Australia open to BA/Qantas merger

By Sonali Paul and Rob Taylor

MELBOURNE/CANBERRA (Reuters) - Australia said it is open to a $5.9 billion (4 billion pound) merger between Qantas Airways (QAN.AX) and British Airways (BAY.L) as long as it's not a takeover, sending the Australian carrier's shares up nearly 10 percent.

Qantas and BA said on Tuesday they were in talks to form a dual-listed airline, a latest move in an industry desperate to slash costs as recession-hit businesses and tourists curb travel.

In Europe, Germany's Lufthansa is vying with Air France KLM (AIRF.PA) to secure a tie-up with bankrupt Alitalia AZPIa.MI, and plans to buy Austrian Airlines (AUAV.VI), while in the United States, Delta Air Lines (DAL.N) is trimming capacity.

But Australia's Labour government, which traditionally relies on trade unions for its power base, threatened to slam the door shut if it felt Qantas was effectively being taken over.

"Our bottom line is the 'Flying Kangaroo' remains majority Australian-owned and based," Treasurer Wayne Swan told reporters.

Ministers flagged any deal would have to meet the national interest and should not amount to a takeover of Qantas.

"Were that to be the case, the government would certainly not support it," Transport Minister Anthony Albanese told state radio.

Qantas shares last traded up 4.4 percent at A$2.35, off a 3-week high hit earlier. The broader market .AXJO rose 0.2 percent.