British Airways and Spanish national carrier Iberia are holding friendly talks about a possible tie-up as the aviation sector battles soaring fuel prices.
'British Airways and Iberia are holding talks with a view to an all-share merger between the two companies. The negotiations are supported unanimously by the boards of both companies,' the pair said in a statement.
The announcement comes as the world's biggest airlines face commercial headwinds from recent record high oil prices, which ramp up jet fuel costs, and weak consumer spending that dampens demand for air travel.
'The aviation landscape is changing and airline consolidation is long overdue,' BA CEO Willie Walsh said in the release.
'The combined balance sheet, anticipated synergies and network fit between the airlines make a merger an attractive proposition, particularly in the current economic environment',' he said.
'We've had a successful relationship with Iberia for a decade and are confident that both companies' shareholders would benefit from the proposed tie-up,' the former Aer Lingus CEO added.
BA, which already holds 13.15% of Iberia, had abandoned takeover plans for the carrier in November last year after a Spanish bank built up a substantial blocking position in the airline.
Meanwhile, Iberia said today that it has bought a 2.99% holding in British Airways, with additional exposure to almost 6.99%.
'The airlines' shareholdings reinforce the mutual interest of both companies in each other,' the statement added.
'It is expected that it will take several months to reach agreement on the terms of the merger and to finalise a joint business and integration plan for the combined group,' it concluded.
Under the tentative merger proposals, the British Airways and Iberia brands would both be retained.
