03 December 2008

British Airways confirms reports it is exploring a potential merger with Qantas.

ABC and a wide range of other media have confirmed the substantial recent speculation in reporting a BA statement regarding the potential merger with Qantas: - "In response to recent media speculation, British Airways Plc confirms that it is exploring a potential merger with Qantas Airways Limited via a dual-listed company structure."

Qantas says it will make a statement on the merger talks later this morning.

Following BA's announcement of a potential merger with Qantas, the share price of British airline soared to the top of London's FTSE 100 index, winning 11 per cent to 155 pence in afternoon deals.

Shortly before BA's announcement there were reports the two airlines were in advanced merger talks to create an $8 billion global carrier.

The two airlines would each retain their names and branding under the agreement, an Australian Financial Review report said.

The Federal Opposition yesterday expressed concern by Government moves to relax ownership restrictions on Qantas.

The Government's aviation green paper released yesterday proposed lifting the 25 per cent limit on individual foreign ownership and the 35 per cent limit on ownership by a foreign airline.

But it does recommend maintaining the 51 per cent Australian ownership provision for the national carrier.

The aviation sector is seeking consolidation as airlines fight for survival having been crippled by record high oil prices and as the world faces a deep recession.

Qantas last week announced further cuts to its capacity, saying the global financial crisis was continuing to dampen passenger demand.

CEO Geoff Dixon, who last week handed over the Qantas reins to Alan Joyce ahs said for some time that lower demand for flights, particularly on international routes, would mean Qantas' profit before tax for the fiscal year ending June 30, 2009 would be about $500 million and that mergers were inevitable.

Meanwhile, BA has confirmed merger talks with Spanish airline Iberia are continuing.

In July, BA and Iberia announced they were holding merger talks to create the world's third largest airline in terms of income.

Recently BA chief executive Willie Walsh, also Irish and he and Joyce reported to be close allies and friends also said his airline had expressed strong interest in a commercial alliance with troubled Italian carrier Alitalia.

A Report by The Mole