11/02/12, 21:37:18 EST

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BA nearer to Iberia deal

telegraph.co.uk

The Spanish government is understood to be resisting a possible takeover bid for Iberia, its national airline, by Air France/KLM.

Air France emerged late last week as a possible competitor to an anticipated bid from British Airways and Texas Pacific Group.

But The Sunday Telegraph has learnt that the Spanish prime minister's office has privately told insiders it "will not look favourably" on a bid from Air France/KLM, as it is worried about losing key international routes under French ownership.

With many of Iberia's prized South American routes duplicated by Air France, the Spanish government is worried a takeover would see business migrate from Madrid to Paris or Amsterdam.

A well-informed source said: "Air France has a very similar network to Iberia. The main aim of the Spanish government is to maintain Madrid as one of the main European hubs for South America.

"This puts them on a collision course with Air France/KLM."

With British Airways already operating a code-share agreement with Iberia on many routes, there is less overlap, making a marriage between the two airlines more palatable to the Spanish authorities.

Support from the Spanish authorities is seen as key to any takeover, not just from a regulatory point of view, but also because the government is a major shareholder in the airline.

Although sources pointed out that under Spanish law the government would be forced to consider any and all bids for the airline, the chance for Air France mounting a significant challenge looked to be receding.

The BA consortium missed what was understood to be an unofficial deadline to make a bid at the end of September to make a bid. But it is now working towards making a proposal to the Iberia board by the end of October.

The consortium is understood to be talking to five banks about funding for the deal.

 Printable Version  | published Sep 30, 2007