British Airways and Iberia have reached a merger agreement in which BA will hold 55 percent of the new airline and Iberia 45 percent.

Both airlines are losing money and hope the merger will see them through the economic downturn. The brand names British Airways and Iberia will stay in place, just like KLM and Air France have done. The merger is due to be completed by the end of next year.

The British and Spanish airlines negotiated for one year, but talks were hampered by the matter of which company would have most control after the merger.

The new airline will be the third largest in Europe after Air France-KLM and Lufthansa.