With the record high cost of fuel and slowing demand, the aviation industry continues to face challenges, and consolidation may be the best option to steering steadily through the turbulence. It has come to no surprise that British Airways has announced that they have been talking with Iberia, a Spanish airline, about a merger. The merger would enable the carriers to cut expenses greatly and could even spark a consolidation wave in the airline sector. Both British Airways and Iberia are also still having merger talks about a transatlantic deal with American Airlines.

Willie Walsh, the Chief Executive of British Airways, noted that the industry of aviation is changing, and the consolidation of carriers is now long overdue. British Airways, which is the owner of 13.15 percent of the Spanish airline with TPG, a private equity company, made an attempt to purchase Iberia last year, however, the agreement fell through. The probability of a merger may take the pain out of what is anticipated to be bleak results from British Airways’ 1st quarter, and their shares have soared by 14 pence to 248.5 pence, which is about 6%.

The gains of British Airways, combined with a fast recuperation on Wall Street along with the falling price of oil, has aided the FTSE 100 in reversing the first big losses, in which the banks suffered following write-downs and fundraisings on Monday from Merrill Lynch, which signaled to a lot of people that the crunch of credit is far from being over.

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