British Airways, Iberia agree to merge

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Steve Chiotakis: On the tarmac, it’s one of the biggest aviation deals in history. British Airways and Spain’s Iberia are getting together to make the world’s third-largest airline. But there’s the matter of a few things to work out. As Marketplace European Correspondent Stephen Beard reports.

Stephen Beard Both airlines need this deal. Both are losing a lot of money and must cut their costs. Analysts say the merger could save up to $600 million a year. The two carriers will maintain their separate brands. But a lot of back office operations could be pooled. There are going to be job losses. Both carriers already face strike action, so further labor unrest seems inevitable.

But BA’s Chief Execiutive Willie Walsh says both airlines will benefit enormously from the merger.

WILLIE WALSH: This is about taking the best out of both and creating a new group of airlines that can compete on a truly global scale. And I think it is very important that British Airways is part of a development like that.

The European regulator is not expected to block the deal. But there is one question mark hanging over it: Iberia says it will pull out if BA doesn’t plug the massive hole in its pension fund — $4 billion and rising.

In London this is Stephen Beard for marketplace.