BA, Iberia shareholders approve US$9b merger

Shareholder approval for a £5.7 billion (US$8.9 billion) merger between British Airways PLC and Iberia SA to create Europe's No 3 airline was over-shadowed Monday by the threat of new strikes at the British flag carrier.

The two airlines revealed at concurrent shareholder meetings in London and Madrid that more than 99 per cent of investors had voted in favour of the merger, which the pair hopes will help counter falling demand from both business and leisure travellers in the wake of the global credit squeeze.

BA Chairman Martin Broughton told the few shareholders who braved a cold snap and a strike on the London subway network to meet in Westminster that the deal had a "compelling, strategic and financial logic" and would benefit employees, passengers, and shareholders.

Historical agreement

In Madrid, Iberia Chairman Antonio Vazquez said it was a "historical agreement that will create a global group to lead a future consolidation process in the airline business".

But the Unite union attempted to throw a spanner in the works by announcing after the shareholder meetings that it would be balloting thousands of cabin crew about whether to take further industrial action in a fractious and long-running dispute with the carrier's management about changes to pay and working conditions.

The battle led cabin crew to walk out for 23 days in May and June - causing the cancellation of hundreds of flights and costing BA millions in lost revenue and compensation.

Unite joint leader Tony Woodley said Monday the union had been left with no choice after negotiations stalled and BA's recent move back into profit after a series of losses.

"BA told us it was a business in crisis," he said. "They demanded structural change. These changes have been made and this business is now in profit, with senior management filling their wallets with the spoils."

BA said that Woodley "shook hands" on an agreement in October that would have allowed cabin crew to vote on a revised deal.

"Unite has broken this promise and instead has now chosen to create fresh uncertainty for customers and damage the interests of thousands of its own members within British Airways," the airline said in a statement.

Peter Smith, travel analyst at consumer site travelsupermarket.com, said that the deal was good news for passengers in the long term.

"Eventually, passengers should expect to see better connections, improved timings, and more choice of departures to and from Spain and to onward destinations," Smith said.

Further industrial action

However, he added that the threat of further industrial action at BA increased the need for integration to be "managed smoothly to minimise the impact to both passengers and employees".

The merged Iberia and BA group will rank behind Germany's Lufthansa AG and Air-France KLM in revenue terms.

The combined group will have a fleet of 406 aircraft, carrying around 57 million passengers a year. Annual revenue is estimated at around £12 billion.

Between them, the two carriers fly to more than 250 destinations and they expect annual synergies worth about €400 million starting the fifth year following the merger.

BA Chief Executive Willie Walsh said the merger - BA shareholders will hold 56 per cent of the company, Iberia's the remainder - would ensure BA could compete effectively with low-cost carriers.

The new holding company will be called International Airlines Group, a moniker that Walsh has said is deliberately vague to allow it to snap up other carriers when the time is right.

International Airlines Group will be registered in Madrid, while its financial and operational headquarters will be headquartered in London and run by Walsh. Trading in the holding company's shares is expected to begin on the London Stock Exchange in late January.

Each airline will retain its existing brand for commercial purposes. A key benefit for BA is Iberia's greater access to South American routes, while Iberia in return will gain from BA's more extensive North American operations.

- AP