BA and Iberia in merger talks
By HAROLD HECKLE, Associated Press Writer
Tuesday, July 29, 2008
(07-29) 08:11 PDT MADRID, Spain (AP) --
British Airways PLC and Spain's Iberia SA said Tuesday they are in talks over a potential combination.
BA and Iberia, which are long-term partners in the oneworld alliance, said that each would retain its branding under the tie-up.
"This is a special day for the air industry and especially for the two companies, British Airways and Iberia," said BA Chief Executive Willie Walsh at a joint BA-Iberia press conference in Madrid.
The airlines said the negotiations are supported unanimously by both boards, but did not disclose any financial details in a statement.
"We would create the third-largest airline in the world, in terms of income — more than 16.5 billion euros, with the fifth-largest fleet of nearly 450 aircraft," Walsh said.
BA and Iberia have also been in discussions for several months with AMR Corp.'s American, the world's largest carrier, to potentially form a trans-Atlantic joint venture, but they did not provide any immediate update on those talks.
Walsh said the two airlines saw the combination as a positive move within ongoing three-way negotiations with American Airlines. "I have spoken with Gerard Arpey — chairman and chief executive of American and parent AMR Corp. — and he has welcomed the move and thought it was positive," Walsh said.
Walsh said that airline consolidation is long overdue as the aviation landscape changes.
"The combined balance sheet, anticipated synergies and network fit between the airlines make a merger an attractive proposition, particularly in the current economic environment," Walsh said in a statement earlier.
The combination process was likely to take months but less than a year, Iberia Chairman Fernando Conte said.
They added they were confident of securing regulatory approval, noting that the European Union has already granted the two carriers approval to cooperate widely. The pair have been working closely as alliance partners for more than a decade.
Media reports earlier this month had suggested that BA, Iberia, and American were close to applying for U.S. antitrust immunity to form a trans-Atlantic joint venture.
BA and American have failed in the past to win an exemption from U.S. antitrust laws to work more closely together because of their dominance at London's Heathrow Airport, where the pair have more than half the capacity to and from the U.S.
In the meantime, BA has been increasing its shareholding in Iberia, from 9 percent in 1999 to 13.15 percent currently.
Iberia revealed Tuesday that it has recently acquired a 2.99 percent direct shareholding in BA and financial exposure to a further 6.99 percent through "contracts for difference" linked to BA's share price.
A contract for difference is an agreement to exchange the difference in a share's value between the time a contract is opened and the time it is closed. Holders of CFDs are financially exposed to the share price but do not own the shares and therefore have no voting rights.
The pair said that the corresponding shareholdings "reflect the mutual interest of both companies in each other."
Shares in BA surged 8 percent to 253.5 pence ($5.04) on the London Stock Exchange after the announcement. Trading in Iberia was halted on the Madrid Stock Exchange, with the stock up 4.3 percent at 1.71 euros.
The carriers said a new holding company would be a member of the London Stock Exchange FTSE100 and would also be quoted on the Madrid Stock Exchange.
"We don't see this as the endgame, we see it as the start of a new era," Walsh said in Madrid.
By HAROLD HECKLE, Associated Press Writer
Tuesday, July 29, 2008
(07-29) 08:11 PDT MADRID, Spain (AP) --
British Airways PLC and Spain's Iberia SA said Tuesday they are in talks over a potential combination.
BA and Iberia, which are long-term partners in the oneworld alliance, said that each would retain its branding under the tie-up.
"This is a special day for the air industry and especially for the two companies, British Airways and Iberia," said BA Chief Executive Willie Walsh at a joint BA-Iberia press conference in Madrid.
The airlines said the negotiations are supported unanimously by both boards, but did not disclose any financial details in a statement.
"We would create the third-largest airline in the world, in terms of income — more than 16.5 billion euros, with the fifth-largest fleet of nearly 450 aircraft," Walsh said.
BA and Iberia have also been in discussions for several months with AMR Corp.'s American, the world's largest carrier, to potentially form a trans-Atlantic joint venture, but they did not provide any immediate update on those talks.
Walsh said the two airlines saw the combination as a positive move within ongoing three-way negotiations with American Airlines. "I have spoken with Gerard Arpey — chairman and chief executive of American and parent AMR Corp. — and he has welcomed the move and thought it was positive," Walsh said.
Walsh said that airline consolidation is long overdue as the aviation landscape changes.
"The combined balance sheet, anticipated synergies and network fit between the airlines make a merger an attractive proposition, particularly in the current economic environment," Walsh said in a statement earlier.
The combination process was likely to take months but less than a year, Iberia Chairman Fernando Conte said.
They added they were confident of securing regulatory approval, noting that the European Union has already granted the two carriers approval to cooperate widely. The pair have been working closely as alliance partners for more than a decade.
Media reports earlier this month had suggested that BA, Iberia, and American were close to applying for U.S. antitrust immunity to form a trans-Atlantic joint venture.
BA and American have failed in the past to win an exemption from U.S. antitrust laws to work more closely together because of their dominance at London's Heathrow Airport, where the pair have more than half the capacity to and from the U.S.
In the meantime, BA has been increasing its shareholding in Iberia, from 9 percent in 1999 to 13.15 percent currently.
Iberia revealed Tuesday that it has recently acquired a 2.99 percent direct shareholding in BA and financial exposure to a further 6.99 percent through "contracts for difference" linked to BA's share price.
A contract for difference is an agreement to exchange the difference in a share's value between the time a contract is opened and the time it is closed. Holders of CFDs are financially exposed to the share price but do not own the shares and therefore have no voting rights.
The pair said that the corresponding shareholdings "reflect the mutual interest of both companies in each other."
Shares in BA surged 8 percent to 253.5 pence ($5.04) on the London Stock Exchange after the announcement. Trading in Iberia was halted on the Madrid Stock Exchange, with the stock up 4.3 percent at 1.71 euros.
The carriers said a new holding company would be a member of the London Stock Exchange FTSE100 and would also be quoted on the Madrid Stock Exchange.
"We don't see this as the endgame, we see it as the start of a new era," Walsh said in Madrid.
