The heads of British Airways (BA) and Spanish carrier Iberia inked an accord for a union and to lay the base for a joint venture, the International Airlines Group (IAG). Both BA and Iberia will continue to operate independently, even after the union.
Willie Walsh, BA chief executive will be the chief executive of IAG, while his equal at Iberia, Antonio Vazquez will be the chairman. Listed both on the London and Madrid stock exchanges, shareholders of BA will have 56% stake in the IAG while those of Iberia will have 44%.
The merger is expected to raise a combined cost savings of around £350 million in five years, a significant number considering that both parties involved in the merger are presently running at a loss. In accordance with the deal, Madrid’s Barajas airport will host BA flights to key regions, while Heathrow will serve the same purpose for Iberia’s flights.
The deal is expected to be completed in December, once BA wins acceptance for its plans to deal with a crisis relating to a £3.7 billion pension deficit.
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