BA blames Iberia merger delay on 'technical issues'

British Airways' merger with Iberia of Spain will not take place in the first quarter of this year as planned because of "technical issues", the UK flag carrier said yesterday.

BA was not prepared to go into any detail, saying only that the agreement would be signed "in due course" and blaming delays on "technical issues that need to be resolved".

It is understood the hold-ups are not related to BA's cabin crew strikes – the second of which finished at midnight on Tuesday. The company's £3bn pensions deficit is also not thought to be a factor, although it was central to the 18-month negotiations before the deal was finally agreed in November.

Under the terms of the agreement, BA will hold 55 per cent of the new company, Iberia 45 per cent. The merger should lead to £350m of efficiency savings, the two airlines have said.

Meanwhile, BA yesterday faced another round of complaints from rival Virgin Atlantic over plans for closer links with American Airlines (AA). Ownership regulations preclude a merger between the two carriers, but they have submitted plans to regulators in the US and Europe under which they would share revenues and jointly manage schedules, pricing and capacity on transatlantic routes.

Virgin has vociferously opposed the move since BA and AA first applied for formal Anti-Trust Immunity (ATI) in the US in August 2008. In February, the US Department of Transportation (DoT) launched a 60-day consultation on its preliminary plan to clear the tie-up providing the airlines gave up four pairs of daily take-off and landing slots on the highly competitive London-to-New York route. Virgin's response, submitted to the DoT yesterday, brands the plan as "massively uncompetitive", highlighting the "sheer inadequacy" of the conditions imposed by the department and the "potential competitive harm" if the deal is allowed to proceed.

Virgin also attackedBA's claims that regulatory clearance would allow the Oneworld alliance, to which BA, AA and Iberia all belong, to compete with the much larger Star Alliance and Skyteam groups, both of which already have monopoly immunity on transatlantic flights.

"The fact is that approval of this deal would distort competition further, not restore it," said Sir Richard Branson, the president of Virgin Atlantic. "If the regulators take this decision on the false assumption that a three alliance vision can meet all competitive needs they will be making a big mistake and doing a disservice to consumers."

In a parallel regulatory process, BA last month approached the European watchdog with an offer to lease out four daily pairs of slots from Heathrow, plus another two if the competitive environment between on the London-to-New York route changes. Virgin described the concessions as "woefully inadequate". The EU is also inviting responses from the industry.

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