Would Create One Of The World's Largest Airlines

British Airways and Iberia of Spain said Thursday that they have agreed to a $7 billion merger that will create one of the world's largest airlines. Company officials say they hope to compete with Air France-KLM and Lufthansa.

The New York Times reports that BA would retain 55% of the combined company, and that Willie Walsh, chief executive of British Airways, would stay on in that position with the combined group. Antonio Vázquez, Iberia’s chief executive, would become chairman.

Gert Zonneveld, an analyst at Panmure Gordon in London, said the merger makes sense. “Both airlines have their issues and there are some decent cost savings and synergies to achieve."

The deal will require both government and shareholder approval, but Iberia said in a statement that they expect those hurdles to be cleared by early next year. The two airlines said the merger would create a company with about $22 billion in revenue and result in annual cost savings of about nearly $600 million. “The merger will create a strong European airline well able to compete in the 21st century,” Mr. Walsh said in the statement. “Both airlines will retain their brands and heritage while achieving significant synergies as a combined force.”

FMI: www.britishairways.com, www.iberia.com/us