British Airways Ends Merger Talks With KLM Royal Dutch

British Airways said Thursday that it had ended talks over a possible takeover of KLM Royal Dutch Airlines after the two failed to agree on the structure of a new joint airline.

British Airways Chief Executive Rod Eddington told Reuters that fundamental to the failure of the talks was that KLM appeared unhappy that BA, Europe’s largest airline, would control the merged entity.

“It was our sense that they were uncomfortable that this would literally be a single company and that we would have complete ownership and control,” said Eddington, adding that KLM had initiated the merger talks with BA.

In a joint statement, the airlines said although they had made considerable progress since they began talks more than three months ago, they had not been able to resolve financial, political and regulatory problems.

The two carriers had been facing several hurdles, including competition concerns, strict regulations over international air rights, particularly in the United States, and price.

The two airlines had already started preliminary discussions with the European Commission over a possible deal.

But several European airlines had already lodged objections with the commission, and a source said last week that the two carriers had not yet pinned down a price.

Eddington said the structural issue had loomed too large.

“All the pieces of the jigsaw had to fit together properly, but if we couldn’t get control of KLM as it is today, then the other bits of the jigsaw were not relevant.”

KLM’s American depositary receipts fell $4.38, or 19%, to close at $19, while British Airways’ ADRs rose $2.31, or 5%, to close at $45, both on the New York Stock Exchange.

The two airlines said they believed consolidation of the European airline industry would happen, but KLM, the fourth-largest airline in Europe, said that for now it had bright prospects on its own.

“We are well-positioned in Europe, are financially strong and have a profitable and growing business.”