3 December 2008

Qantas and British Airways have confirmed that they are in talks for a possible merger of the two airlines into a dual-listed entity, amidst media speculation that it could create the worlds first truly global airline.

The newly merged company would be listed in both Sydney and London, and both brands would still remain.

Qantas has been quick to add that, any transaction would also comply fully with Qantas obligations under the Qantas Sale Act and Australias international Air Services Agreements.

There is no guarantee that any transaction will be forthcoming and a further announcement will be made in due course, if appropriate, the Australian carrier says.

British Airways also adds that, [merger] discussions between British Airways and Iberia are continuing.

At the moment, the Qantas Sale Act allows a foreign airline to hold a maximum of 25% in Qantas, while a joint foreign airline could potentially hold 35%.

These levels are currently under review in Canberra, with a recent green paper released by the government proposing a lift in these levels, but retention of the 51% Australian owed provision.

If the tie-up goes ahead it will slash costs for both carriers, as well as shoring up revenues on key routes. A merged entity will also likely buffer the two airlines against the impacts of the current global economic crisis.

Rumour of the merger pushed British Airways stocks up 12%, making the carrier now worth some GBP1.8 billion or AU$4.2 billion. This is now only slightly lower than Qantas market value of AU$4.4 billion.

The merger would now create a merged entity with a market value of AU$8.6 billion, with revenues of AU$36 billion a year.

In 1993 British Airways had bought a 25% stake in Qantas when the flying kangaroo was privatised, slowing lowering its stake, British Airways sold out completely in 2004.

Currently the two carriers codeshare on select flights and are both part of the Oneworld airline alliance.

Qantas to remain Australian

The Australian federal government Wednesday confirmed that whilst it was reconsidering foreign ownership laws, the majority of Qantas would still remain in Australian hands.

Our bottom line is that Qantas remains in majority Australian ownership, said Wayne Swan, Australian Federal Treasurer.

The fact that there may be some changes beneath that in terms of the way in which foreign ownership is regulated is something that is discussed in the green paper presented by the [transport] minister yesterday.

On Tuesday Anthony Albanese, Federal Transport Minister, had said, We support further liberalisation, but further liberalisation in the national interest.