It looks like BA and Iberia, both members of One World, are flying towards a full merger by the end of this summer.

In a statement, BA said: “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 statement added that the BA and Iberia brands would be retained as part of a combined group. The holding company is expected to be a member of the FTSE-100 and quoted on the Madrid stock exchange.

BA chief executive, Willie Walsh, said: “The aviation landscape is changing and airline consolidation is long overdue. The combined balance sheet, anticipated synergies and network fit between the airlines make a merger an attractive proposition, particularly in the current economic environment. 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.“

Iberia chairman and chief executive, Fernando Conte, added: “A merger would be good news for our customers and enhance our existing relationship. We’ve worked together for nearly ten years and a tie-up would build on that success. It would also strengthen the oneworld alliance and further develop Madrid’s position as the European gateway to Latin America.”

BA acquired a 9% shareholding in Iberia in 1999 and increased it to 13.15% earlier this year. Iberia recently acquired a 2.99% direct shareholding in BA.

The airlines expect 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 is thought that both companies are confident of securing regulatory approval in light of the fact the European Union has already granted British Airways and Iberia approval to co-operate widely.

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