British Airways In Merger Talks With Quantas

by Robin Pilgrim, LawAndTax-News.com, London

04 December 2008

British Airways confirmed on December 2 that it is currently holding discussions with Australian airline Quantas over the possibility of a merger which has the potential to create one of the world's largest air travel companies.

If the talks succeed in securing a merger, it would result in the creation of a giant airline company with an estimated annual revenue of around GBP15.4bn – the third-largest in the world.

BA and Quantas have had a strong relationship for the past 13 years, after signing a deal in 1995 which enabled both companies to share costs and revenues derived from flights between the UK and Australia.

BA is already part way through separate merger negotiations with Spain’s Iberia Airlines, although concerns have been expressed by staff and passengers that if both mergers succeed, unemployment in the sector will rise, with an increase in ticket prices to follow.

The aviation market is under considerable strain at present with fuel costs and lower ticket sales contributing to squeezed margins, and it is thought that BA has timed its tie-up talks to coincide with the launch of the "open-skies" agreement which has lifted many of the restrictions previously placed upon flights between Europe and the US.

If approved, the mergers would come at a critical time for BA, which announced in November that its half-year profits had plummeted by almost 92%.

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