British Airways (London) and Iberia (Madrid) have agreed to merge under a preliminary agreement styled after the Air France-KLM model. The two airlines will creat a holding company that will own both airlines. BA stockholders will own 55 percent of the new holding company and IB stockholders will own the remaining 45 percent. Both airlines will retain their separate AOCs and brand for at least five years. The new entity will maintain two hubs at London Heathrow and Madrid. Both companies hope to finalize the deal before the end of 2010 but the deal is far from final due to BA’s pension deficit which could scuttle the deal.