SYDNEY - QANTAS must remain Australian-owned for reasons of national security, even if a potential merger with British Airways goes ahead, Transport Minister Anthony Albanese said on Sunday.

The two airlines announced last week they were in talks to create a global carrier worth an estimated A$8 billion (S$7.9 billion) to help cope with the global financial crisis.

Mr Albanese acknowledged that consolidation was inevitable for the industry, which has been buffeted by previously high oil prices and now declining passenger numbers.

But he said that needed to be 'balanced' with the national interest.

'There are national security issues, particularly for an island continent located on the globe where Australia is, for having a national airline,' he told the Australian Broadcasting Corporation (ABC).

Under Australian law, the carrier popularly known here as the 'Flying Kangaroo' must remain at least 51 per cent Australian-owned, with its headquarters in the country.

Mr Albanese said the political protests in Thailand, which shut down Bangkok's main airport for a week, illustrated the importance of having Qantas remain majority Australian owned.

'When Australians were having difficulty departing from Thailand I was able to pick up the phone to the chief executive of Qantas, Mr Alan Joyce, and make the request that extra flights be put on,' he told ABC television.

The minister also said that given international air service agreements, which are negotiated between countries rather than airlines, it was necessary for Qantas to remain in Australian hands.

'For example, only a 51 per cent Australian-based airline is eligible to fly from Australia to Japan,' he said.

Mr Albanese said while the foreign ownership rule will stay, the government was open to changing other restrictions which limit individual foreign holdings to 25 per cent and aggregate foreign airline interests to a 35 per cent stake. -- AFP