18 Dec 2008

Qantas, British Airways call off merger

8:51 pm on 18 December 2008

Qantas Airways and British Airways have called off plans to merge into an $A8 billion mega carrier after failing to agree on key terms.

Qantas revealed earlier in December it was in talks with the British 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 carriers will continue to work together on "Kangaroo route" services between Australia and the United Kingdom 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 $A8 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 Stg 1.7 billion, as well as the broader economic outlook.

Airlines have been looking to consolidate to muscle up to battle softer economic conditions, which combined with soaring oil prices earlier in the year have severely crimped travel demand.