British Airways in Merger Talks with Qantas

Posted by: Kerry Capell on December 02

Consolidation fever is sweeping the European aviation industry. On Dec. 2, British Airways Plc issue a statement confirming that it is exploring a potential merger with Australia’s Qantas Airways Ltd. via a dual-listed company structure. BA says existing merger discussions with Iberia are continuing.

If successful, both airlines would retain their separate brands but would be run by a single management team. Analysts speculate that together, the airlines could reduce costs by combining many functions such as administration and sales. The new company would have a stronger global focus, combining British Airways’ strength in European and transatlantic routes with Iberia’s clout in Latin America and Qantas’ reach in Asia.

Qantas is an airline BA knows well. BA held a stake in Qantas for 11 years until 2004, when it sold its 18.25% shareholding to raise money to pay off some of its debt.

Now BA’s strategy, says Joe Lampel, professor of Strategy at Cass Business School, is to target privatized or about to be privatized national airlines such as Iberia and Alitalia and use its turn them around.

“Qantas is a ‘national’ airline in difficulty,” says Lampel. “And the national airline model is fading.”

The news comes the same day that Australia's government indicated it might be prepared to relax the rules on foreign ownership. Under current Australian law, Qantas must be at least 51% Australian-owned. Any individual foreign airline can own up to 25% of an Australian carrier while a total of 35% may be owned by a consortium of foreign airlines.