British Airways could merge with Australian carrier Quantas to form one of the world's biggest airlines.
British Airways could merge with Australian carrier Quantas to form one of the world's biggest airlines.
BA, which is already in merger talks with Spanish airline Iberia and discussing a marketing alliance with American Airlines, said yesterday it is now exploring a "potential merger" with Australia's biggest airline.
The pairing would create a super-airline with 71 million passengers a year, 474 aircraft and airport hubs in two different continents, with £15.4bn in annual sales. A tie-up between all four would create the world's largest carrier, trumping the US giant Delta/Northwest and Air France-KLM.
It marks the latest consolidation development as airlines fight for survival, having been crippled by record high oil prices and the economic downturn. The industry has already seen more than 30 airlines collapse this year and the International Air Transport Association, the industry trade body, expects the world's airlines to post a collective loss of £6.3bn in 2008 and 2009.
The BA announcement immediately sent its shares soaring, finishing 12.5% higher at the close of the day's trading. Its market value had more than halved in recent months as the airline warned that, after last year's record breaking £875m profits, it would barely break even this year.
It has already indicated it would cut flights and would raise prices by up to 4% this year, a move that will already add hundreds of pounds to the cost of a family holiday.
Executives at the airlines are known to be exploring being listed in London and Australia, an arrangement similar to the model employed by Anglo-Dutch groups Reed Elsevier and Shell.
The move came hours after the Australian government said it was considering removing Qantas's foreign ownership cap. That would potentially allow mergers with other international airlines, but would ensure majority Australian ownership.
In a brief statement released in response to market speculation, BA did not provide any reasoning for the prospective deal but chief executive Willie Walsh has long advocated industry consolidation, arguing closer co-operation will help airlines cut costs in the current economic climate.
The announcement also raised fears about the future over BA's proposed merger with Spanish carrier Iberia, where discussions have encountered difficulties over concerns about BA's pension liabilities. BA said its discussions with Iberia are continuing.
However, Mr Walsh added: "I didn't see BA and Iberia being the endgame, I always saw consolidation beyond that. We believe this (Qantas) is a very real and sensible way forward to us."
BA used to control nearly 20% of Qantas before its former Australian chief executive Rod Eddington ordered the sale of the stake in 2004 to repair BA's damaged finances.
Virgin Atlantic Airways, which objected to the BA-American-Iberia tie-up, said BA was attempting to increase its dominance to the detriment of competition. Its chief executive, Steve Ridgway, said: "The only strategy BA seems to have is to lock-up some of the busiest routes in the world, against the consumer interest."
