Singapore Government urges airline to pursue Qantas links

Singapore's Government will encourage Singapore Airlines to pursue links with Qantas Airways, including a possible merger, the country's Transport Minister Yeo Cheow Tong said yesterday.

Initially, Asia's two largest airlines outside Japan may seek to co-operate on maintenance and other services rather than to merge, Yeo said on Nine Network's Business Sunday programme. The Singapore Government would be "very happy" to cut its 57 per cent stake in the airline, known as SIA, he said.

Australia's Prime Minister John Howard last month raised the possibility of a merger between the two airlines. Qantas was likely to merge with another international airline as early as 2010, chief executive Geoff Dixon said on June 26.

Airlines worldwide are seeking mergers or alliances to reduce costs as low-cost carriers take customers and as fuel prices rise.

"In Asia, we will also have to make sure that we are part of what's happening around the world, the strengthening of airlines," Yeo said. "If that means that Qantas and SIA should also be looking at joining the consolidation process ... we will encourage them to actively talk."

Last year, Qantas was blocked by regulators from forming an alliance with Air New Zealand.

"Hopefully, as time passes and as the Australian regulators appreciate better what's happened on the international scene and the fact that the Australian market is actually quite competitive, they may agree to a merger between Qantas and one of the other airlines serving Australia, whether it's SIA or another airline," Yeo said.

- BLOOMBERG