The world’s favourite airline could soon be one of the world’s largest if the proposed merger of British Airways and Iberia is approved by regulators. A provisional deal was agreed between the two in November 2009 and is expected to be finalised by the end of this year.

BA and Iberia will still continue to operate under the same names but the new parent company will be called International Airlines Group. Willie Walsh, BA’s chief executive said that the merger would provide customers with a larger network in which to fly.

International Airlines Group will be based in London and British Airways shareholders will retain 55 per cent ownership. Antonio Vazquez, chairman and chief executive at Iberia, said that the deal would produce an airline which would be able to compete on a global scale with other groups. He said that further consolidation would also become possible.

As well as being better able to take on other European giants such as Lufthansa and Air France-KLM, it is hoped that the merger will result in cost cutting for the two carriers. The global recession has not been kind to airlines and British Airways is expected to announce a huge loss for the year.

Industry analysts have greeted the merger with enthusiasm, saying that the deal will allow both airlines to spread their costs. Many also see the move as a stepping stone to other alliances. It is likely that an alliance with American Airlines will be sought next, and that both BA and Iberia will be looking for partners in Asia as well.