BA and Iberia merger talks stumble

Merger talks between British Airways and Iberia are making little headway despite reassurances from both sides of an imminent tie-up, according to sources within both airlines.

The number of problems to be resolved before the merger can proceed is far bigger than the respective heads Willie Walsh and Fernando Conte have revealed. A deal is unlikely to be struck before the summer, reports the Times newspaper.
At the start of the month, Willie Walsh, the chief executive of BA, told investors that the only major stumbling block to clear was determining financial control of the parent company. However according to the newspaper the number of problems stands at twelve, including management positions, the location of the company’s headquarters, BA’s pension deficit and the even the previously contentious share split had been overcome, according to Walsh.

Last week Transport Secretary Geoff Hoon went on record to confirm it would not hinder BA becoming a Spanish company as a result of a merger with Iberia.
It is thought that the airlines would continue to operate as separate brands under a new operating company. However, it is unclear whether this parent company would be based in Spain or in Britain.

When the deal was announced, BA’s shareholders would have owned nearly 70 per cent of the combined group, based on the respective market capitalisations of the airlines. But now Iberia has a larger market value due to the slump in BA’s share price over downturn concerns.

Further evidence of this downturn emerged over the weekend when BA confirmed that it had parked two Boeing 747 jets at Cardiff airport. The jumbos, worth more than £140 million each, have had their engines covered and doors sealed as the airline awaits for passenger numbers to pick up.

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BA, which declined to comment yesterday on the progress of its talks with Iberia, added that it had parked the 747s at Cardiff because that was where its maintenance and repair facility is located. This will allow the aircraft to be brought back into service quickly when needed.
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