BA and Iberia merger deal announced

The merger will create one of the world’s largest airlines and will help the firms come out of recession.

The deal will have a combined market value of $7 billion, and is expected to close by the end of 2010.

BA shareholders will have 55 percent of the combined firm with 419 aircraft flying to 205 destinations, while Iberia shareholders will be getting 45 percent.

In a joint statement, BA and Iberia said the merger would provide "enhanced scale to compete with other major airlines and participate in future industry consolidation".

A “natural fit”
Analysts see BA and Iberia as a "natural fit" which can use their own unique value proposition to strengthen the market.

BA’s position in Europe-North America and Iberia’s position in Latin America will be the strong point. The new firm will have annual revenue of 13.5 billion pounds.

Iberia's chairman Antonio Vazquez will be chairman of the new company, while BA's CEO Willie Walsh will be the CEO of the new firm. The two companies will have dual centers in London and Madrid.

The deal will create a new holding company having seven members on the new 14-member board.

Potential to grow in a tough market
BA has applied to U.S. and European authorities for competition clearance, which would allow it to share costs and revenues on transatlantic routes with Iberia.

"We expect BA to be given anti-trust immunity as Air France-KLM and Deutsche Lufthansa have been granted immunity and an open skies agreement has come into operation," said analyst Tony Shepard.

"The deal will give them the potential to grow in a tough market that low-cost rivals can't match without losing money," Joaquin Garcia-Romanillos, an analyst for Portuguese bank, said.

BA posted revenues of 9.1 billion pounds last year, while Iberia has sales of 5.4 billion euros.

After the announcement of the deal, BA and Iberia shares rose up 7.5 percent and 11.8 percent respectively.