British Airways, Iberia in merger talks

Both airlines are struggling in the face of what some say is the worst aviation recession on record.

STORY HIGHLIGHTS

BA: No decisions have been taken and there can be no guarantee that a transaction will be forthcoming
Weight of each company in possible tie-up could be 45 percent Iberia, 55 percent for BA
BA last week reported $483 million pre-tax loss for the six months to the end of September
Dismal results have come as both airlines brought in cost-cutting programs that have led to industrial unrest

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The boards of British Airways and Iberia are holding separate meetings on Thursday amid mounting speculation they are close to sealing a merger to create Europe's third-biggest airline.

Shares in Iberia were up 10.3 percent in morning trading at €2.19 ($3.26), while BA's rose 7 percent to 214p.

BA released a statement following the share price rises confirming the airlines' boards were discussing a potential transaction, but the company was cautious about the outcome of the talks.

"No decisions have been taken and, at this time, there can be no guarantee that a transaction will be forthcoming," BA said.

"A further announcement will be made in due course, if appropriate."

Iberia, in a later regulatory filing, was similarly cautious, saying that "no decision [on the merger] has yet been taken and there are no guarantees that the transaction will be carried out."

However, it also confirmed reports that the weight of each company in any eventual tie-up "could be around" 45 percent for the Spanish carrier and 55 percent for BA.

The two companies first announced their intention to merge in July last year, but talks have floundered following management changes at Iberia and the Spanish airline's concern about BA's large pension scheme deficit.

The move comes as both airlines struggle in the face of what some say is the worst aviation recession on record.

BA last week reported a £292 million ($483 million) pre-tax loss for the six months to the end of September, its worst half-year deficit ever, and Iberia is expected to post a nine-month operating loss of more than €300 million ($447 million), some analysts say, when it reports its results on Friday.

BA's loss followed a £401 million ($663 million) pre-tax loss last year and the airline has forecast another annual loss this year, the first time it has ever gone into the red two years running.

The dismal results have come as both airlines have brought in cost-cutting programs that have in turn led to industrial unrest.

Cabin crew at BA have been threatening industrial action ahead of the critical Christmas season in response to the airline's move to change their work practices.

Iberia has had to cancel hundreds of flights since last month because of cabin crew strikes.