Shareholders in Britain and Spain overwhelmingly backed the £4bn merger of their two national airlines yesterday, clearing the last significant hurdle before the deal's scheduled completion in January.
The merger – which now requires only legal formalities to be finalised – will create Europe's second largest carrier by market value after Air France-KLM.
The two brands will be retained by the newly created International Airlines Group, which will be registered and headquartered in Spain, but listed in and run from Britain. Competition regulators on both sides of the Atlantic have already given the green light to the plan, as has Britain's pensions regulator, which became involved because of the deficit in BA's final-salary pension scheme.
The BA side of the deal was backed by 99 per cent of shareholders at a meeting in London yesterday. BA has long insisted that the deal is the right thing to do. This is despite the economic problems in Spain, the biggest of the heavily indebted nations in Europe, that are still worrying the markets, despite Sunday's bail-out of Ireland and the launch of a stability mechanism. BA shareholders will hold 56 per cent of the merged company and Willie Walsh will retain his position as chief executive. Iberia's shareholders get 44 per cent, and its president, Antonio Vázquez, will become the chairman.
Economic problems sparked by the downturn and the sharp decline in transatlantic travel, particularly the business travel that is BA's lifeblood, first got the two sides talking about a deal that is expected to reap savings of €400m (£340m) from the fifth year. The two companies also hope that their merger will serve as a platform for future deals.
BA said yesterday: "This is an historic day for British Airways, with shareholder approval giving us the green light to merge with Iberia.
"We've had a strong relationship with Iberia for more than a decade, and this merger will enhance both airlines' strategic and financial positions, creating benefits for our customers, shareholders and staff. The merger will create a new holding company, International Airlines Group, that will be ideally placed to lead future consolidation within the aviation industry."
The two airlines are largely complementary. In addition to its transatlantic business, BA boasts a strong presence in Asia and Africa, while Iberia contributes its Latin American ties together with the two companies' combined presence in Europe.
Some smaller shareholders in BA have raised objections to the new company's registration in Spain, where future shareholder meetings will likely be held as a result.
But the BA chairman, Martin Broughton, has pointed out that BA would have had to pay a premium were the deal structured as a takeover rather than a merger, which would have given its shareholders rather less than the 56 per cent of IAG they will hold in January.
While the two airlines have lost money during the downturn in the year to March, BA boasted revenues of £8bn with Iberia turning over €4.4bn in 2009. The pair carried a combined 57.5 million passengers.Reuse content