BA, Iberia target airlines in spend spree

Chief executive Willie Walsh said that the two airlines, which plan to merge by the end of the year and call themselves International Airlines Group (IAG), had compiled a list of 12 potential targets following talks over expansion.

"We have had a number of meetings where we have looked at airlines around the world and identified those that would be attractive to us in joining IAG," the BA chief said, adding that no deals were imminent.

"This is just to give us a focus. We have not had any discussions with any airlines. There is nothing going on at the moment," he said.

Davy stockbrokers analyst Stephen Furlong said BA-Iberia is likely to target Asia where it has a weak market share.

"I would say that Asia's number one in the context that it's a high growth market. Asia's where it's going to be at," he said.

BA announced on Sunday a partnership agreement with India's Kingfisher Airlines, which Mr Furlong said could be a precursor to a full takeover.

"India's very important for them and I suspect Kingfisher is top of the list," he said.

Kingfisher, the second-largest Indian private-sector carrier with about 380 flights a day, said last week its board had approved a $1bn (650m) fundraising in a bid to stem losses and turn the airline profitable.

Deutsche Bank analyst Geoff Van Klaveren agreed that Asia would be a key focus.

"Asia is where the growth is so I would have thought that will be an interesting area," he said.

Analysts said they were unsurprised by Mr Walsh's comments given the need for consolidation within the industry as companies look to increase their competitiveness in a market dominated by big air alliances and low cost carriers.

"The BA-Iberia merger is a start not an end.

"There's a thousand airlines and there should be maybe a hundred or less," said Davy's Mr Furlong.

Portuguese broker BPI said it considered the joint venture between American Airlines, BA and Iberia "as a prior stage towards a potential merger" and noted that BA had held merger talks with Qantas which is part of the Oneworld airline alliance of which BA is the leading European member.

Mr Furlong identified Air Berlin, British Midland, Finnair and Aer Lingus as possible targets in Europe.