BA and Iberia merger to lift procurement savings

13 November 2009

13 November 2009 | Jake Kanter

A tie-up between British Airways (BA) and Spanish airline Iberia would see purchasing contribute to annual savings of €400 million (£357 million).

Speaking to SM following yesterday's announcement of the proposed merger, BA's head of procurement Tim Richardson said the two firms had identified areas where they could buy together and described the potential union as a "great opportunity".

"Within the cost-synergies stream we absolutely expect savings from joint procurement and it featured in the business case for doing the deal."

The companies will purchase goods and services together "where it makes sense", but Richardson was unable to confirm any further details at this stage.

Other savings are expected to result from sharing IT and fleet, as well as revenue related cutbacks such as joint selling. The first ?400 million saving will be delivered by the fifth year of the tie-up.

As part of the agreement the two airlines will keep their operation units - including purchasing - separate, while a new holding company, TopCo, will be created with directors from each firm on its board. Current BA CEO Willie Walsh is expected to become group CEO and Iberia chairman Antonio Vázquez will become group chairman.

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