BA-Iberia expect €400m in merger synergies by fifth year

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British Airways aims to generate synergies of €400 million ($530 million) by the fifth year of its planned merger with Iberia.

The two carriers have formally signed a merger pact following last November's tentative agreement.

Since that original deal the carriers have "refined the synergies" and "confirmed the principles" of the merged organisation's structure, says BA.

It adds that the Spanish and UK civil aviation authorities have confirmed that the ownership and governance structure would enable the carriers to retain their route licences and traffic rights.

"The merged company will provide customers with a larger combined network," says BA chief Willie Walsh. "It will also have greater potential for further growth by optimising the dual hubs of London and Madrid and providing continued investment in new products and services."

BA's and Iberia's operating companies will remain separate, under a holding company previously known as TopCo but formally renamed as International Consolidated Airlines Group - which will, in turn, be called International Airlines Group.

The shareholding transaction will give BA a 55% stake in the merged company, and Iberia 45%, although BA stated in November that elimination of the airlines' cross-shareholdings would bring the ratio closer to 56:44.

Iberia chief Antonio Vazquez says the combined entity will be "better equipped to compete with other major airlines" and adds that it will be poised to "participate in future industry consolidation".

International Airlines Group will have its premium listing in the UK, and trade its shares on the London stock exchange. The shares will also be traded in Spain through the Mercado Continuo Espanol.