British Airways and Iberia Sign Merger Agreement 09APR2010

The two carriers have been working together since 1999 when was the first phase of Iberia's privatisation by the Spanish government. In July 2008, both BA and Iberia said they were holding talks on a possible merger, with both brands to be retained as part of a combined group. The most anticipated merger in airline history was provisionally agreed in November last year and it is expected to be completed by the end of this year.

The two companies announced that the agreement would benefit shareholders, employees and customers. The signature of the merger would also secure the future of the two unprofitable carriers and it is expected to save the airlines 400m euros ($533m; £350m) a year.

The new company will be called International Airlines Group, but the BA and Iberia brands will continue to operate as normal. The intention is to imitate the model of Air France-KLM, allowing both Britain and Spain to continue having a national carrier. The company will have its headquarters in London and it is expected to become Europe's third largest airline by revenue. In total the group will operate 408 aircraft and carry more than 58 million passengers a year.

Now British Airways and Iberia face severe competition in domestic and European markets, both from budget airlines and - in Iberia's case - from high-speed train services. However, the Spanish carrier remains unrivalled in its services to Latin America, a region where BA has cut back flights in recent years.

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