Australia's Trade Minister Mark Vaile first floated the idea of a merger between the airlines last month.

Since then, both Prime Minister John Howard and Singapore Transport Minister Yeo Chow Tong have canvassed the prospect.

Qantas chief executive Geoff Dixon also said he believed his airline would merge within the next decade, nominating SIA, British Airways, Cathay Pacific and Air New Zealand as potential partners.

But Commsec aviation analyst Matt Crowe said a full-blown merger was unlikely, although he believed the airlines could combine some non-competitive functions such as catering and ground services.

"There's no compelling reason for a merger, these are the two most profitable national airlines in the world," he told AFP. "They're also major rivals in the same market, so it's difficult to see how they could avoid running foul of competition regulators."

Crowe said another major obstacle was the special place the airlines held in the psyches of both countries, saying while a merger may appear attractive to politicians, it would prove extremely unpopular with the public.

Analysts said while a merger of the full service airlines made little sense, their budget offshoots were prime candidates for consolidation.

Qantas' Jetstar Asia began operating from Singapore last December but the Centre for Pacific Aviation (CPA) said it was struggling because it had failed to secure access to a number of countries in the region.

Jetstar Asia announced it was holding alliance talks with rival Valuair last week as a way of dealing with rising fuel prices and carving out a niche in the region's crowded low cost airline market.

CPA senior consultant Ian Thomas said Jetstar Asia could also consider merging with SIA's Tiger Airways, creating a large discount airline to take on the market's dominant budget carrier, Malaysia's AirAsia.

"The low cost carrier market in Southeast Asia is at a very early stage, it's in a state of flux as everyone tries to establish themselves," he said.

"The alliances formed now are going to be crucial in determining who survives long-term."

Thomas pointed out that SIA and Jetstar Asia already had a common shareholder in Temasek Holdings, which owns the majority of SIA shares and a 19 percent stake in Jetstar Asia, which is 49-percent owned by Qantas.

Crowe said Jetstar Asia had failed to impress since its launch.

"It's been a bit of a flop really," he said. "A merger from Jetstar Asia's point of view would be very appealing, it would solve their access problems and a link-up with Tiger in particular would provide a partner for an aggressive push into China, which has huge potential."

Crowe said he was puzzled at the stream of SIA-Qantas merger talk from Australian and Singaporean politicians. He suggested it was a way of publicly glossing over any potential rift from Canberra's decision last month not to allow SIA access to the lucrative Australia-US route, despite intense lobbying by Singapore.

SIA's Sydney-based spokeswoman Kate Pratley said the merger proposal had not originated from the airline, which was still concentrating on gaining access to the Australia-US route.

"A possible merger with Qantas is something that hasn't come up with us as an issue for a number of years," she told AFP. "We're very much focussed on the trans-Pacific route."

A Qantas spokeswoman said no merger talks were underway.

Any merger would require Canberra to scrap a 49 percent cap on foreign ownership of Qantas, a measure the government is considering as part of a wider transport review.

A spokeswoman for Transport Minister John Anderson said a merger had not been formally canvassed between the two governments. She refused to say whether the issue was informally discussed when Singapore Transport Minister Yeo Chow Tong met Anderson in Australia last month.

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