Qantas chief executive Alan Joyce today warned that the Australian airline's planned £3.8 billion merger with British Airways faces major obstacles and could well not go ahead.

Speaking for the first time since news of the merger talks leaked last week, he said: "There is a reasonable chance that this might not go ahead. We still are in a position where we have significant hurdles to overcome."

Joyce listed the share-swap terms of any deal, BA's pension deficit and the economic outlook for airlines as potential problems.

He claimed that a merger had the potential for major revenue and cost savings, but admitted it is still unclear whether or not there are enough synergies to justify doing the deal.

"There's absolutely no guarantee that transaction will be forthcoming. That's why I think we felt that the leak was a bit premature," he said.

Joyce met BA chief executive Willie Walsh in Hong Kong at the weekend, and is due to brief the Qantas board on progress in negotiations on Wednesday. He today refused to outline any sort of timetable for a deal.

He also made it clear Qantas will remain solidly Australian, saying: "All I can say to all Australians is this: whatever happens, Qantas will remain majority Australian-owned, the vast majority of employees will always be Australian, and Australia will remain our headquarters."

Joyce added that he believes BA will not merge with Spanish airline Iberia if it is able to tie up with Qantas. "BA are conscious, I think as Iberia are and as we are, that only one of the transactions could take place," he said.