Iberia chairman Xabier de Irala has once again raised the possibility of Iberia buying a stake in oneworld alliance partner British Airways (BA), which already has a 10% holding in the Spanish flag carrier.

This idea first surfaced several years ago, but was dismissed by analysts at the time as nothing but a dream. Since then, Iberia has registered three years of consecutive profits, in addition to raising Euro122 million ($130 million) through the sale of 6% of the shares that it held in Amadeus, the travel information technology provider. Iberia, which has a 25% stake in Amadeus, has said it plans to sell a further 10.25%shareholding.

While Iberia's prospects have improved, those of BA have waned, with the latter's share price now at a level that means an equity purchase is no longer beyond Iberia's reach. A 10% stake, for example, would cost Irala £400 million ($596 million). Any purchase would require shareholder approval.

Analysts have been surprised by Irala's announcement. It has also been suggested that Iberia might be better advised to use some of its cash reserves to either bring forward re-equipment plans or buy back shares linked to October's mooted initial public offering. This would place the remaining 54% of the company in the public domain.

Presently, the parlous state of many publicly listed airline shares suggests that SEPI, the government holding company that has a majority stake in Iberia, may struggle to dispose of its all the shares at a price with which the government would be comfortable.

Spanish Treasury Minister Cristóbal Montoro has reiterated that the government will insist on retaining a "golden share" in the flag carrier, essentially to stop control of the airline passing to another state. However, the EU has warned that this may contravene the concept of free flow of capital.

Source: Airline Business