"As commercial companies in a very competitive sector I think it is useful for the two companies to keep all options open, which includes joining in the consolidation process," Transport Minister Yeo Cheow Tong told reporters.

"There's a consolidation process going on on a worldwide basis and I think it's to be expected that both SIA and Qantas should also be thinking of what they need to do to remain one of the key players in the global aviation sector."

Yeo's comments were the first by a Singapore government official since Australian Prime Minister John Howard and Transport Minister Mark Vaile raised the merger prospect last week.

Howard said one issue the Australian government was looking at in regards to the aviation industry was "the question of whether Singapore Airlines and Qantas were to remain as separate companies for an indefinite period of time".

Vaile said a merger could help the Australian airline remain viable in the face of tough competition, adding "that is the direction that international aviation is moving in".

SIA initially expressed no enthusiasm for a merger when responding on June 20 to Vaile's comments but showed greater interest when Howard made his remarks two days later.

"A merger between Singapore Airlines and Qantas is an interesting idea, but very complex one. Both companies are publicly listed entities and there would be many issues to be addressed," SIA spokesman Stephen Forshaw said last week.

Following Yeo's comments, Forshaw expressed similar sentiments Wednesday, but also highlighted that SIA was prepared to explore with Qantas areas where they can co-operate.

"We have had discussions with Qantas on co-operation in areas where we do not directly compete with each other, such as engineering, catering, training and ground handling," Forshaw said in a statement.

"We remain open to discussions on such co-operation in the future."

SIA and Qantas are fierce rivals and belong to different global airline alliances.

After heavy lobbying from Qantas, the Australian government last week rejected a bid by SIA to fly between Australia and the United States, an extremely lucrative route.

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