Thursday, November 12, 2009

BA/Iberia Agree to Consummate Merger

British Airways and Iberia have agreed to terms to consummate a merger which would make them Europe's third-largest airline by revenue.  See Pilita Clark & Mark Mulligan, BA and Iberia to Create Europe's Third-Largest Airline, Fin. Times, Nov. 13, 2009 (available here).  However, there is a caveat: "[T]he two airlines have agreed that Iberia will be able to terminate the accord if it is unhappy with BA's handling of its swollen pension scheme, which has been one of the sticking points in the deal, first announced in July last year."  Id.

The agreement comes against the backdrop of regulatory uncertainity over the future of the oneworld Alliance, to which both carriers belong.  While some analysts believe the U.S. Department of Transportatio will grant the alliance approval and antitrust immunity despite objections from the Justice Department, there is less certainity with respect to the European Commission's view of the alliance.  In the recent past, the Commission has emphasized its "broadly positive approach" to airline alliances in order to allow European carriers to compete effectively on a global level.  See Competition: Commission Confirms Sending Statement of Objections to Members of SkyTeam Global Airline Alliance, Memo/06/243 (Jun. 19, 2006).  Neelie Kroes, Commissioner for Competition Policy, has stressed that EC policy encourages European airlines to become "global winners" even as it enforces its competition rules.  See Competition in the Aviation Sector: The European Commission's Approach, Address to the Conference Celebrating the 20th Anniv. of the Int'l Inst. of Air & Space L., Speech/06/247 (Apr. 24, 2006) (available here).  Whether that still holds true remains to be seen.

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