, Oz
It was not long ago that Iberia was the dregs of European carriers (not inc. Turkish Airlines).
But I suppose also that at the same time, BA provided much higher service levels than today - so maybe the marriage of 2 mediocres will not be as ill fitting as it once may have been
Richard, Bucharest,
i welcome this merger. Petrole price is becoming a challenge for all airline company. I hope working together will help to limit the economic and social disaster of bankruptcy.
Valentine Asah, Douala, Cameroon