LONDON — Shareholder approval for an $8.9 billion merger between British Airways PLC and Iberia SA to create Europe’s No. 3 airline was overshadowed Monday by the threat of new strikes at the British flag carrier.
The two airlines revealed at concurrent shareholder meetings in London and Madrid that more than 99 percent of investors had voted in favor of the merger, which the pair hope will help counter falling passenger numbers in the wake of the global credit squeeze.
British Airways Chairman Martin Broughton told the few shareholders who braved a cold snap and a strike on the London subway network to meet in Westminster that the deal had a “compelling, strategic and financial logic” and would benefit employees, passengers and shareholders.
In Madrid, Iberia Chair-man Antonio Vazquez said it was a “historical agreement that will create a global group to lead a future consolidation process in the airline business.”
But the Unite union attempted to throw a wrench in the works by announcing after the shareholder meetings that it would be balloting thousands of cabin crew about whether to take further action in a fractious and long-running dispute with the carrier’s management about changes to pay and working conditions.
The battle led cabin crew to walk out for 23 days in May and June - causing the cancellation of hundreds of flights and costing British Airways millions in lost revenue and compensation.
Unite joint leader Tony Woodley said Monday the union had been left with no choice after negotiations stalled and British Airways’ recent move back into profit after a series of losses.
“BA told us it was a business in crisis,” he said. “They demanded structural change. These changes have been made and this business is now in profit with senior management filling their wallets with the spoils.”
British Airways said that Woodley “shook hands” on an agreement in October that would have allowed cabin crew to vote on a revised deal.
“Unite has broken this promise and instead has now chosen to create fresh uncertainty for customers and damage the interests of thousands of its own members within British Airways,” the airline said in a statement.
Shares in the two carriers slumped, with British Airways closing down 3.9 percent in London, while Iberia stock finished 2.9 percent lower in Madrid.
Peter Smith, travel analyst at consumer site travelsupermarket.com, said that the deal was good news for passengers in the long-term.
“Eventually, passengers should expect to see better connections, improved timings and more choice of departures to and from Spain and to onward destinations,”Smith said.
However, he added that the threat of labor strikes at British Airways increased the need for integration to be “managed smoothly to minimize the impact to both passengers and employees.”
The merged Iberia and British Airways group will rank behind Germany’s Lufthansa AG and Air-France KLM in revenue terms.
The combined group will have a fleet of 406 aircraft, carrying around 57 million passengers a year. Annual revenue is estimated at around 12 billion pounds.
Between them, the two carriers fly to more than 250 destinations.
British Airways Chief Executive Willie Walsh said the merger - British Airways shareholders will hold 56 percent of the company, Iberia’s the remainder - would ensure British Airways could compete effectively with low-cost carriers.
The new holding company will be called International Airlines Group, a moniker that Walsh has said is deliberately vague to allow it to merge with or buy other carriers when the time is right.
Last year, British Airways abandoned merger talks with Australia’s Qantas Airways, but Walsh said in September that he had a target list of around 12 carriers.
The pair also plan to expand their alliance with American Airlines, a proposal that has angered rival carriers, including Richard Branson’s Virgin Airways. Strict U.S. antitrust laws bar a full-scale merger with the U.S. airline, but the trio still plan to set prices together and share seat capacity on trans-Atlantic flights.
International Airlines Group will be registered in Madrid, while its financial and operational headquarters will be in London.
Each airline will retain its existing brand for commercial purposes.
A key benefit for British Airways is Iberia’s greater access to South American routes, while Iberia in return will gain from British Airways’s more extensive North American operations.
Information for this article was contributed by Ciaran Giles of The Associated Press.
Business, Pages 23 on 11/30/2010