British Airways and Iberia agree on MoU for merger to be completed in late 2010

British Airways (BA) and Iberia announced (12-Nov-2009) their Board Directors agreed on a binding MoU, setting out the basis for a proposed merger of the two carriers to create a new European airline group that "recognises the principle of parity at board and management level". The new group would have 419 aircraft and service 205 destinations. The merger, which is expected to be completed in late 2010, is forecast to generate annual synergies of approximately EUR400 million p/a by the end of the fifth year, following the completion of the merger, at a cash cost of up to EUR350 million. As part of merger plans, the current operations of each carrier and their individual brands will be retained. Details include:

• New holding company: TopCo, registered in Madrid, with 55% ownership by BA and 45% by Iberia;
• BA shareholders: Receive one ordinary TopCo share for every BA ordinary share;
• Iberia shareholders: Receive 1.0205 TopCo shares for every Iberia ordinary share;
• Share listing: Primary listing on the Official List of the UK Listing Authority and its ordinary shares will be traded on the main market of the London Stock Exchange and included in FTSE's UK Index Series;
• Board of Directors: 14 Directors, with seven each from BA and Iberia, including the group CEO, CEOs of both OpCos and 11 Non-Executive Directors;
• Group management team: Will Initially comprise;
  • Willie Walsh, Group CEO;
  • Rafael Sánchez-Lozano, CEO of Iberia OpCo;
  • Keith Willliams, CEO of British Airways OpCo;
  • Enrique Dupuy De Lôme Group CFO;
  • Robert Boyle, Revenue Synergies Officer;
  • José María Fariza Batanero, Cost Synergies Officer;
• Synergy benefits: One third revenue related (joint selling, network and revenue management benefits) with remaining from cost synergies in areas such as IT, fleet, maintenance and back office functions. [more - MoU] [more - merger talks]

British Airways: "The merger will create a strong European airline well able to compete in the 21st century. Both airlines will retain their brands and heritage while achieving significant synergies as a combined force," Willie Walsh, CEO. Source: Company Statement, 12-Nov-2009.

Iberia: "It has been a long process where many people, both at British Airways and Iberia, have worked very hard to reach this agreement. But in the end it was worth it. This agreement is a giant step in the history of both Iberia and British Airways. We are laying the foundations of what will be one of the most important airlines in the world, a real global airline. I believe that, thanks to this transaction, which is the most important in the European airline industry in recent years, we are more prepared than ever to face future challenges," Antonio Vázquez, Chairman and CEO. Source: Company Statement, 12-Nov-2009.