BA and Iberia tie-up cleared for take-off after pension deal

Iberia decides not to cancel its BA merger over the latter's pension deficit. One less thing for Willie Walsh to worry about...

by Emma Haslett
Last Updated: 21 Jan 2011
It’s been a long time coming, but British Airways and Iberia seem to have overcome the final hurdle to their merger: the Spanish airline's board has just approved BA's new funding plan for its £3.7bn pension deficit. Under the terms of the agreement, Iberia had the right to walk away from the merger completely if it didn’t like the pension deal – but decided to approve it at a board meeting in Madrid yesterday. After a bad year, blighted by everything from ash clouds to industrial unrest, it's a rare bit of good news for BA boss Willie Walsh. Although he has plenty of other outstanding stuff still on his to-do list...
The two airlines are keen to have their tie-up sorted out by the end of the year; regulators are already on board, and shareholders are expected to give it the thumbs-up in November. The deal makes good sense, on paper: it will create one of the world’s largest airlines, with a combined market value of about $8bn (£5.1bn). BA shareholders will own 56% of the rather boringly-monikered International Airlines Group, while Iberia will control the other 44%; Walsh will be CEO and his Iberia counterpart Antonio Vazquez chairman. So both sides seem happy.
However, as far as Walsh is concerned, that's just the beginning: the BA boss wants to use this the merger as a stepping stone for further consolidation. He said recently that he's been busy making lists of potential targets; his shortlist of 12 (narrowed down from a rather more ambitious 40) is rumoured to include the likes of Finnair, South African Airways and Australian flag-carrier Qantas (which it failed to merge with a couple of years ago, after Aussie regulators seemed less than enthusiastic about a British company taking over one of their national champions - had the situation been reversed, we're not convinced the UK Government would have been so intransigent).
Walsh's other major headache, of course, is this pesky cabin crew dispute, which continues unabated. Although it's unlikely to derail the merger - since it doesn't undermine the strategic rationale behind the deal - Walsh would obviously have liked to have had it sorted by now; instead, the Unite union are actually threatening to escalate it even further. Just the kind of hassle you don't need when you're tying to oversee the merger of two big airlines...

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