As Aer Lingus enters the final stage of its search for a strategic alliance partnership, British Airways and American Airlines have signed a deal to buy a combined 10 per cent stake in the Spanish flagship airline, Iberia.
The Spanish deal, announced yesterday, is likely to provide one model of the kind of deal which Aer Lingus could strike, offering an equity injection and membership of one of the main international airline alliances.
Under the long-awaited deal, which values Iberia at over €2 billion, British Airways will buy a 9 per cent stake and American 1 per cent. They will retain them for at least three years.
The purchase price will be fixed when the sale is formalised and Spain sells 30 per cent of the group to other institutional investors later in the year.
"This purchase is a significant step in the consolidation strategy that the three companies are carrying out in their respective markets and in the construction of a global network to ensure they can compete effectively against rivals," Sepi, the state holding company, said in a statement.
The deal is a key move towards a full privatisation of Iberia and should lead to a full share flotation of 50 per cent of the group in the first half of this year.
It also puts Iberia in the oneworld global marketing alliance of airlines, which already includes BA, American, Qantas, Cathay Pacific, Canadian Airlines and Finnair.
That alliance, launched in September, combines the airlines' timetables and frequent flyer programmes and already covers 632 destinations in 138 countries, rivalling the Star Alliance led by United Airlines, Lufthansa and others.
Aer Lingus is likely to seek an alliance into one of these major groupings and to want the participation of a major US airline to help it to build its trans-Atlantic business.
Following radical restructuring the Spanish airline is now seen as one of Europe's most profitable, having more than doubled net profit in 1998 and will extend the oneworld alliance's reach in southern Europe and Latin America.
American is already the biggest North American airline flying into South America, through its Miami hub, and also has a 10 percent stake in Iberia's associated Aerolineas Argentinas.
In addition, it will give oneworld a new southern European hub airport at Madrid, connecting traffic to and from Latin America with flights within Europe and beyond.
"The geographical positioning is good for oneworld," said Mr Chris Avery, airlines industry analyst at Paribas Capital Markets.
"Based on the provisional figures for Iberia's 1998 profits, the indicated stake price doesn't look unreasonable, given that there are large benefits to come for BA and oneworld from Iberia's participation."
"And oneworld will bring Iberia Asia and North Atlantic network exposure," he added.
The final stake price will take into account the value of international computer reservation company, Amadeus Global Travel Distribution.
