British Airways PLC (BAY, BAY.L) and Spanish carrier Iberia Líneas Aéreas de España SA (IBRLF.PK) are moving closer to a decision on the future of their GBP 3.16 billion merger plan, the Wall Street Journal reported Wednesday, quoting people familiar with the situation. Iberia's board is scheduled to hold a meeting on Thursday in which a new proposal that would accelerate the process is expected to be tabled, the report added.
The new proposal is expected to have more guidelines regarding the splitting of shares in the new entity as well as the corporate governance structure of the new company. British Airways' board met on Wednesday and no details of the deal has been disclosed yet, except that the talks are progressing.
One of the key points being discussed is who would head the combined company. While Willie Walsh, the chief executive of British Airways, will have a leading role, another option being mooted is a dual structure with two chief executives. According to the existing plan, both airlines will continue to operate with separate brands at the same time, having local heads of operations in London and Madrid.
The all-stock proposal hit the headlines last July with no concrete decision taking shape since then. British Airways has a pension-fund deficit of GBP 1.74 billion, which had been a hurdle in the progress of the talks, but is at present viewed less seriously by the parties.
The UK airline had a much higher market capitalization when the talks began, but the stock has been severely volatile in the recent past due to market turmoil. However, in comparison, Iberia stock has witnessed less downward movement in the past few months.
Both companies are now under pressure to strike or abandon a deal. British Airways would like to arrive at a decision before its investor day scheduled for March 5.
The surge in fuel prices and a drop in passenger demand have made independent operations tough for airlines. Many have adopted measures such as job cuts, grounding of fleet, reduction in routes or decrease in the number of operations.
Once completed, this would be one of the largest deals in Europe, second only to the 2003 acquisition of KLM by Air France. Earlier, British Airways, as part of a consortium led by U.S. buyout firm TPG, withdrew from a bid to buy Iberia.
Both British Airways and Iberia are members of the OneWorld alliance. The deal will give British Airways access to the lucrative Latin American market as Iberia is a key player in that market.
While announcing the deal in last July Walsh had said, "The aviation landscape is changing and airline consolidation is long overdue. The combined balance sheet, anticipated synergies and network fit between the airlines make a merger an attractive proposition, particularly in the current economic environment. We've had a successful relationship with Iberia for a decade and are confident that both companies' shareholders would benefit from the proposed tie-up".
In December 2008, British Airways, which had been in discussions with Australian air carrier Qantas Airways Ltd. (QUBSF.PK, QAN.AX), ended its merger talks. Despite the potential longer term benefits to both the companies, the two companies were not able to come to an agreement over the key terms of a merger, British Airways said at that time.
In another arrangement in August 2008, British Airways, Iberia and American Airlines (AMR) signed a joint business agreement on flights between North America and Europe and said they plan to expand their global cooperation.
Last week, the British carrier reported a net loss for the nine-month period, hurt by sharply higher fuel costs and lower travel volumes, despite foreign exchange benefits. The company maintained its fiscal 2009 revenue growth forecast and added that it sees an operating loss for the year.
BAY.L closed Wednesday's regular trade at 144.10 pence, up 2.00 pence or 1.41%, on 15.23 million shares.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.