Rumours have resurfaced that Qantas and British Airways are getting interested in each other once again, coinciding with the Federal Government’s transport policy green paper, due this afternoon.

There are strong suggestions the two airlines are actively talking about a swap of equity, with the Rudd Government set to leave the cap of a 49% maximum shareholding for foreign investors.

But that cap will be different to what is in place at the moment: it’s a total, the change being suggested would allow just one person to hold the 49%, which would allow Qantas and BA to swap stakes in each other. The position at present limits a single foreign holding to 25% and 35% in total for all foreign airlines, and 49% for all foreign investors, portfolio and airlines.

BA was the cornerstone investor when Qantas was floated by the Keating Labor Government in 1995. The cap was set in such a way to allow that sort of arrangement, but not dominance. BA sold out a few years ago to raise cash when its finances became strained.

BA has also been talking to Iberia about a possible merger. The talks were strong to start with but have cooled somewhat with fears over the two airlines’ respective home markets, the UK and Spain. BA also has a big pension deficit and Iberia is jockeying for the dominant role in any merger, something rejected by BA and some of its shareholders. BA and Iberia were planning to merge but leave their operations split, like KLM-Air France does. A link of BA and Qantas with stakes of 49% each could be a similar arrangement.

The Federal Government would not approve any deal that saw Qantas’ base and HQ leave Australia. Under this scheme, Qantas would remain Australia-based.

It could be that BA and Qantas have started talking to supplant the Iberia marriage. American Airlines was to be a non-merged member of the BA-Iberia linking. American is also Qantas’ code share partner across the US.

Peter Fray

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