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1987: Great British airline ready for take off
The two biggest airlines in the UK are to merge and create a carrier to compete with America's giant air corporations.

One time rivals British Caledonian (BCal) and British Airways (BA) have agreed a deal worth 237m.

Many smaller companies and opposition MPs believe that this - the biggest shake-up in the airline industry for 20 years - should be referred to the Monopolies and Mergers Commission.

BA chairman Lord King described the planned merger as "an unrepeatable opportunity to create a British airline to take on the world."

An unrepeatable opportunity to create a British airline to take on the world
BA chairman Lord King
Together the companies would control 70% of the UK flight market with a combined annual turnover of nearly 4bn and 46,000 staff.

Both organisations are confident that there would be no need for compulsory redundancies.

The British Caledonian Board - under the chairmanship of Adam Thomson - has already approved the merger and 40% of BCal shares have been pledged to BA.

BA shares rose by 10p to 170p as soon as the plans were announced.

British Aerospace would benefit as BA would pledge their 1bn budget for new aircraft to the airbuses currently used exclusively by BCal.

In parliament government trade spokesperson Kenneth Clarke told MPs he knew about the proposal a week ago.

Mr Clarke said the Director General of The Office of Fair Trading, Sir Gordon Borrie, would examine the case and report back to trade secretary Lord Young in the next few weeks.

Last year BCal reported losses of 25m following the disappearance of 6m of South American business after the Falklands War and when the US bombing of Tripoli last year closed off the lucrative route to Libya.

Founded as a charter airline in 1961, BCal expanded in 1970 when it merged with British United Airways.

The two airlines currently share 13 destinations, but Bcal would provide BA with access to 20 new routes and dominance at Gatwick as well as Heathrow airport.

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Photograph of British Airways chairman Lord King
Lord King looks forward to creating a world-class airline

In Context
After a three-month investigation, the MMC reported and vetoed the original proposal as a BA takeover that was against the public interest.

BA put forward 10 new conditions acceptable to the MMC. The main concession was that BA would surrender BCal's European and domestic licences.

The stock market crash in autumn 1987 meant BA shares were worth less than 1 and they reduced their bid to 156.7m.

The BCal board was unhappy with this and the new terms, which suggested there would be compulsory redundancies from their 8,000 staff.

They had a month to decide and considered proposals from European airlines.

In December the BCal board and majority shareholder - Investors in Industry - accepted a BA offer of 250m.

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