British Airways 'exploring merger' with Qantas

[Neil R.]

British Airways said on Tuesday that it was "exploring a potential merger" with Australian rival Qantas Airways.

"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," BA said in a statement.

http://news.smh.com.au/world/british-airways-exploring-merger-with-qantas-20081203-6pvv.html

[Kieran Wells]

This sounds very interesting..Is this something like what BA tried to do with Iberia & AA? Also with British Airways already owning a share in qantas, this should be an easier process.

[Andrew P]

This sounds very interesting..Is this something like what BA tried to do with Iberia & AA? Also with British Airways already owning a share in qantas, this should be an easier process.

I thought BA has sold all it shares already

[Michael Morrison]

Ba have sold their shares. It iwll be interesting to see what is proposed and how much QF take of BA.

[Montague S]

I think this is a bit more than just shares...its bound to happen sooner or later.

[Phillippe M]

Qantas shares jump after British Airways merger talks
AAP - December 03, 2008 10:26am

SHARES in Qantas Airways have surged in the wake of the Australian carrier and rival British Airways confirming they are exploring a potential merger.
Qantas shares, which closed down 10 cents yesterday had added 20 cents or 8.89 per cent to $2.45 at 10.09am (AEDT).

"It may be positive news for Qantas shares,'' CMC Markets Stockbroking general manager Andrew West said.

Mr West said a tie-up between the carriers would be a positive move for Qantas, particularly at a time where many airlines are facing tough market conditions and consolidation is on the cards.

"If the deal goes through it will create a formidable airline that has a major share of major routes to the US, UK and Asia,'' he said.

A merger of BA and Qantas would create an airline with a market value of almost $9 billion.

BA has a market value around £1.8 billion ($4.17 billion) and Qantas around $4.5 billion.

The flying kangaroo confirmed this morning it was exploring a potential merger with its fellow OneWorld alliance member, after a similar announcement by BA which sent the British company's shares soaring in London trade.

Qantas' statement echoed BA's assertion that there was no guarantee any transaction would be forthcoming.

"In response to recent media speculation, Qantas confirms that it is exploring a potential merger with British Airways plc via a dual-listed company structure,'' Qantas said.

"There is no guarantee that any transaction will be forthcoming and a further announcement will be made in due course, if appropriate.''

Qantas said any transaction would comply with its obligations under the Qantas Sale Act - which stipulates the company must be 51 per cent Australian-owned, keep its headquarters in Australia, and have an Australian chairman.

Following BA's announcement, which also confirmed that its tie-up talks were continuing with Spanish airline Iberia, the British airline's share price closed up 12.5 per cent at Stg1.57 in London.

British Airways has previously held a stake in Qantas but sold its share in 2004 after more than a decade of ownership to repay debt.

News of the fresh merger talks came a day after the Federal Government revealed plans to increase the level of foreign ownership allowed in Qantas, effectively to 49 per cent.

Australian law currently limits a single foreign holding to 25 per cent, while a group of foreign holdings can total 35 per cent.

If the Government's green paper on aviation is followed through to legislative change, it would allow Qantas and BA swap equal stakes in each other.

The aviation sector is facing consolidation as airlines fight for survival having been crippled by record high oil prices. They also face a drop off in air travel as the global economy enters recession.

"I think we can see further consolidation in the aviation industry as airlines try to find ways to survive in this tough market,'' Mr West said.

Westpac economist James Shugg said any merger between BA and Qantas was just one of many consolidation options in the industry.

"In five years' time, the airline business is going to look very different,'' Mr Shugg said.

Seven Investment Management analyst Justin Urquhart Stewart in London said it was logical for BA and Qantas to explore a merger, especially as activities such as replacing aircraft would prove difficult in coming years with limited capital and credit available.

"There are great economies of scale between them in terms of sharing routes and equipment,'' he said.

"They would complement each other very nicely indeed and of course take out competition on the route.''

