By Matt Scuffham and Rhys Jones

LONDON/MADRID, Sept 6 (Reuters) - British Airways andIberia have identified possible acquisition targets to pursueonce their own merger completes, with Asia seen as a key regionfor expansion.

Shares in Kingfisher Airlines, India's second-largestprivate-sector carrier, jumped on Monday after BA ChiefExecutive Willie Walsh told reporters in Mumbai that BA andIberia had compiled a list of 12 potential targets.

Davy stockbrokers analyst Stephen Furlong said: "I wouldsay Asia is number one in the context that it's a high-growthmarket. India is very important for them and I suspectKingfisher is top of the list."

BA and Iberia plan to merge by the end of the year to createthe world's third-largest airline by revenue calledInternational Airlines Group (IAG).

Walsh said: "We have had a number of meetings where we havelooked at airlines around the world and identified those thatwould be attractive to us in joining IAG," adding that no dealswere imminent.

"This is just to give us a focus. We have not had anydiscussions with any airlines. There is nothing going on at themoment," he said.

Shares in Kingfisher, India's second-largest private-sectorcarrier, were 9 percent higher at 69 rupees by 1325 GMT.

Kingfisher last week approved a $1 billion fundraising tostem losses and make the airline profitable.


Aviation fell into a steep nosedive after the financialmarket collapse in 2008 but airlines are growing more confidentas economic recovery takes hold, with performance at pre-crisislevels and expectations of profitability rising.

So far, most airline mergers have been within continents,but recently more airlines are forging intercontinental ties viapartnerships and joint ventures.

Japan Airlines earlier this year agreed a joint venture withAmerican Airlines on Pacific routes to tap revenue growth in alarger route network.

"Asia is where the growth is ... that will be an interestingarea," said Deutsche Bank analyst Geoff Van Klaveren.

Portuguese broker BPI highlighted Kingfisher and Brazil'sTAM as possible targets.

Analysts pointed to the need for consolidation within theindustry as companies look to increase their competitiveness ina market dominated by big air alliances and low-cost carriers.

"The BA-Iberia merger is a start not an end. There's athousand airlines and there should be maybe a hundred or less,"said Davy's Furlong.

Other analysts say BA has more pressing issues to tacklebefore considering more tie-ups.

"This is a long-term ideal -- a wish list -- and merely aninvitation to other airlines to consider some form ofconsolidation under the BA-Iberia name," said Howard Wheeldon,the senior strategist at brokerage BGC Partners.

"We're talking 10 years away, not one or two. BA needs tosort its pension deficit which will take many years and provethat the merger with Iberia can work first."

However others say deal financing could be made easier byBA's agreement with its pension trustees over a recovery planfor its 3.7 billion pounds ($5.7 billion) pension deficit.

Analysts have also identified Air Berlin, British Midland,Finnair and Aer Lingus as possible targets in Europe.

BA could face more industrial action over the coming weeksafter cabin crew voted for a ballot on new strike action at amass meeting of its union members at the southern English townof Kemptown on Monday, Sky News reported.

Shares in BA were down 0.4 percent to 222.2 pence withIberia flat at 2.67 euros. (Additional reporting by Jonathan Gleave, Judy Macinnes and RobHetz; Editing by Will Waterman, Mike Nesbit, Erica Billingham) ($1=.6507 pounds)