British Airways Says Eager to Join Consolidation

British Airways wants to take part in global consolidation but expects regulatory hurdles to hinder cross-border deals, Chief Executive Willie Walsh said on Thursday.

Separately, chief executives of American Airlines and Finnair anticipated more fund-led buyouts in the industry after Australia's Qantas agreed to an $8.7 billion takeover by a consortium including Macquarie Bank.

The global airline sector has seen a wave of consolidation attempts, such as a failed bid by US Airways Group for Delta Air Lines and merger talks between UAL's United Airlines and Continental Airlines.

Heavy international regulation, over-capacity in some regions, rising fuel prices and terrorism have all undermined earnings and driven several airlines into bankruptcy in recent years.

"I think the industry will definitely benefit from it (consolidation), and British Airways would definitely want to participate in it," Walsh said on the sidelines of a briefing by "oneworld" airline alliance members.

"But I think we need a regulatory framework that will facilitate it and we don't have that right now."

BusinessWeek magazine reported last month that AMR may be a buyout target by a group including British Airways and Goldman Sachs, although sources familiar with the matter said the two parties had no current plans to bid for the American Airlines parent.

Analysts viewed the reported scenario as unlikely because it would face close anti-trust scrutiny and restrictions on foreign ownership, while strong labour unions are also seen limiting successful cross-border deals.

For example, U.S. law caps foreign ownership in the country's airlines at 25%, which would restrict British Airways' influence and would complicate any benefits that could be gained from the increased scale even if the airline bids for AMR.

Private Equity Consortium

Australia's Qantas, another "oneworld" member, in December agreed to a takeover bid by Airline Partners Australia, a consortium which includes private equity firm Texas Pacific Group, Allco Equity Partners, Allco Finance Group and Canadian investment firm Onex.

Texas Pacific, which helped fund Continental Airlines' emergence from bankruptcy in 1993, is also involved in the bidding for Italian carrier Alitalia.

"Equity investors ... they have been gaining weight. They are much stronger now than they were five years ago," Finnair chief executive Jukka Hienonen said.

"Some of the airlines have things that interest them -- restructuring potential, strong cash flow and a lot of sellable assets."

Whether funds' interests in the airline industry are seen as a threat or an opportunity, he said, depends on each case.

In Qantas' case, the airline was interested in talking as it saw itself constrained by a share market that has not recognised the group's value and limits its ability to raise the capital it needs to fund its fleet and growth plans.

"Certainly the evidence is that there is a lot of money moving around globally," American Airlines chief executive Gerard Arpey said. "There is a lot of money controlled by private equity firms, and there is certainly a lot of interest in aviation."