BA, Iberia Move Closer on Merger

Update 5:00 p.m. ET, 11-12-2009: BA, Iberia Agree on Merger

A merger between British Airways and Iberia moved closer Nov. 12 as the boards of the two carriers held separate board meetings to finalize details of the planned $7 billion deal.

The combined carrier would have a million tonnes a year cargo business and rank as Europe's third largest scheduled freight airline after Air France-KLM and Lufthansa.

BA said the meetings in London and Madrid would consider a "potential transaction" but it stressed "no decisions have been taken and, at this time, there can be no guarantee that a transaction would be forthcoming."

Merger talks, which began in July 2008, have been slowed by disagreements over the balance of control between BA and Iberia in a new carrier, concerns over BA's bloated pension fund deficit and management changes at Iberia.

Under the plan being discussed Thursday, BA would control 55 percent of the merged airline while Iberia would own the remainder, according to the Spanish carrier. BA already owns 13.5 percent of Iberia.

BA and Iberia would continue to operate as separate brands under a new operating company, mirroring the merger of Air France and KLM, to protect landing rights which are usually based on a carrier's nationality.

A merger would require approval from European Union competition regulators but this is not seen as a hurdle as they waved through Air France's takeover of KLM in 2004.

BA and Iberia are also awaiting anti-trust immunity from the United States to form a trans-Atlantic joint venture with American Airlines.

Contact Bruce Barnard at brucebarnard47@hotmail.com.