Australia’s Qantas Airways and British Airways have called off talks over a proposed $6.4 billion merger, leaving the British carrier to consider other combinations with European rivals as the sector grapples with falling demand and volatile fuel prices.

Qantas and BA announced the end of talks to the Australian and London stock markets, saying they could not agree on key terms for a deal, which a BA spokeswoman said included a Qantas demand for more than 50 per cent of the business.

The BA spokeswoman said the British carrier’s long-running merger talks with Spain’s Iberia were continuing but that it was not planning to take an equity stake in Italy’s Alitalia.

The CAI group that owns Alitalia has said it is looking for a potential airline partner to take an equity stake, but the BA spokeswoman said it was only interested in a commercial deal.

Air France and Lufthansa are also battling for a tie-up with Alitalia.

Qantas Chief Executive Alan Joyce had warned last week that a BA merger faced major hurdles and would only go ahead if Qantas could secure major revenue and cost benefits.