British Airways is in takeover talks with Brussels Airlines in a move that could lead to Sir Richard Branson, who owns 30 per cent of the Belgian national carrier, selling out to his fiercest rival.

Lufthansa, the German flag carrier, has made an offer for Brussels, and BA is considering whether to table its own formal bid. The airline is likely to be valued at about €150 million (£121 million). A source said: “BA have approached the board of Brussels and we are waiting to see if they make a serious offer.”

Sir Richard’s stake in Brussels Airlines arose after its merger with Virgin Express in 2006. His relations with BA have been strained for the past 25 years, and the billionaire entrepreneur won £500,000 in damages from BA after a campaign of dirty tricks against him and his airline in the early 1990s.

Virgin Atlantic is seeking to block BA’s proposed transatlantic alliance with American Airlines, claiming it would limit competition and harm passengers.

A spokesman for Virgin declined to comment on the sale of Brussels but did say that there would be no problem selling to BA as the stake was not considered a strategic asset.

Brussels Airlines was formed after the bankruptcy of Sabena, the former national carrier of Belgium, in 2001. It has strong links with Belgium’s former colonies in Africa and also has a partnership with American. BA’s approach to Brussels is thought to have been initiated by American.

BA also has its eye on other airlines in Europe as the main carriers embark on a phase of consolidation.

High fuel bills and weakening demand have made many airlines realise that they are unlikely to survive on their own and are therefore seeking better-capitalised partners.

BA is in merger talks with Iberia, the Spanish national airline, and has also expressed an interest in Austrian. There have been suggestions that BA might want to partner with Alitalia, the Italian carrier that was declared bankrupt last week, but analysts believe that this is unlikely.

Doug McVitie, managing director of Arran Aerospace, an aviation consultancy, said: “Brussels makes much more sense for BA than either Alitalia or Austrian. Air France-KLM are in the driving seat if they are daft enough to go for Alitalia, and Lufthansa will not want to let Austrian slip away.”

The latest wave of consolidation is expected to leave BA, Lufthansa and Air France as the dominant international carriers in Europe. All three are said to be watching one another carefully.

Meanwhile, the budget carriers are also consolidating with rumours that a number of weaker European airlines are up for sale. Ryanair, the largest budget carrier, said this week that it hoped that the latest round of consolidation would allow it to revive its €1 billion hostile bid for Aer Lingus, the Irish flag carrier.

The European Commission blocked that deal last year claiming it would limit competition in the Irish Republic.

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