Australian carrier Qantas Airways and British Airways have called off talks for a $6.4 billion merger, a deal that analysts said could have transformed the international airline industry.
Qantas announced the demise of the talks in a three-paragraph statement to the Australian stock market today, saying the two parties were unable to agree on key terms for a deal.
"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.
Qantas chief executive Alan Joyce had warned last week that the merger faced major hurdles and would only go ahead if Qantas could secure major revenue and cost benefits. He also lamented the fact the talks had been leaked and forced out into the open.
A marriage of Qantas and BA faced several big challenges, not least the ownership split of the combined business, which was proposed to be formed by way of a dual-listed merger.
BA said in a separate statement today it would not agree to Qantas owning more than 50 per cent of the combined entity, though Qantas is currently the larger firm by market value.
Under Australian law, Qantas must remain majority-owned by Australian investors and its head office, stock-market listing and major facilities must remain in its home country.
Other complications include BA's $2.2 billion in pension-fund liabilities and also BA's separate merger talks with Spain's Iberia. Qantas had ruled out a three-way merger.
"It was always going to be a difficult marriage and clearly there are a lot of pressures from outside the relationship that are being applied - not least from Iberia and also within Qantas's institutional base," said Ian Thomas, analyst at aviation consulting firm CAPA Consulting.
There were questions being asked about how much value it was going to bring to the organisation and whether they would be better off pursuing an Asian partner as opposed to a European one," added Thomas.
Qantas, with a market value of about $3.3 billion, and BA, worth about $3.1 billion, are already code-sharing partners.
Reuters