British Airways (BA) confirmed yesterday that it is undergoing talks with Australia's Qantas Airways on possible merger.

A statement issued by the BA said it is exploring a "potential merger" with Qantas Airways Limited via a dual-listed company structure while continuing discussions with Iberia, the Spanish airline.

However, it added, "there is no guarantee that any transaction will be forthcoming."

Following the news, the BA shares rose 12.46 percent.

Earlier yesterday, Australian Transport Minister Anthony Albanese was quoted by British media as saying that Qantas would remain majority Australian-owned, with a cap on foreign ownership at 49 percent.

Qantas is the 10th largest airline in the world by market value. A merger with the British flag-carrier will help it consolidate a bigger market share to fend off a worldwide recession.