The number of corporate destinations possible for British Airways is now as bewildering as the route map in the back of the inflight magazine.

Willie Walsh could fly it off to Madrid for a merger with Iberia or to Sydney for a deal with Qantas or even to Texas for a tie-up with American Airlines.

It is a measure of how the industry has been transformed over the past few months that he might just do all three. The pressure for consolidation is now so intense that the obstacles that have prevented so many attempted mergers in the past are crumbling.

A merger with Qantas is very far from a done deal, but the fact that Qantas approached BA at least suggests that the Australian Government is keen.

The rules preventing foreigners owning a majority of either airline will require some corporate contortions. A company dual-listed in London and Sydney with separate boards will hardly be the most manoeuvrable of vehicles.

But it would certainly pack some punch.

Arguably the first truly global airline, the merged company would hope to generate much more additional revenue than from the existing passenger-sharing agreement. There would also be very significant potential cost savings.

The Air France-KLM merger, agreed four years ago, is expected to generate more than £600 million of savings this year. Qantas and BA, which have a combined market value of only £3.7 billion, might hope for something similar.

No wonder BA's share price rose 12 per cent yesterday.

A potential deal will bring fears about job cuts from BA's 42,000-strong workforce and it will also raise competition concerns.

A merged company would handle almost half of the London-Sydney traffic and Richard Branson's Virgin Atlantic was predictably quick to attack the proposal.

If Mr Walsh also managed to clinch a deal with Iberia and a tie-up with American, the resulting group would operate nearly half of all flights from Heathrow.

The industry is in a dire state, thanks to the spike in the oil price followed by the slump in demand as the global economy has tanked. Airline bosses hope that this will weaken the resolve of competition authorities, which is why Ryanair is having another tilt at Aer Lingus. But it is by no means clear that the regulators will be prepared to rip up all the rules.

There is some hard negotiating to be done between BA and Qantas before we reach that point, not least over who would run the merged company. Discussions with Iberia have dragged on for months, with BA's huge pension deficit one of the sticking points.

But now is surely the time for bold action and it is good to see BA taking the lead, even if the final destination is still unclear.

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