British Airlines and Qantas were negotiating a merger deal between the two airlines. British Airways is Britain’s national flag carrier where Qantas in an Australian airline. The merger talks failed, however to reach a deal as Australian law forbid foreign ownership of airlines and dictate that at least 51 percent of the airlines should be Australian owned while this condition is not acceptable to the Britons.
Furthermore, British airways has come under some trouble due to its pension pays and as economic turmoil deepens it finds itself defenseless against rising fuel and oil prices which it needs to hedge against via such mergers.
Even though the talks between BA and Qantas have not worked out both airlines are looking to other potential, global partnerships in order to have a stringer company to face the recessionary period and to survive in the game where only the fittest and the largest can survive.
Statement of the Problem
The problem indicated in the case is that the airlines both need to have a merger or an acquisition with another airline in place in order o grow stronger, face more economies of scale and exert more power over suppliers of oil in order to reduce overall costs. However in global transactions and contracts the government of the country has a lot of stake in a company especially one as vital as one in the airlines industry. Therefore the regulations can be a hindrance in such business negotiations where mutual agreement, understanding and clarity of the contract terms on both sides is a must. What happened in this case was a classic case of the aforementioned problem in international business, the government laws did not condone such a merger.