BA and Iberia sign merger agreement to become one of the world’s largest airline groups.

British Airways (BA) and Iberia have signed a merger agreement that will see the creation of one of the world’s largest airline groups – International Airlines Group – carrying more than 58 million passengers every year to 200 destinations.

The signing follows the completion of a Memorandum of Understanding (MOU) between the two airlines in November 2009, and, according to a statement by the airlines, has been “structured so that it can take advantage of further consolidation in the global aviation industry.”

It is expected to save the airlines around €400 million (£350m) in the first five years.

Willie Walsh, British Airways’ Chief Executive, said: “The merged company will provide customers with a larger combined network. 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.”

Spanish airline Iberia has reiterated in the statement that it is entitled to terminate the agreement if it is not satisfied with BA’s pension recovery plan.

Antonio Vazquez, Iberia’s Chairman and Chief Executive, said: “This is an important step in the process towards creating one of the world’s leading global airlines that will be better equipped to compete with other major airlines and participate in future industry consolidation.”

The merger is expected to be completed by the end of 2010. It will be presented to shareholders for approval in November 2010, with completion expected approximately one month later, subject to regulatory approval from relevant organisations.