Qantas, Singapore Air merger won't happen very soon

Australia raised the possibility of a merger between national carrier Qantas and arch-rival Singapore Airlines, but both airlines and analysts yesterday said that any such tie-up would not happen anytime soon.

Australian Trade Minister Mark Vaile told the Australian newspaper a merger could help ensure Qantas Airways remain viable in the face of tough competition.

"My view is if [a merger] could occur then the government should not rule that out," Vaile said. "Quite frankly, that is the direction that international aviation is moving in."

Qantas faces serious commercial challenges, and the government "needed to ensure Qantas isn't exposed to unfair competition," he said.

Vaile's comments were welcomed by Qantas, with chief financial officer Peter Gregg telling the newspaper: "We are very supportive of a regime in which more consolidation can occur."

"It's happening in Europe, it's happening in America," he said.

A spokesman for Qantas said that consolidation was already happening in other areas of the world and that the company supported moves to allow consolidation in this region.

"However, we have no plans on the table for consolidation," he said. "We understand the minister [Vaile] was talking about a hypothetical situation."

Singapore Airlines also expressed little interest in the proposal, saying it would not happen "anytime soon."

"The proposal for Qantas and Singapore Airlines to merge, as outlined by the Australian Trade Minister and welcomed by Qantas, will do nothing to satisfy consumers who want more competition and choice on the trans-Pacific route," Singapore Airlines spokesman Stephen Forshaw said in a statement.

"Both companies are publicly listed companies and the matter would, therefore, be extremely complex and given the current rules governing international civil aviation and competition, industry consolidation won't happen anytime soon," Forshaw said.

The Australian government is reviewing the strict foreign-investment rules governing Qantas as part of a broad review of aviation policy.

Last week the government rejected a bid by Singapore Airlines to gain access to the lucrative Australia-US route, which is controlled by Qantas and United Airlines.

Qantas lobbied fiercely against letting the Singapore carrier onto the route, saying such a move would cut deeply into its profits and cost thousands of Australian jobs.

Analysts expressed caution on the proposal, seeing major obstacles in the way of a tie-up.

A merger between the two airlines, which are national icons, would be impossible without a huge change in attitudes, according to a Sydney-based analyst who asked not to be named.

"Would it be reasonable to allow the Qantas head office to move from Sydney to Singapore?" he said.

"Do you think Singapore would allow Singapore Airlines to be run out of Australia? No chance," the analyst said.