20-Jan-2010 4:47 PM

British Airways/Iberia merger to be complete by Feb-2010; Lufthansa pleased with Lufthansa Italia

European markets gained on Tuesday (19-Jan-2010), after being down most of the day due to a fall in banking shares ahead of the release of earnings results. Energy stocks were also lower.

In key European markets, UK’s FTSE (+0.3%), France’s CAC (+0.8%) and Germany’s DAX (+1.0%), while Spain’s SMSI gained 1.3%.

British Airways/Iberia merger to be complete by Feb-2010

Both British Airways (+2.9%) and Iberia (+2.6%) made gains on Tuesday on news they could complete their merger agreement by Feb-2010, according to Iberia’s largest shareholder, Caja Madrid. Caja Madrid Chairman, stated there was little left to be done to finalise the deal, which should be completed by Mar-2010 "at the very latest". The two carriers signed an MoU in Nov-2009 for the merger, in which BA will take a 55% stake in the combined carrier, with Iberia to own the remaining 45%.

British Airways shares were also boosted after Credit Suisse stated the carrier is "attractively positioned". It expects BA to report the best return on equity among European carriers this year, as Premium traffic recovers.

The analysts thus flagged the carrier as a “top aviation-stock pick” for 2010, alongside Iberia.

Lufthansa pleased with Lufthansa Italia performance

Lufthansa (+0.2%) gained marginally yesterday. Lufthansa Italia CEO, Heike Birlenbach, stated she was "pleased" with the results of Lufthansa Italia operations in its first year, despite reports the carrier is planning to suspend services from Milan Malpensa Airport to Rome, having failed to penetrate Alitalia's core market. Lufthansa Italia instead will add new European destinations from the airport. New services from Milan Malpensa to Stockholm and Warsaw will be added in Mar-2010. Other planned services are Milan Malpensa-Palermo and Milan Malpensa-Olbia, while the carrier would revive Milan Linate-Rome services if it gains enough slots to operate at convenient hours.

Ms Birlebach did not comment on the Malpensa-Rome reports, but said that the airline would like to develop its own presence in the Italian market, by introducing a "more Italian on-board experience", such as Italian speaking staff and Italian food, while retaining existing Lufthansa values. The airline is also in the process of securing its own Italian Air Operator's Certificate, which is expected to be granted in the next few weeks.

The airline was launched in Feb-2009 and has since transported 800,000 passengers. Lufthansa made the decision to launch the carrier to take advantage of a gap left by Alitalia at Milan Malpensa airport. The economic crisis has affected the carrier's operations, but it remains optimistic for the future. Lufthansa stated that 2009 was the "right time" to invest in a new carrier for the region.

Europe selected airlines daily share price movements (% change): 19-Jan-2010