Qantas, BA merger talks fail

Qantas Airways Ltd and British Airways (BA) have called off plans to merge into an $8 billion-plus mega carrier after failing to agree on key terms.
Qantas revealed earlier this month it was in talks with the UK carrier about a
potential merger through a dual listing structure.
Both carriers said in almost identical statements on Thursday their 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 said.
The two carriers will continue to work together on "Kangaroo route" services between
Australia and the UK under its joint services agreement and as members of the
Oneworld alliance, Qantas said.
Last week, Qantas's chief executive Alan Joyce said there were a number of hurdles
to overcome in relation to the potential merger, a deal that would have created an
$8 billion plus carrier by market value and a fleet of about 500 planes.
Significant matters that needed to be resolved before a deal could be done included:
agreeing to an appropriate merger ratio, resolving issues around BA's pension fund,
which has liabilities of around STG1.7 billion ($A3.74 billion), as well as the
broader economic outlook.
Mr Joyce said another obstacle to the deal was BA's parallel merger talks with
Spanish airline Iberia, adding that only one transaction could take place.
BA chief executive Willie Walsh had said a three-way deal was possible, but if BA
was to merge with Iberia before Qantas it could have made it difficult for Qantas to
comply with the Qantas Sales Act, which requires the company to be headquartered in
Australia, have a board made up of two-thirds Australian citizens and have an
Australian chairman.
Mr Joyce said last week the Australian carrier was not in talks with any other
airlines.
However, earlier this week Malaysia Airlines said it had begun talks with various
carriers, including Qantas, to form tie-ups including joint ventures.
Several analysts had predicted that a Qantas and BA merger had a 50 per cent chance
of succeeding.
"At this stage [we] place less than 50 per cent probability on success unless Iberia
defects to another airline," Citigroup said in a client note.
Airlines have been looking to consolidate to muscle up to battle softer economic
condition, which combined with soaring oil prices earlier in the year have severely
crimped travel demand.
Qantas closed up 17 cents, or 7.52 per cent, at $2.43.