[qantas and ba] why talks failed

In a time of airline mergers, the latest has fallen through.

The two majors were Qantas and BA and the reason for that order here is on overall market share. The Qantas objections included:

1. government stipulation that it must be 50% Australian owned;
2. worries about the large number of unsecured pension fund liabilities of BA;
3. concern over the proposed BA merger with Iberia.

BA did not state its objections but they were centred on Qantas seeking greater than 50% equity in the joint venture. Just a word on the BA plan to close the pension fund hole. They offered the unions to maintain a fund of sorts but:

In return, employees will offer one-off sacrifices worth a further £400m along with changes to future benefits, including the capping of future pensionable pay rises at the rate of inflation.

Willie Walsh's fixation on the government coming to the party on the the Heathrow third runway and parallel government dictation to the company, even on which engines it should have in its planes, has made BA's task all the harder:

As an autonomous, publicly owned company, BA is under no obligation to consider national interest when buying new aircraft. But the aviation sector is heavily regulated and BA''s future growth depends on government support for new infrastructure such as additional runways at Heathrow, Stansted and Gatwick.

The Australian government has a history of support for its main carrier and is hardly likely to step back and see it go down but clearly, BA do not consider that Nu-Labour is likely to support them in the same way, whilst they are still solvent. Instead, there appears to be a climate of demand and counter-demand and a feeling BA must have that the government is just waiting for, willing them to default.

It's not as far-fetched as it sounds.

To be fair to Nu-Labour, an airline has to pay its way these days, just as pubs have to and everything else in Britain has to. However, at the same time, the government bails out fallen concerns like the banks, nationalizes them and borrows hugely to fund this.

It almost seems as if the government's policy is to say: "You're on your own, chum," until a firm defaults, then Gordo decides if it will be nationalized or not. The alternative, of course, would have been to have sat down with the British flagship companies and thrashed out a working proposal, with clearly defined government parameters to it.

On a simplistic level, there is the truism that whatever this government goes near or touches, automatically goes pear-shaped somewhere down the line. Less simplistically is the grand design, the EU demands on Gordo and the pan-European socialist vision for the next few years.