BA and Iberia

Implications: This "merger" is not of equals but is necessary for both airlines.

Analysis: BA needs this deal. It is one of three big Euro-airlines, the others being Lufthansa and Air France/KLM.  Lufthansa has Swiss in its stable and will no doubt be adding Austrian before too long. Air France/KLM started the consolidation in order to ensure they added a lot of heft to their joint business.  Both Lufthansa and Air France/KLM have benefited from their actions.

BA needs heft now too. Hence the Iberia connection. By becoming bigger, BA ensures nobody else will try take a bite out of it. Note Iberia has a stake in BA and has said it will increase this. Similary BA has a stake in Iberia and has an option to go as high as 30%.

Iberia, fearing Lufthansa mainly, wants the BA deal because it has been trading with BA for years. There is comfort in that. Better for Iberia to hook up with BA than anyone else.

The combined company will clearly try to source items, like planes and fuel, together. They will also try to add American Airlines to their group and thereby lock up the North Atlantic and Latin American markets with the USA. A smart ove if they can pull it off - and the bet is that they can.