British Airways is planning an emergency strategy session this week to discuss ways of scuppering any merger between rivals Virgin Atlantic and bmi British Midland - and top of the agenda will be whether it could mount a bid of its own for Sir Richard Branson's Virgin.
The move comes as Virgin claimed it considered an audacious £1.4bn hostile bid for British Airways when its shares were at their nadir at the start of the year.
Now BA says it is "not ruling anything in, not ruling anything out", as senior executives fly back to discuss the revelation that bmi and Virgin have been in on-off talks over a merger or other form of co-operation.
A bid for Virgin is one option that will be considered, as will the possibility of an appeal to the competition authorities to block any tie-up between Virgin's rivals. Sources at BA said yesterday that the company could "work up a case" against the combination.
The claims over the weekend are the culmination of a week of grandstanding by the airlines. Consolidation has moved high up the agenda as the troubled industry struggles to combat an economic downturn and the fear of flying caused by war, terrorism and disease - but mergers and acquisitions activity would have to surmount enormous personal, business and regulatory hurdles.
It has emerged that Sir Richard engaged the services of Credit Suisse First Boston, the investment bank, and private financiers Texas Pacific earlier this year to examine whether Virgin should make an audacious £1.4bn bid for BA. However, the plan, nicknamed Project Balloon, was never carried through.
Virgin says it was advised by competition lawyers that a combination with BA would require some concessions but would be cleared by the regulators.
Although BA and Virgin are the only two UK companies allowed transatlantic flights, the second licence would be up for grabs if the two merged.
The talks between Virgin and bmi, revealed on Thursday, appear to have stalled as the pair failed to agree on price, but Virgin sources continue to insist that they will resume.
The flag-carrier has been rattled by the prospect of a deal between Virgin and bmi, which would combine BA's main transatlantic rival with one of the UK's biggest short- haul operators.
Yesterday, Virgin dismissed the idea that BA could bid for the group as "a flying pig scenario". Will Whitehorn, spokesman for Virgin, said: "British Airways is a public company. We can make a hostile bid for them and there is nothing at all they can do about it. But Virgin is 51 per cent owned by Sir Richard. He has no plans to sell, only plans to expand."
BA said that Roger Maynard, its director of investments, is returning from a trip to Australia to discuss the bmi-Virgin talks with Rod Eddington, the chief executive.
A spokesman for BA said: "We will be looking where we fit in, whether we should fit in, and whether we should take steps to make sure we fit in."