Qantas's pursuit of a merger with its largest European ally, British Airways, may be the Australian carrier's best route to assure its role as part of a powerhouse of the global airline industry.

International trade treaties and the emergence of aircraft capable of flying greater distances have made it easier for foreign airlines to open routes to Australia.

This is threatening to loosen Qantas's grip on its home region.

"Qantas wants to be part of a bigger airline, and BA is the most logical choice, given the cultural ties," says Ray Neidl, an analyst at Calyon.

"It would give Qantas a real heavy base in Europe and give BA a nice toehold into the growing Asian market."

The deal would mark the latest step by members of the Oneworld global alliance to forge closer ties with their international partners and provides a promising foundation for a closer relationship between Qantas and BA.

Aside from the two chief executives, and their common roots in Ireland, there are other figures that have been prominent bridgeheads between the companies. Former BA chief Rod Eddington, for example, was a director of Allco Finance, when it joined the buy-out consortium bidding for Qantas two years ago.

The new-found heft that would come with the creation of a BA-Qantas group, particularly on transcontinental routes, may push Qantas's Asian rivals to seek deals with Europe's other flag carriers, Lufthansa and Air France-KLM.

It would also help build the case for US airlines seeking to loosen restrictions on cross-border mergers.

While Qantas's biggest North American peer, American Airlines, may have made an attractive alternative merger partner, US regulations are a major stumbling block. They limit foreign ownership to 25 per cent.

Executives at American and its peers have lobbied to eliminate the cap, which they argue restricts their access to capital and ability to compete globally.

Rival cross-border alliances have grown stronger, too.

Delta Air Linesmerged with Northwest Airlines this year to form the world's largest carrier, and the combined company also recently strengthened its relationship with Air France-KLM.

Lufthansa and United Airlines are seeking immunity from US antitrust rules to free another large US carrier, Continental Airlines, to join their own transatlantic venture.

In an unrelated announcement, Delta said it would slash the number of available seats by as much as 8 per cent next year to confront the global slowdown in demand for air travel.