BA swoops on Iberia

UK airline in move for 10% of Spanish counterpart
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The Independent Online
BRITISH AIRWAYS and American Airlines are thought to be close to approving a plan to buy a 10 per cent stake in Iberia Lineas Aereas de Espana for at least Pta50bn (pounds 210m).

The deal is understood to have been discussed at a BA board meeting on Friday, although the company remained tight-lipped on the subject. "The board meeting was an ordinary meeting, and we do not comment on speculation," a spokeswoman said.

But the Spanish Expansion newspaper reported on Friday that BA and Spain's national airline could sign an agreement this week, citing its source as Angel Mullor, Iberia's general director. Iberia's press office said it expected an announcement from BA within the next few days.

American and BA last month announced a global alliance including Canadian Airlines, Cathay Pacific airways and Quantas Airways to compete with the dominant Star Alliance. Buying a stake in Iberia would probably lead to the Spanish airline joining the BA-American alliance, called Oneworld, strengthening its position in Spain and Latin America.

Iberia is worth about Pta580bn, meaning a 10 per cent stake is likely to cost BA and American more than Pta50bn, the Spanish government said.

Sepi, the Spanish state holding company that controls Iberia, will sell about 35 per cent of the airline to institutional investors, while a further 50 per cent will be sold to the public in 1999.

Iberia, which returned to profit in 1996 after making losses since 1990, said on Tuesday that its pre-tax profit in the first eight months doubled to Pta32.7bn - helping to raise investor interest in the airline. The company said full-year pre-tax profit was likely to rise to Pta44bn from Pta18.4bn in 1997. The Spanish airline carried 24.4 million passengers last year. It flies to 97 destinations in 47 countries and offers 850 flights a day.

Last year, the carrier booked passengers on flights to 23 destinations in the US, as a result of a code-sharing agreement with American. Code- sharing allows airlines to sell seats on each others flights.

The deal, if concluded, will help offset the strains placed on the BA- American alliance last week, when the US walked out of "Open Sky" talks with the the UK, complaining that the British government was being intransigent in negotiations to open up air routes.

On Friday, the US government postponed a long-waited hearing on the BA- American alliance.

American's chairman, Don Carty, said he remained confident that his relationship with BA would lead to a number of initiatives that would "exceed our customers' expectations in international travel".