A Merger between British Airways and Iberia of Spain was announced today, creating Europe’s second largest airline.
Shareholders of both companies voted for the merger in November, valuing the companies at $9.6 billion. Shares in the new company, International Airline Group (IAG) will begin trading on Monday.
BA will hold over half of the shares, while Iberia will take the remaining 45 percent.
Each company will still retain its individual operations and brands, but current BA boss Willie Walsh will be promoted to head of the new group. “Our future is a multinational, multibrands airline group. We look forward to welcoming further brands,” he said back in November.
“We are excited about future opportunities but we will be patient.”
Analysts predict that the new merger will allow the two companies to catch up with rivals such as Air France-KLM and Lufthansa. Saj Ahmad, an analyst at consultants FBE Aerospace said “In terms of size, BA-Iberia will be the second biggest carrier in Europe and amongst the top ten in the world,”
The merger will mean that BA can benefit from Iberia’s strong Latin American presence, while similarly Iberia is set to gain from the British carrier’s strength in North America and Asia.
IAG will now be second only to German carrier Lufthansa in Europe, and is predicted to carry about 60 million passengers per year.
The merger was a result of the recent economic downturn, which has led to the rise of budget airlines. This has resulted in steep costs for traditional airlines.
It has been a tough time for airlines recently, with the volcanic ash in Iceland causing massive disruption and the recent cold snap halting many flights over Christmas. However, recent figures from IAG show returns to healthy profit, suggesting that the sector is on the road to recovery.