Australia's Qantas Airways has confirmed British Airways' disclosure that the two airlines are engaged in tentative merger talks.
Revelation of the talks came as the Australian Government released a draft national aviation policy paper, which signalled that it would be prepared to look at ownership restrictions on the Australian flag-carrier.
Few additional details about the exploratory discussions have emerged, but a combination of the mainline carriers - including their regional divisions - would create an operation with a fleet of some 430 aircraft, handling more than 60 million passengers.
Qantas primarily operates services within the Asia-Pacific region, with a few connections to major European cities, as well as transpacific connections to the USA.
BA has an extensive route network across Europe and numerous transatlantic links to the USA - where it partners with American Airlines through Oneworld - as well as connections to selected points in Asia, the Middle East and Africa.
It operates to Australia via points in southeast Asia and a tie-up with Qantas would cement the airlines' dominance on the 'kangaroo' routes. The two airlines already co-operate through a joint services agreement on routes between the UK, Europe, southeast Asia and Australia.
Qantas and BA state that the merger mechanism under discussion is that of a dual-listed company structure, whereby the two carriers would agree contractual obligations but remain separate, with individual stock-exchange listings.
"Any transaction would also comply fully with Qantas' obligations under the Qantas Sale Act and Australia's international air services agreements," says Qantas.
The Qantas Sale Act restricts foreign ownership to 49% and sets other conditions on the airline's operations.
In its draft Australian aviation policy 'green paper', released today, the Government says it will "maintain the legal requirement" for Qantas to be Australian majority-owned in order to "ensure a strong, Australian-based aviation industry continues into the future".
But it adds: "It may, however, be timely to consider whether the additional ownership restrictions currently imposed on Qantas remain appropriate."
As such, the Government is to consider removing intermediate caps imposed by the Qantas Sale Act, which restrict Qantas ownership by individual foreign airlines to 25% and that of aggregate foreign carrier interests to 35%.
"That may open additional options for structuring investment, while ensuring the airline remains Australian-run and Australian-based," it adds.
Qantas chief Alan Joyce is optimistic over the potential prospect of these ownership restrictions being eased.
"This is a step in the right direction which will set us on an equal footing with other Australian international carriers," he says.
British Airways held a 25% stake in Qantas but gradually disposed of it, finally divesting the remaining shares in 2004.
Source: Air Transport Intelligence news
