British Airways/Iberia to merge end of 2010...

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Page last updated at 14:49 GMT, Friday, 13 November 2009

British Airways (BA) boss Willie Walsh has said the planned merger with Iberia is "great news for British Airways, our customers and our shareholders".

He also said there was "no question" of the airline's standards of service being cut after its merger.

His comments came a day after the two carriers said they had reached a preliminary merger agreement.

BA's main union, Unite, warned it would not back the deal without a commitment to avoid compulsory redundancies.

Third largest

In an interview with the BBC, Mr Walsh reiterated that both firms would retain their separate brand names.


I think BA will be pleased with the deal they have got - the headquarters in London, led by Willie Walsh, and BA will be majority shareholder

Douglas McNeil of Astaire Securities


BA's long-haul route to Iberia tie-up
BA's pension scheme problems
The view from Madrid
The merger, which is expected to get regulatory backing and be concluded by the end of next year, is set to create the world's third largest airline.

Under the terms of the deal, BA will hold a a 55% stake in the new company with Iberia holding 45%.

The combined firm would have 419 aircraft flying to 205 destinations, and BA and Iberia said it would save them a total of 400m euros ($594m; £358m) in costs a year.

However, Iberia says it can pull out of the deal if BA fails to resolve its pension deficit problem.

Cabin service

"This is all about the future, about creating a strong European airline at which BA will be at the heart," said Mr Walsh.



"The headquarters will be based here [in London], it will be listed in the UK, I will be chief executive."

He denied speculation that, following the merger, BA's level of cabin service would be reduced to Iberia's level.

"There is no question about British Airways' standards. We are working to improve them, and think we are doing a tremendous job," he said.

Responding to the question of whether the planned merger would result in significant job cuts, he said: "I don't think staff will be worried, consolidation is part of our industry."

Unite's national office for civil aviation, Steve Turner, said the union was seeking urgent talks with BA.

"It is imperative that both companies sit down as soon as possible with the unions here and in Spain to discuss how jobs and standards can be safeguarded," he said.

Unite is already balloting its members among BA's cabin crew on whether to take action over the company's existing cost-cutting plans, while Iberia staff have already gone on strike over pay and plan more disruptions in the run-up to Christmas.

Analysts say that post-merger job cuts are expected among administrative staff, but that with the headquarters of the new firm being established in London, redundancy fears are strongest in Spain.

BA 'dominant'

Aviation expert Douglas McNeil of Astaire Securities said BA would be "relieved" to have finally got the merger deal in place.

"I think BA will be pleased with the deal they have got - the headquarters in London, led by Willie Walsh, and BA will be majority shareholder," he said.

However, Virgin Atlantic, one of BA's big competitors in the UK, raised concerns over the new company's market share.

Both BA and Iberia have been losing money during the downturn as businesses and individuals cut back on flying.



Mick Rix, GMB union: "A friendly merger is far better than a hostile takeover"
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.

Financial woes

The agreement comes a week after BA said it would cut a further 1,200 jobs and reported a loss in the first half of its financial year for the first time in its history.


HAVE YOUR SAY We are in a recession and the member states of the EU must pull together for the good of all
James, East Lothian
Send us your comments 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 revealed on Friday that it had made a net loss of 182m euros in the nine months to the end of September, compared with a profit of 51.1m euros a year ago.