BA seals Iberia tie-up - as Unite returns to negotiating table

Part one of the Willie Walsh grand plan - a merger with Iberia - is complete. Now for those pesky unions.

Last Updated: 31 Aug 2010

British Airways, as we know it, is about to cease to exist: after finally completing its merger with Spanish airline Iberia, the combined group will be henceforth be known by the incredibly anodyne moniker of International Airlines – although thankfully, the two airlines will keep their current branding, so passengers won’t immediately notice the difference. BA boss Willie Walsh (who’ll be CEO of International) has long argued that the airline industry needs to consolidate, and he’s finally got his wish – although presumably he won’t be happy until he’s managed to get American Airlines involved in a mid-air ménage-a-trois. And with BA finally back around the negotiating table with the unions, he’s even got a chance of persuading his disgruntled cabin crew to cut a deal…

BA and Iberia agreed their tie-up in principle last November, but said ‘technical issues’ had prevented them from signing on the dotted line by the end of March, as planned (perhaps one of them broke their printer?). Even now, it’s not quite done and dusted: Iberia is still reserving the right to pull the plug if BA can’t agree a suitable plan to deal with its nasty pension liability.

But the essence of the deal is agreed. BA shareholders will get one share in the combined group for every one they own, while Iberia shareholders will get 1.0205; the all-new International Airlines Group will have a joint listing in London and Madrid. Together, they’ll have 408 planes flying to 200 destinations (BA will be particularly looking forward to reaping the benefits of Iberia’s strong links to Latin America). And Walsh reckons joining forces will result in a cost saving of €400m a year by 2015.

We suspect this last bit will make the unions rather nervous. But perhaps they’re finally starting to bow to the inevitable: Unite said yesterday that talks have resumed with BA in a bid to avoid a third strike, and that ‘serious progress has been made over the issues which have divided us’. BA said this week that the two strikes thus far resulted in a 15% drop in passenger numbers, and cost it somewhere between £40m and £45m. Since another strike is clearly not in anyone’s interest, it’s good to see the union adopting a more conciliatory tone.

Walsh will no doubt continue his cost-cutting crusade, presumably by resuming his pursuit of American Airlines. But in the mean time the strikes are the biggest threat to BA’s short-term health. Let’s hope they can cut a deal – and the cabin crew aren’t put off by the prospect of working for an airline group that sounds like it ought to be staffed by the Thunderbirds.

In today's bulletin:
Bank of England holds interest rates as economic data perks up
BA seals Iberia tie-up - as Unite returns to negotiating table
Rose goes out with a bang as M&S beats forecasts with 5% hike
Reckitt boss Becht cleans up with £90m annual pay packet
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