British Airways in merger talks with Qantas

British Airways and Australia’s Qantas Airways Ltd. said Tuesday that they were holding talks about a potential merger, sparking hopes of consolidation in the hard-hit aviation industry.

Both companies issued statements saying they were exploring a potential merger with each other “via a dual-listed company structure.”

Neither British Airways nor Qantas provided further details. In their statements to the London Stock Exchange and the Australian Securities Exchange, the two companies said: “There is no guarantee that any transaction will be forthcoming and a further announcement will be made in due course, if appropriate.”

British Airways’ chief executive, Willie Walsh, has long advocated industry consolidation, arguing that closer cooperation would help airlines cut costs in the current difficult economic climate.

British Airways, the third-largest airline in Europe, is already pursuing a revenue-sharing deal with AMR Corp.’s American Airlines and Spain’s Iberia. It said that its discussions with Iberia on a potential merger were continuing.

British Airways and Qantas are code sharing partners in the Oneworld alliance.

British Airways’ confirmation on the talks came a day after the Australian government disclosed that it planned to increase the level of foreign ownership allowed in Qantas but would not permit a takeover.

Analysts have been expecting greater consolidation after the global economic crisis combined with soaring oil prices this year to severely crimp passenger demand.