BA and Iberia at last agree to get together to sort out their problems

LIKE two drowning men Iberia and British Airways have long eyed each other as potential means of mutual buoyancy. The rate at which the airlines have been sinking at last forced them into each other’s arms on Thursday November 12th. BA made big pre-tax losses in the year to the end of March as it suffered from the credit crisis and the global economic slump. Iberia actually managed to eke out a slender profit for 2008. But as the terms of the merger were thrashed out Iberia announced a loss in the latest quarter, which includes the usually profitable summer months. A week ago BA said that it had lost GBP292m ($466m) in the first half of the year, which includes the summer period.

These airlines are not alone in their travails. The International Air Transport Association, an industry body, estimates that total losses for the world’s airlines this year will be some $11 billion. By agreeing to merge the two firms will belatedly join the trend for big European airlines to bulk up. This has become an attractive means to make substantial cost savings as they compete against low-cost rivals and try to cope with a precipitous fall in numbers of lucrative business passengers. The pair reckon that by the fifth year the new group will save some €400m ($595m)annually by cutting overlapping routes, and by combining maintenance, office functions and business-class lounges. The pair may also have more heft when it comes to negotiations to buy new planes from Boeing and Airbus. …

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