Why the Qantas/British Airways merger won’t happen: Kohler

Two days after Qantas and British Airways were forced by a leak to confess they were talking about a merger, I think we can safely rule one out.

It’s clear that the Australian Government will not allow Qantas to be foreign owned. The only prospect of a proper merger is if the British economy gets so bad that no one cares who owns BA and Qantas can simply acquire it. This is distinctly possible.

But a dual listed company structure, which is what they said they were talking about, would be pointless.

About the only things that could be truly merged would the boards of directors, which might actually be quite worthwhile, saving hundreds of thousands of dollars in board fees. Excellent idea.

Apart from that, the brands would remain separate and distinct; each airline would have to have its own management, probably with Willie Walsh and Alan Joyce remaining in their existing jobs; they couldn’t merge their hubs (Sydney and Heathrow) because they are too far away from each other, and there is no need for a merger for them to share maintenance and other activities.

Meanwhile, the head of Spain’s Iberia, Fernando Conte, whom BA has been double dating, has popped up at a Aviation Club lunch in London in a huff, telling his erstwhile suitor to choose – him or me, you cad.

He revealed that he had only been told that BA was flirting with Qantas one hour before the announcement. He agreed with all the analysts that a threesome would be far too complicated, and demanded a meeting with his BA counterpart, Willie Walsh, as soon as possible. The paint will blister.

The only way all this makes any sense is if Willie Walsh and BA chairman Martin Broughton, along with their counterparts at Qantas, Alan Joyce and Leigh Clifford, really want to try to turn the Oneworld codeshare alliance into some kind of massive global merged company.

As well as talking to Iberia, BA has also been talking to American Airlines about a closer relationship, while Qantas has long flirted with Cathay and has lately been talking to Malaysian Airlines (which is not a member of Oneworld).

But getting all the governments to agree to full mergers of their national carriers would be more complicated than the Doha round of GATT. That failed, and so will Oneworld Inc.

Spending time discussing a dual listed company arrangement between Qantas and BA is nothing but a distraction to management and a waste of money on lawyers.

If the Qantas board believes that the company has no future on its own as an international airline, stuck with a hub at the end of the earth, then it should be clear about that and tell the government that it’s crunch time.

This article first appeared in Business Spectator