British Airways (BA), the UK flag carrier, announced today that it is in merger talks with Qantas Airways, Australia's national airline.

In a statement today, BA said: "In response to recent media speculation, British Airways Plc confirms that it is exploring a potential merger with Qantas Airways Limited via a dual-listed company structure."

Shares in BA soared 13.24 per cent to 158.2p immediately following the announcement, giving the company a market value of £1.8 billion, compared to Qantas's £1.9 billion capitalisation.

A combination would create a business with 79,000 employees and combined revenue of £14.9 billion.

BA is already in talks with Iberia, the Spanish airline and said these discussions are ongoing, alongside a possible deal with Qantas.

BA said: "There is no guarantee that any transaction will be forthcoming and a further announcement will be made in due course, if appropriate."

A merged BA-Qantas-Iberia would be one of the largest airlines in the world with a dominant market share on routes across the North and South Atlantic as well as to Australia.

However, the plan will be subject to approval by the Australian government. Qantas must remain 51 per cent owned by Australian investors and the government has indicated that it is not willing to remove the restriction.

BA and Qantas have a long history of cooperation and are currently partners in the oneworld alliance. BA bought a 25 per cent stake in Qantas when the Australian airline was privatised in 1993 and this was subsequently reduced to 18.25 per cent.

BA finally sold out in 2004 but the airlines code share on routes to Australia, meaning passengers that book through BA may fly on a Qantas aircraft.

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