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BA's Attempted Merger With Quantas Collapses

by Robin Pilgrim,, London

21 December 2008

Merger negotiations between British Airways (BA) and its Australian counterpart, Quantas, have come to an end after the parties failed to strike an agreement over ownership rights.

Earlier this month, British Airways confirmed rumours that it was holding discussions with Quantas over the possibility of a merger which had the potential to create one of the world's largest air travel companies, with an estimated annual turnover of around GBP15.4bn (USD22.3bn).

However, after much deliberation, the companies released a joint statement on December 18, announcing:

"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."

It is thought that the merger talks stalled after neither company could agree upon how ownership of the conglomerate would be distributed.

Originally, it was intended that the airlines would combine to form a dual-listed company. However, BA objected to the notion that, under Australian law, the merged company would have to remain majority-owned by Australian investors and headquartered in Australia.

Subsequent to this, BA announced it was not prepared to allow Quantas to own more than a 50% stake in the joint company.

BA's current position in the aviation market has come under intense scrutiny during the last few months, with flagging ticket sales and its falling share price becoming an increasing cause for concern.

Throughout the course of discussions, Qantas Chief Executive Alan Joyce had warned that a successful merger between the airlines, two of the world's largest, faced major hurdles.

However, despite the halt of the merger negotiations, the companies' joint statement indicated that they will continue to collaborate, stating:

"Qantas and BA will continue to work together on their joint business between Australia and the UK and as part of the oneworld alliance."

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