BRITISH Airways last night sealed a &pound;4bn merger deal with Spanish carrier Iberia to create an aviation giant.<br /><br />The two loss-making companies said they had reached a preliminary agreement for the tie-up that will see BA shareholders take 55 per cent of the combined group, with Iberia holding the remaining 45 per cent.<br /><br />BA chief executive Willie Walsh will take the same position at the new company and chairman Martin Broughton will become deputy group chairman. Chief financial officer Keith Williams will become chief executive of the UK division.<br /><br />The enlarged airline will be headquartered in London but will be incorporated in Spain, with Iberia&rsquo;s chairman and chief executive Antonio Vazquez becoming group chairman.<br /><br />A joint statement from the two firms said that on completion of the merger the company &ldquo;will be tax resident in Spain,&rdquo; which could win the firm tax advantages.<br /><br />The tie-up &ndash; which is expected to deliver &euro;400m (&pound;360m) of synergies &ndash; is the biggest single consolidation of European airlines since Air France and Dutch airline KLM tied the knot in 2004.<br /><br />With 62m passengers a year, the combined airline is the largest in Europe in terms of passenger numbers, but budget airline Ryanair is expected to beat that figure this year.<br /><br />Shares in both firms jumped in anticipation of a deal yesterday, with BA closing up 7.5 per cent at 215p and Iberia up 11.78 per cent to 222 cents.<br /><br />The merger is expected to be formalised in the first quarter of 2010 and closed by the end of the year. Walsh said the tie-up would create &ldquo;a strong European airline well able to compete in the 21st century&rdquo;.<br /><br />Investors will welcome the deal, as BA has been under fire over its record first-half losses of &pound;292m.<br />