Last month, British Airways reported a net loss of £42 million 97.45 million) for the six months to the end of September and said passenger numbers were down by almost 4 per cent.

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

http://www.news.com.au/business/story/0,27753,24744511-31037,00.html

[Radi K]

I’m going to go out on a limb and suggest this will happen sooner rather than later. Industry speculation has been rife over the last month about the deal.

[Saj_A]

Here's an interesting perspective from one of my close colleagues:

Link (http://www.fleetbuzzeditorial.com/2008/12/10/britishairways-qantas/)

For years BA has struggled to convince that it is ‘the’ international airline of choice. From a market standpoint the view has long been that the airlines higher margin North Atlantic routes are its major strength and the rest of the international route based structure comes close behind. Achieving a deal with an airline such as Qantas would in my view do nothing but enhance the strategic potential of both airlines and give them a commanding position against the fast rising star airline in the Mid and Far East. Eventually, it is also my belief that when the time comes that some kind of deal with American Airlines emerges that can meet with international regulatory concerns this really could become a very formidable international airline.

[Ash W]

Here's an interesting perspective from one of my close colleagues:

Link (http://www.fleetbuzzeditorial.com/2008/12/10/britishairways-qantas/)

For years BA has struggled to convince that it is ‘the’ international airline of choice. From a market standpoint the view has long been that the airlines higher margin North Atlantic routes are its major strength and the rest of the international route based structure comes close behind. Achieving a deal with an airline such as Qantas would in my view do nothing but enhance the strategic potential of both airlines and give them a commanding position against the fast rising star airline in the Mid and Far East. Eventually, it is also my belief that when the time comes that some kind of deal with American Airlines emerges that can meet with international regulatory concerns this really could become a very formidable international airline.


The thing I don't follow with these Alliances is how having a share in a company strengthens things when these airlines are already in alliance with each other? The same thing came up when BA was planning on taking a stake in Iberia (does anyone know how that is going BTW, haven't heard anything for sometime).

So like I said, the point is if they are already alligned and working together then how does ownership make it any stronger? Or could it be that the members of Oneworld are not quite as close a knit family to their rivals in Star.

[Ellis Taylor]

Ash, the problem with alliances is that airlines will still always do what is in their best interest, no matter how close the alliance is. Look at how CX has been increasing capacity on many Australian routes and how it competes with QF although they are still in the oneworld alliance. At the end of the day if you can make more money doing a route yourself rather than in an alliance, you're better to take that one.

Ownership on the other hand means that you can have a lot more control and influence over the other party which is why in every other industry you see mergers and takeovers. This obviously hasn't happened in aviation due to the bilaterals but hopefully this is changing.

[Daniel F]

Looks like its not going ahead:

SYDNEY, 18 December 2008: Qantas Airways Limited (Qantas) and British Airways Plc
(BA) are announcing that 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.
Qantas and BA will continue to work together on their joint business between Australia and
the UK and as part of the oneworld alliance.

http://www.asx.com.au/asxpdf/20081218/pdf/31f8dgw4tbzx8l.pdf

[Saj_A]

....queue the next merger talk failure for BA with IB.

BA should focus SOLELY on gaining ATI with AA.

Walsh has wasted too much time *****footing around this year and I certainly will not be voting for him at next July's AGM. If he doesnt secure ATI, this man is on borrowed time...

[Mike W]

I heard there was some... well, misalignment over the % of ownership of the proposed merged company. QF wanted 51% to meet Australian Government ownership obligations. BA wanted something else. Surprised anyone?

[Mike W]

....queue the next merger talk failure for BA with IB.

BA should focus SOLELY on gaining ATI with AA.

Walsh has wasted too much time *****footing around this year and I certainly will not be voting for him at next July's AGM. If he doesnt secure ATI, this man is on borrowed time...

Hey Saj, you might want to get a few Mates along with you to back you up if you want the Irishman out. ;)

[Saj_A]

I was never his biggest fan, letting go of Eddington was BA's biggest mistake.

;)