The ambitious $11 billion buyout bid from Airline Partners Australia (APA) to take Qantas private will succeed, if only because of the dire consequences of failure, the region's leading aviation think-tank says.

Centre of Asia Pacific Aviation founder and executive chairman Peter Harbison says "the consequences of failure are too grotesque to imagine.

"If the deal is knocked back, there would be a massive loss of confidence and the share market would bale out of the stock sending the share price below last year's lows."

On January 11, Mr Harbison warned that Qantas is a child of regulation, and as that protection is removed through liberalisation so it would progressively wither on the vine.

"This is an international trend and beyond the control of the Australian Government, even if it wanted to prevent change," he said. "In the face of this evolutionary process, Qantas would be lucky to survive another 10 years in its current form.

"It would contract into a domestic airline and eventually be taken over by one of the post-2010 multinational airlines."

It has been Qantas's sluggish share price and the airline management's futile pleas to the Australian Government to ease foreign ownership restrictions to give it greater access to foreign capital at lower interest rates that set up the conditions for the buyout bid.

Many airline analysts, including Mr Harbison, believe that the share market, conditioned to quarterly reporting, does not understand the long-term nature of the airline market and Qantas's high standing in the global airline market. That lack of understanding is also reflected in the Roy Morgan research poll which found that a small majority of Australians did not want the buyout to proceed but that sentiment was based on the false premise that Qantas is either government-controlled or 100 per cent Australian-owned.

Mr Harbison added that there are many reasons why the Qantas buyout should be given the green light.

He says greater airline liberalisation is coming, particularly in Asia, and Qantas needs to be able to access capital to implement its strategic push into Asia.

"The Airline Partners Australia investors may be money-hungry, but stupid they are not - they see the international emerging opportunities in much the same light as Qantas CEO Geoff Dixon does," Mr Harbison said.

"Their 'patient equity' - as APA chairman Bob Mansfield describes it - unconstrained by quarterly analyst scrutiny and therefore able to take long-term strategic positions, allows APA to make more aggressive financial plays, where such moves would see slumps in a listed Qantas's share price."

And it would appear that the Australian Government would be struggling to attach any meaningful conditions to the deal.

Earlier this week, Australia's Deputy Prime Minister and Transport Minister Mark Vaile said on ABC-TV that "on the commercial side of things it's a bit difficult to put overly restrictive requirements on (the deal), but certainly it would be in the national interest to maintain a high level of skill in the aviation industry in Australia".

However, Mr Vaile hinted that conditions might be applied similar to those imposed when Air New Zealand acquired Ansett Australia in 2000 - namely, that Ansett remained based in Australia, kept regional routes and did not reduce skilled employment. As it turned out, those conditions were utterly meaningless when the airline went into bankruptcy.

Not well known was an Ansett-Air New Zealand plan drawn up in May 2000 to abandon all intrastate and regional routes in Western Australia to stem savage losses.

While leading analysts, such as Mr Harbison, are backing the deal, there is enormous heat being applied to Qantas from around Australia by federal and state politicians and tourism bodies clamouring for better services from the airline.

However, the reality is that the public and the Government, as happens elsewhere in the world, believe that the "national airline" or any airline is a public utility with a duty to provide services when, where and at whatever price the sometimes unforgiving public demand.

Leading the charge for the public utility argument have been politicians in the Australian state of Victoria and Queensland, with Tasmanian politicians pitching in late this week for services to be increased or at least protected.

Not well understood is that the Qantas of today and its ability to serve Australia is in many cases a legacy of decisions taken - or not taken - in the 1990s.

Analysts point to the fact that the airline has withdrawn from European cities such as Rome, Athens and Paris because it doesn't have aircraft such as the 300-seat 777-200ER, which are perfectly matched for the passenger demand on those routes.

Qantas in fact is the only major long-haul airline that does not have a 300-seat jet in its fleet.

The airline's management in the 1990s was also slow to install seatback videos for all passengers, which is thought to have cost business.

Current Qantas chief Geoff Dixon took over in 2000, and with current chief financial officer Peter Gregg and general manager John Borghetti has moved aggressively to reposition the airline at the forefront of innovation both operationally and in market positioning with the launch of low-cost Jetstar.

Qantas has the second-largest order of 20 of the giant 500-seat A380 and is the second-largest customer for the 270-seat 787, with both aircraft slated for delivery in mid-2008.

The Australian Competition and Consumer Commission and the Foreign Investment Review Board are examining the Qantas deal on a range of complex issues, including the cross-ownership of Sydney Airport by bid leader Macquarie Bank and examination of how the bid parties have acted. The reports from both bodies to the Australian Government are expected late next month.

Treasurer Peter Costello will consider the case on national interest grounds, but the review may take some time. In 2001 Costello took six months to reject the bid by Anglo-Dutch oil giant Shell for Australia's Woodside Petroleum. (Australian dollar is the currency used in this report unless otherwise stated)