The likely marriage of British Airways and Spain's Iberia should be the first in a wave of airline consolidations in Europe as carriers seek to strengthen their balance sheets before winter.

Soaring fuel bills and and sagging passenger demand has created the scenario where a number of smaller airlines operating in the UK and on the continent will go to the wall before the year is out.

According to the International Air Transport Association (IATA) 24 carriers have stopped flying or filed for bankruptcy protection around the world in 2008, with airlines facing combined losses in the region of £3 billion this year.

Size and balance sheet muscle is now key to survival.

An Anglo-Spanish merger is likely to be followed by Lufthansa adding the ailing Austrian Airways to its operations. The German flag carrier is known to be running the slide rule over Austrian, which is 43 per cent owned by the Austrian Government.

The big question after that is how can Alitalia - which is being propped up by the Italian Government at a cost of €100 million a month - survive without its own white knight?

A combined BA-Iberia group, which would have revenues of £13.1 billion, would rank the group up alongside Europe's top three international carriers Ryanair, Lufthansa and Air France.

As the bigger - and financially stronger - partner, BA would be dominant if a deal is sealed.

For BA the attractiveness of a tie up with Madrid-based Iberia is gaining access to its extensive route network into South America, including the highest density routes to Buenos Aires and Rio de Janeiro.

The European Union is expected to rubber stamp the deal without much fuss.

While a combined management will busy itself in cutting any fat out of the larger business to face a grim winter, passengers will see very little difference. Both BA and Iberia will retain their own brands and services.

However, it is thought that BA customers flying to South American cities will change in Madrid while Spanish passengers heading across the Atlantic with Iberia will be treated to a change of planes at Heathrow.

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