Dispute on stake ownership led to collpse of BA-Qantas merger talks

20 December 2008

Merger talks between British Airways and Australian flag carrier Qantas, fell through (See: British Airways, Qantas fail to agree on merger terms) as the two companies could not converge on the size of their stakes in the combined group that would have resulted from the merger.

Reports quoted unnamed sources as saying that talks fell through on account of Qantas' insistence for a 55 per cent stake in the new company, to which BA could not agree.

The collapse of talks two weeks after negotiations were made public, was more or less expected, as was evident from the well-documented hurdles it faced along the way, along with Australia's foreign ownership rules.

In a conciliatory note, both airlines said that relations between them remained cordial and they would continue to co-operate in the OneWorld alliance.

BA is also in merger talks with the Spanish carrier Iberia, and is pursuing is an alliance with American Airlines that is facing regulatory hurdles. A three-way tie-up between BA, Qantas and Iberia would have created a next next generation global super-airline, the likes of which are being forced into existence by the exigencies of the credit crunch and global recession.

BA started talking to Iberia in August 2008. Reports said that they would most probably not conclude before next summer as Iberia's investors are wary of BA's ballooning pensions deficit.