Madrid, February 12, 1999: British Airways today confirmed that it is to take a 9 per cent stake in Iberia Lineas Aereas de Espana SA as part of the Spanish airline`s privatisation programme. American Airlines also today confirmed that it will take a 1 per cent holding in Iberia.

Iberia announced that it has accepted an invitation to join oneworld?. This will be ratified at a meeting of the oneworld Chief Executives in Sydney on Monday. It will further strengthen the world`s premier airline alliance, launched on February 1, 1999, and bring added benefits to oneworld travellers.

In addition, British Airways and Iberia have signed a commercial agreement under which they plan to co-operate in a wide area of activities, including code-sharing on flights beyond the UK and Spain, reciprocal participation in frequent flyer programmes.

The expected price of British Airways` 9 per cent investment will be in the region of £200 million with a maximum of £215 million. The final price will depend on a number of adjustments, such as the eventual value of Iberia`s investment in Amadeus, the computer reservations system, in which Iberia currently has a 29 per cent stake and which is planning an initial public offering.

Iberia`s core airline activities includes its interests in regional and domestic airlines Aviaco, Binter Canarias and Binter Mediterraneo, and its holding in Amadeus.

British Airways, through its investment, will be Iberia`s key industrial partner and will have the right to appoint two directors to Iberia`s 12 person board as well representation on all Board sub-committees. British Airways will be working very closely with Iberia`s management to support the privatisation process and drive the future business strategy.

Under this arrangement, and a commercial agreement signed today, British Airways and Iberia plan to share best practice in all aspects of their business to help deliver the highest level of customer service and value for money, in what is becoming an ever more competitive global market.

The agreement will offer British Airways` passengers a wider choice of services to and within the Iberian peninsular and beyond, particularly to South America, where Iberia is the leading carrier. Iberia`s customers will have more easy access to the extensive worldwide network served by British Airways, the world`s leading international airline, and those of its fellow oneworld members.

For British Airways, today`s announcement is the latest step in its strategy to consolidate its position as the leading European airline to compete more effectively with the rival alliances already in place there, and further to build the global network offered by oneworld? carriers.

Bob Ayling, British Airways` Chief Executive, said: “I am delighted to welcome Iberia to the family of British Airways` alliance partners. Our agreement will bring considerable advantages to customers of both British Airways and Iberia, in particular by making it easier to fly to a wider range of destinations.”

Pedro Ferreras, Chairman of SEPI, said: “Today is an important step in the history of Iberia. It marks the first stage of our programme to privatise Spain`s leading airline. We are well on course for a successful flotation during this year.”

Xabier de Irala, Iberia`s Chairman, said: “Alliances will be vital for Iberia in the increasingly competitive airline environment of the 21st Century and we are very pleased to be joining the world`s leading airline alliance.”

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