British Airways was showing a loss of about pounds 60m on its investment in Qantas, the Australian airline that made its debut on the Sydney stock exchange yesterday.
Although the airline listed at a 16 per cent premium to its A$2-a-share institutional issue price, BA's 25 per cent stake in Qantas remains significantly undervalued.
BA paid A$665m (pounds 258m) for its stake in 1993, and said yesterday that it was normal to pay a premium to secure such a large stake. "The price we paid was fair," a spokesman said.
Dealers said yesterday's flotation of the remaining 75 per cent of Qantas had got off to a flying start. One said: "Qantas opened at A$2.32 but I think the majority of the trading has taken place around the A$2.20 level. I think the price is in line with the weekend's expectations and probably it's higher than the expectations of a week ago."
Meanwhile, the former chairman of Qantas, Jim Leslie, sparked controversy after he criticised the amount of influence BA has on the airline's board. BA holds three of the 10 seats on the Qantas board and a veto over the appointment of the chairman.
Mr Leslie, who chaired the airline from 1980 to 1989, warned the veto "could mean a virtual and powerful fourth pro-British Airways director on the Qantas board".
Some key board decisions could be rejected by the three BA-appointed directors together with only one other director, because decisions required a two-thirds majority of the 10-member board, he said. He was saddened by what he described as another example of Australia going "to great lengths to quite unnecessarily place the control of one of its most cherished and successful assets in foreign hands".
BA refused to comment directly on Mr Leslie's remarks, but a spokesman said BA had a veto over the nomination of a chairman, but could not nominate its own candidate. All candidates must be Australian.
Having three board representatives in return for a 25 per cent stake is not generally regarded as excessive.