The takeover approach has drawn criticism from unions

Prime Minister John Howard said his government would not change foreign investment laws to halt the takeover.

On Wednesday, Macquarie Bank and Texas Pacific approached Qantas about a takeover, thought to be worth 10.3bn Australian dollars ($8bn; �4.2bn).

However, Qantas chief executive Geoff Dixon has emphasised that talks with the firms are at a very early stage.

"We won't be changing the foreign investment rules," Mr Howard said. "Nor will we be altering the caps on individual shareholdings."

However, he added that, under current laws, there was no means to prevent the company being broken up.

Spin off?

Experts have suggested that the consortium led by Macquarie and Texas Pacific could divide up the airline and sell off its non-core assets such as its two airport terminals, catering arm and holiday business.

It is very early days, and I would like to suggest that some people take a cold shower and settle down Geoff Dixon, Qantas

"We can't preach the philosophy of the free market and every time something arises which might look a bit uncomfortable, dart around and say we're going to pass a new law to stop it happening," Mr Howard said.

"You can't run a country like that and we don't intend to do that."

Under government rules, there is a cap of 25% for any single investor in Qantas, while stakes owned by foreigners cannot exceed 49% and foreign airlines cannot own more than 35%.

But Qantas chief Geoff Dixon moved to cool speculation surrounding the bid saying: "It is very early days, and I would like to suggest that some people take a cold shower and settle down."

News of the takeover approach has led to a surge of nationalistic sentiment in the Australian media.

Unions have also voiced their opposition to any takeover, saying they are "extremely concerned" and opposed to such plans.

There are concerns that a possible takeover could not only lead to job losses in Australia - by transferring some 6,000 maintenance jobs to China instead - but also that unprofitable routes would be eliminated.