Qantas/ba merger grounded

Australia's flagship carrier, Qantas and British Airways have ended talks on a merger valued at £4.1 billion, saying they could not agree on the terms of the deal...

Analysts were hoping the merger would help to transform an industry that is struggling with falling demand and fluctuating fuel prices.

In a brief statement to the Australian Securities Exchange yesterday, Qantas said, "After detailed discussions about a potential merger of the companies, talks have ended.

"Despite the potential longer-term benefits for Qantas and BA, the airlines have not been able to come to an agreement over the key terms of the merger at this time."

The two carriers, which began talks to form a dual-listed company earlier this month, will continue to cooperate on the so-called kangaroo route between Australia and the United Kingdom via the OneWorld alliance, according to BA.

Qantas Chief Executive Alan Joyce, who took over the airline last month, had warned that the merger faced several challenges, especially the division of ownership between the two carriers. He also lamented the fact the talks had been leaked and forced out into the open.

Under Australian law, Qantas must remain majority-Australian owned and its headquarters and major offices must stay in the country.

But British Airways said yesterday that it could not agree to Qantas owning more than 50 percent of the combined company.

Mr. Joyce also named British Airways' huge pension fund liabilities as an obstacle to the merger, and also the British carrier's ongoing merger talks with the Spanish carrier Iberia.

Qantas is worth about £2.1 billion and BA about £2 billion, based on latest exchange rates and share prices.

A BA spokeswoman said the carrier's long-running merger talks with Spain's Iberia were continuing but it was not planning to take an equity stake in Italy's Alitalia.

The BA Spokeswoman said, "Whilst BA has long been interested in a commercial relationship with Alitalia, BA is not interested in taking an equity stake."

Air France and Lufthansa are also fighting it out for a tie-up with Alitalia.

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