The easy partnership of BA and Iberia

The tie-up of the two airlines has thus far been free of turbulence

After nearly two months of effective union, new business partners Iberia and British Airways (BA) have yet to have their first official fight. "Better than expected" is how Iberia CEO Rafael Sánchez-Lozano described the relationship, attributing it to the fact that the strategic merger was thought out "for a long time."

The fact that each airline has remained to a certain extent independent from each other no doubt goes a long way toward this "marital bliss." In fact, the degree of autonomy can sometimes surprise customers. First-class travelers flying with BA from Madrid, for instance, are turned away from Iberia's express security control, and will find that it is quite useless to protest that the companies have now merged.

Gavin Halliday, BA's General Manager for Europe and Africa, recently explained that there are some difficulties harmonizing their own mobile boarding pass systems with those used by Spanish airport operator AENA, but that this glitch should be resolved in a few weeks. In any case, BA will have to pay AENA for the benefit of offering its customers the express service - which it probably will in order to keep its highest-paying clients happy, since they are the ones who bring in the biggest profits for the company.

Is this, then, simply a financial merger? At a meeting with European journalists last Monday at BA headquarters in Waterside, near Heathrow Airport, BA chief executive Keith Williams said that the great value of both brands explained the need to maintain that operating independence while it also became necessary to consolidate traditional airlines to make them stronger in an environment where "consumers increasingly view the market in a global way."

For Iberia and BA passengers, there are important benefits resulting from the merger, said Williams and Halliday, such as a larger network, similar baggage policies, and additional help catching a connecting flight at some of the airlines' hubs. What customers will not be benefiting from, at least in the short run, is cheaper travel. With oil prices on the rise again, BA already raised its fuel fees twice, once in December and again in February. This is a policy that Williams prefers to directly raising ticket prices, because it is easier to pass the costs along to the consumer.

As part of their future plans, last week Iberia announced it would upgrade its long-range fleet through the acquisition of eight Airbus 330s and a purchase option on eight more. Meanwhile, IAG (the parent company that brings both carriers together) has returned to the Spanish blue-chip Ibex 35, besides being listed on London's FTSE 100.

Meanwhile, Iberia and AENA have agreed to build a new cargo terminal at Barajas airport in Madrid that will be closer to Terminal 4, out of which Iberia operates. The cost of the new building will be around ¤100 million, of which the airport manager will contribute 40 percent. The project is expected to be completed by 2015, and will aim to increase Barajas' role in European air shipping. The decision was partly triggered by the fact that last year's volcanic ash crisis saw a significant proportion of Europe's cargo shipments rerouted through Spain as an emergency measure.

On the British side, there are no new projects in the pipeline, beyond IAG's intention to grow the family by adding more airlines to the alliance. IAG chief Willie Walsh set this goal 16 months ago, when the preliminary Iberia-BA merger plan was signed, but there is "no defined target yet," said Williams, who became BA CEO in January following the strategic merger.

While these plans get underway, executives from both companies seem to be getting along relatively well, despite "cultural differences" that sometimes make communication difficult, according to a source at Iberia. "They never say no to something outright, unlike ourselves - we are much more direct."

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