LONDON
Shareholders in British Airways PLC and Iberia SA have approved a 5.7 billion pound ($8.9 billion) merger that will create Europe's third-largest airline.
More than 99 percent of shareholders from both airlines on Monday voted in favor of the deal - a result that was announced at investor meetings in London and Madrid.
The two airlines announced the merger earlier this year as a way to survive in an industry facing falling demand from both business and leisure travelers in the wake of the global credit squeeze.
BA Chairman Martin Broughton told investors at the meeting in Westminster, central London, that the deal had a "compelling, strategic and financial logic" and would benefit staff, passengers and shareholders.
Only around 30 BA shareholders attended the meeting because of a strike on the London Underground rail network and a cold snap that has brought early snow across the country, but proxy votes left the result in no doubt.
BA Chief Executive Willie Walsh said the merger - BA shareholders will hold 56 percent of the company, Iberia's the remainder - would ensure BA could compete effectively with low-cost carriers.
The airlines expect annual synergies worth some euro400 million ($529 million) starting the fifth year following the merger.
In Madrid, Iberia Chairman Antonio Vazquez said it was a "historical agreement that will create a global group to lead a future consolidation process in the airline business."
The merged Iberia and BA group will rank behind Germany's Lufthansa AG and Air-France KLM in revenue terms.
The new holding company will be called International Airlines Group, a moniker that Walsh has said is deliberately vague to allow it to snap up other carriers when the time is right.
BA last year abandoned merger talks with Australia's Qantas Airways, but Walsh said in September that he had a target list of around 12 carriers.
The pair also plan to expand their oneworld alliance with American Airlines, a proposal that has angered rival carriers, including Richard Branson's Virgin Airways. Strict U.S. antitrust laws currently bar a full-scale merger with the U.S. airline, but the trio still plan to set prices together and share seat capacity on trans-Atlantic flights.
International Airlines Group will be registered in Madrid, where its board of directors and shareholders meetings will be held. Its financial and operational headquarters will headquartered in London and run by Walsh. Trading in the holding company's shares is expected to begin on the London Stock Exchange in late January.
Each airline will retain its existing brand for commercial purposes.
The combined group will have a fleet of 406 aircraft, carrying around 57 million passengers a year. Annual revenue is estimated at around 12 billion pounds.
Between them, the two carriers fly to more than 250 destinations. A key benefit for BA is Iberia's greater access to South American routes, while Iberia in return will gain from BA's more extensive North American operations.
The merger approval comes at the end of a difficult year for BA, which still faces an unresolved pay dispute with its cabin crew that resulted in several days of strike action earlier this year.
But the deal has overcome another potential hindrance - BA's large pension deficit. Iberia, which had the right to walk away from the merger if it was unhappy with BA's plan to deal with a pension fund deficit of 3.7 billion pounds, said in September it was happy with BA's plan to tackle the funding gap.
BA shares are down 0.1 percent at 271.6 pence in London, while Iberia stock was 0.2 percent lower at euro3.20 in Madrid. Both markets were trading broadly negatively.
Associated Press writer Ciaran Giles contributed to this report from Madrid.
