Any takeover would be subject to strict regulations

"The approach is confidential and incomplete and is being investigated by Qantas," the airline said.

News of the approach drove Qantas shares up by as much as 20%, but they later fell back to close up 15%.

Earlier reports had suggested Macquarie - an Australian investment bank - was working on a bid worth up to 10.3bn Australian dollars ($8bn; �4.2bn).

In a statement issued soon after the market closed, Macquarie said it had held preliminary "indicative talks" with Qantas over the possibility of a takeover.

Jobs worry

The possibility of the company ending up in foreign hands has worried trade unions.

Doug Cameron, national secretary of the Australian Manufacturing Workers' Union, said: "We are calling on the government to say quite clearly that the jobs should stay in Australia because we depend on Qantas for our transport, our defence, and in the case of emergencies when Australians are overseas."

Government Transport Minister Mark Vale responded by saying: "It's a well known fact that there are individual shareholding limits and also foreign ownership on Qantas.

"We don't have any view about changing that," he added.

Government-imposed limits restrict any single investor in the flag-carrier to a stake of 25%, while stakes owned by foreigners cannot exceed 49%.

Macquarie has been involved in a number of takeover bids recently, including unsuccessful approaches for the London Stock Exchange and Associated British Ports.