EU approves BA, Iberia merger and American Airlines tie-up

The European regulator yesterday approved the merger of British Airways (BA) with Spain's Iberia to create Europe's third-largest airline and paved the way for the merged entity to form a transatlantic joint venture with American Airlines.

The merger and the joint venture is expected to strengthen competition across the Atlantic and benefit customers with better connections, improved flight schedules and enhanced frequent flier benefits.

The new company will be called International Airlines Group, but the BA and Iberia brands will continue to operate as normal.

The BA-Iberia-American Airlines joint venture is expected to bring in revenues of £230 million annually to BA, while its tie up with Iberia is expected to bring in savings of £330 million a year from 2015.

The issue was in focus before the commission for over a year, as the European Commission (EC) was concerned about the level of collaboration anticipated between the three airline majors and its potential adverse impact on consumer benefits. However, the commission said that the three airlines agreed to the anti-trust conditions set it.

The BA-Iberia-American Airlines joint venture will now have to be approved by the US Department of Transportation (DoT) within 24 hours, and analysts say that the DoT will not object once it has passed the scrutiny of the EC.