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British Airways Confirms Merger Talks With Qantas

A New Colonialism?

At the height of its power in colonial times, it was once said the "sun never set" on the British empire. Today, it may soon be said the sun will never set on British Airways... as the UK flag carrier confirmed Tuesday it's in merger talks with Australia's Qantas.

Responding to repeated inquiries by The Associated Press and others, BA issued a terse statement to confirm "that it is exploring a potential merger with Qantas Airways Limited via a dual-listed company structure."

Nick Cunningham, an analyst at Evolution Securities in London, told CBS Marketwatch that BA once held a 25 percent stake in Qantas... which it sold in 2004. "They already have a long history of cooperating on the UK-to-Australia route," he said. "It's worked, and it could work some more."

A BA-Qantas pairing "certainly makes sense," added NCB Stockholders analyst Neil Glynn. "I see it as being very early stages, but the companies have a very strong relationship and would know each other quite well."

Talks to join forces with the Australian flag carrier are concurrent with British Airways' ongoing talks to merge with Spain's Iberia, first announced in July. Those two carriers also signed an alliance with American Airlines in August, to shore up the trans-Atlantic market.

All three airlines are now awaiting anti-trust approval for that agreement... and British Airways has reportedly run into resistance from Iberia, over concerns about BA's pension liabilities.

Cunningham pointed out BA's talks with Qantas may also be a psychological ploy of sorts against Iberia. "It also reminds Iberia that BA has other irons in the fire and to some degree is going to lead the process," he said.

Regardless of motive, shareholders in British Airways loved hearing news of the Qantas talks. After seeing their shares plummet 53 percent this year, stock in the British flag carrier rose 15 percent on the announcement.

FMI: www.ba.com, www.qantas.com

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