Iberia and BA announce merger agreement

LONDON, April 8 (UPI) -- British Airways and Iberia announced Thursday they would combine forces to become International Airlines Group, although regulators must approve the deal.

The Financial Times said the merger would create an airline with 408 planes that carries 58 million passengers a year. BA Chief Executive Office Willie Walsh, who would keep his position with the new company, said operating costs would shrink by $609.5 million within five years if the deal is approved.

Iberia's Chairman Antonio Vazquez would also keep his position in an agreement that gives BA shareholders 55 percent of the new company and Iberia's shareholders 45 percent.

BA shareholders would swap shares one-for-one, while Iberia shareholders would receive 1.0205 shares for each Iberia share they hold.

The merger, which hinges on approval by the European Commission, would create the third largest airline in Europe after Germany's Lufthansa and Air France-KLM.

The expected deal is part of a trend among airlines merging to compete for passengers and reduce operating costs by eliminating redundancies.

In 2008, Delta Airlines merged with Northwest Airlines. In recent weeks, US Airways and United Airlines have been discussing a merger. Lufthansa, in 2005, acquired Swiss International and has since purchased Brussels Airlines and Austrian Airlines, The New York Times reported.