British Airways and the Spanish airline Iberia say they have reached a preliminary agreement for a merger.

The two airlines have been discussing the deal at separate board meetings throughout the day.

Iberia had earlier said the deal under discussion would give it 45% and BA 55% of the new company.

BA chief executive Willie Walsh has previously said that a merger would help both firms cope with the current economic downturn.

The firms have considered a tie-up for a number of years, holding talks on the issue in July 2008.

Co-operation

BA already owns 13.5% of Iberia, and the two carriers have a code-sharing agreement under the One World grouping of airlines, which allows them to sell seats on each other’s services.

If a merger is formalised, it would still require regulatory approval from the European Commission.

However, analysts say a deal is likely to be cleared, pointing to Air France’s successful merger with Dutch airline KLM in 2004.

BA’s announcement comes a week after it said it would cut a further 1,200 jobs, as it reported a first-half loss for the first time. It made a pre-tax loss of £292m in the six months to the end of September.

Iberia’s most recent results showed that it made a loss of 72.8m euros ($109m; £66m) between April and June.

Source: BBC News