British Airways is set to net £425 million from the sale of its shares in the Australian flag-carrier Qantas.

The troubled airline, which employs some 4,000 workers at Gatwick, intends to offload its 18.25 per cent holding in Qantas and use the proceeds to repay part of its existing gross debt, which in June amounted to £5.6 billion.

BA bought its original shareholding in Qantas in 1993 for £304 million.

Since then, it has received 600 million Australian dollars (£240 million) in dividends.

BA chief executive Rod Eddington said: "Our shareholders have had a good return from our investment in Qantas.

"We now believe it is in our best interests to sell our shares to pay down our debt and continue to strengthen our balance sheet. A strong balance sheet will place BA in a robust position for any future European consolidation.

"The share sale has no impact on the existing business relationship between the two airlines and is not linked to our joint services agreement (JSA), which continues. The JSA is a strong, well-established relationship which brings real commercial benefits to both BA and Qantas."

The JSA between British Airways and Qantas has recently been given draft approval for a five-year extension by the Australian Competition and Consumer Commission. It includes joint flight schedules, sales and operations between Australia, South-East Asia, the UK and Europe.

A further announcement about the share sale was expected to be made today.

Qantas is listed on the Australian Stock Exchange and BA's shareholding in it is held through a wholly owned subsidiary, British Airways (Investments) Australia Pty Limited.

Qantas chief executive Geoff Dixon said; "BA has been a supportive shareholder over a period of some ten years and both airlines have formed a strong and constructive commercial relationship.

"Neither airline now believes the shareholding is necessary for the ongoing conduct of that relationship."

In a separate development, BA has announced four new flights from Gatwick.

From the end of next month there will be two services a day to Zurich and from late March 2005 there will be four flights a week to Salonika, three to Split and five to Vilnius.

Flights between Gatwick and Charles De Gaulle airport in Paris will be suspended.

Thursday September 09, 2004