British Airways and Iberia are holding talks with a view to an all-share merger between the two companies. The boards of directors of both companies are unanimously supporting negotiations.

Both British Airways and Iberia brands will be retained as part of a combined group.

British Airways acquired a nine per cent shareholding in Iberia in 1999 and has recently increased its shareholding to 13.15 per cent. Iberia announced that it has recently acquired a 2.99 per cent direct shareholding in British Airways and financial exposure to a further 6.99 per cent through contracts for difference linked to British Airways’ share price.

The airlines’ shareholdings reinforce the mutual interest of both companies in each other. It is expected to take several months to reach agreement on the terms of the merger and to finalise a joint business and integration plan for the combined group.

Both parties are confident of securing regulatory approval. The European Union has already granted British Airways and Iberia approval to co-operate widely.