SYDNEY (International Herald Tribune) – Qantas Airways, the flagship Australian carrier, and British Airways have ended negotiations on a merger valued at around $6 billion, with neither side able to agree on core elements of the deal.

The two companies announced this month that they were in talks to form a dual-listed company, the latest move in an industry-wide bid to cut costs and lessen the effect of a global economic slowdown that is reducing demand for international travel.
“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 told the Australian Securities Exchange after the end of trading on Thursday.
British Airways confirmed the collapse of talks, adding that the two carriers would continue to cooperate on the route between Australia and Britain via the OneWorld alliance.
Last week, Alan Joyce, the chief executive of Qantas, raised doubts about the merger, saying that it faced several challenges, including the division of ownership between the airlines.
Australian law mandates that Qantas must be at least 51 percent Australian owned and its headquarters, stock market listing and major facilities must remain in Australia. But British Airways said it would not agree to Qantas owning more than half of the combined entity.
Joyce, who took control of Qantas last month, had also pointed to British Airways’ $2.2 billion dollar pension liabilities as one obstacle, as well as its parallel merger talks with the Spanish carrier Iberia.
Chris Yates, an aviation industry analyst with Jane’s Information Group in London, said disagreements over the ownership split and Australia’s strong union presence might have contributed to British Airways’ decision to pull out of the deal.
He said both companies would likely redouble their efforts to forge unions with other airlines in a push to cut costs and streamline operations as the global economic crisis and volatile oil prices crimp international demand for travel.
“I think BA is looking at quite a number of other options,” Yates said. “We’re seeing this flurry of activity toward closer ties or complete mergers between airlines for the quite simple straightforward reason that only the strong will survive in the current financial crisis.”
Howard Wheeldon, senior strategist at BGC Partners, a London brokerage house, said BA now faced increased pressure to forge a strategic alliance.
“Air France-KLM is done and dusted, Lufthansa is a power in itself,” Wheeldon said. “If BA doesn’t find a suitable partner with whom it can take its UK-international strategy forward - it wants to be a global airline - within the next two years, that ambition might well be thrown to the wind.”
He said it was difficult to guess whether BA’s merger talks with Iberia, or its negotiations for a tie-up with American Airlines, would be successful.
“If both fail, though, there can be little doubt that BA will have big problems to face in the medium and longer term,” he said.
Qantas may also be seeking partners elsewhere. Malaysia Airlines has announced that it has begun discussions with various carriers, including Qantas, about a possible strategic tie-up ranging from a possible joint venture to a code sharing or maintenance agreement.