BA says in a statement that the boards of the two airlines are meeting separately to “consider a potential transaction”.
The two already work together under the One World airline alliance, which allows them to sell seats on each other’s planes held talks on a tie-up last year, while BA owns 13.5% of the Spanish carrier
BA says no decisions has yet been made on the merger, which would create the world’s third largest airline, and “there can be no guarantee that a transaction will be forthcoming”.
It adds: “A further announcement will be made in due course, if appropriate.”
Reports say BA will take 55% of the new company, while Iberia will have a 45% stake. It is understood BA chief executive will have the same role in the enlarged group while Iberia’s Antonio Vazquez Romero would become chairman.
The aviation industry has been hit hard by the global recession with the International Air Transport Association (IATA) predicting that the industry will lose $11 billion this year.
BA recently reported a £292m loss for the six months to 30 September and announced it is to cut a further 1,200 jobs.