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Speaking at a press conference following the unveiling of a proposed all-share deal, Walsh said the new company would have combined annual revenue of €16.5bn.
"The talks we are announcing today are the consequence of the ongoing - and much needed - liberalisation of the aviation industry," Walsh said.
The recent Open Skies agreement between the US and the European Union "has opened up our home base at (London's) Heathrow to new competition," Walsh added. "Hand in hand with liberalisation is the need for consolidation."
The CEOs said the deal had been unanimously supported by the boards of both companies and had also been welcomed by UK and Spanish authorities.
Iberia's Conte said both companies are "probably the most complementary airlines within Europe: Iberia leads the Europe-Latin America market, while British Airways is the leader in the routes between Europe and the US, and has an important position in Asia."
The tie-up plan takes place after British Airways overcame initial hostility from Iberia's largest shareholder, local savings bank Caja Madrid. The unlisted bank last year scuppered a takeover approach for Iberia by a consortium led by US private equity firm TPG that included BA. The British airline, which was already a major Iberia shareholder, has been talking to Caja Madrid about Iberia's future since.
BA has largest stake
The companies will also operate from two of the major and newest European airport hubs. Both recently inaugurated state-of-the-art terminals at Heathrow and Madrid's Barajas, which together handle more than 120 million passengers per year.
Conte said British Airways will have the largest stake in the new holding company that will be created in the merger. Both airlines will continue to operate with their respective brands and licenses.
Iberia's Conte said the proposed merger differs from the tie-up between Air France and KLM to create Air France-KLM, as the all-share transaction will tie two carriers with stronger capital and balance sheets than the rival French and Dutch airlines.
Iberia, which had a cash position of more than €2bn in cash and no debt, recently purchased a stake of 2.99% in British Airways and secured derivatives for another 6.99% in the UK-based carrier. Iberia said the stake buy was conducted to balance British Airways' own 13.15% stake in the Spanish flagship carrier.
Conte said the share swap formula for the merger still need to be defined. The Spanish government still owns more than 5% of Iberia. Caja Madrid last year became Iberia's largest shareholder with a 23% stake.
- Dow Jones
