British Airways reported a record loss of £292 million

One answer for flailing airlines in the economic downturn is to merge with healthier competitors. The most likely candidate for a merger in 2010 appears to be Japan Airlines, which is bleeding huge losses – a far cry from their heyday of the 1980s. The idea of mergers is not a new one, British Airways has been in talks to merge with Spanish airline Iberia since 2008. Under the terms of the merger, which is expected to be completed in late 2010 and will make them Europe’s third largest airline, BA will have a 55% stake in the company and Iberia 45%.

It is expected to save the companies £358 million in costs a year. BA chief executive Willie Walsh has said, ‘the merger will create a strong European airline well able to compete in the 21st century. Both airlines will retain their brand and heritage while achieving significant synergies as a combined force.’ Although a merger appears likely, Iberia has said it could still pull out if BA fails to resolve its £3 billion pension deficit problem.