British Airways and KLM break off merger talks

LONDON - British Airways PLC and KLM Royal Dutch Airlines broke off talks about a long-planned merger Thursday, blaming intractable commercial and regulatory issues.

''We always recognized that this would be a complex transaction, involving not only commercial and economic issues but also aero-political, regulatory and other matters. Although we made considerable progress, it has not been possible to resolve these,'' BA chief executive Rod Eddington and his KLM counterpart Leo van Wijk said in a statement.

Relations between the two companies ''remained amicable,'' they said.

The Netherlands-based KLM and British Airways disclosed June 7 that they were in negotiations to combine and form the world's third-largest airline.

British Airways is the fourth-biggest airline in terms of passenger traffic, while KLM ranks 12th. A merger attempt in the early 1990s broke down over how to value the two airlines.

European airlines are under increased pressure to consolidate following deregulation of the regional market and intensified competition. Analysts are predicting a wave of mergers resembling the consolidation of the U.S. airline industry.

BA still believes there will be consolidation in the European airline industry, its chairman Lord Marshall said.