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British Airways, Iberia Merger Takes Effect

Fri, 01/21/2011 - 9:17am
LONDON (AP) -- The merger of British Airways and Spanish carrier Iberia took effect Friday, creating Europe's third-largest airline in a deal meant to counter a slump in air travel following the global financial crisis.

The merger came as BA cabin crew, who have staged a costly series of rolling strikes in a long-running dispute over working conditions, voted for further walkouts.

Shares in British Airways and Iberia both ceased trading, to be succeeded on Monday by stock in the new holding company, International Consolidated Airlines Group SA. The two airlines will continue flying under their current names, and BA Chief Executive Willie Walsh becomes top man in the combined group.

The new group will have a fleet of 406 aircraft, serving more than 250 destinations and carrying around 57 million passengers a year. Annual revenue is estimated at around 12 billion pounds ($19 billion), ranking behind Germany's Lufthansa AG and Air-France KLM.

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.

BA shareholders get a 56 percent stake in the new company.

Iberia and BA hope the merger will help them weather a fall in demand from both business and leisure travelers in the wake of the global credit squeeze.

The combined group has signaled that it is looking for further acquisitions, and Walsh has said the holding company's name was deliberately vague to allow it to snap up other carriers.

Last year, BA abandoned merger talks with Australia's Qantas Airways, but Walsh said in September that he had a target list of around 12 carriers.

The pair also plan to expand their oneworld alliance with American Airlines, a proposal that has angered rival carriers, including Richard Branson's Virgin Atlantic Airways. Strict U.S. antitrust laws bar a full-scale merger with the U.S. airline, but the trio still plan to set prices together and share seat capacity on trans-Atlantic flights.

International Airlines Group is registered in Madrid, but its financial and operational headquarters will be in London.

Unite, the union representing BA cabin crew, said Friday that its members had voted 5,751 to 1,579 to take further industrial action. No dates have been announced for walkouts.

The dispute was originally about pay and working conditions but now centers on travel perks which were taken from staff who participated in previous strikes.
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