SYDNEY (Bloomberg) — Qantas Airways Ltd., Australia’s largest airline, yesterday accepted a sweetened A$11.1 billion ($8.7 billion) buyout led by Macquarie Bank Ltd. and Texas Pacific Group, in the world’s biggest aviation takeover.

The agreement was struck less than a day after Qantas rejected an initial offer, as the leveraged buyout firms dropped conditions allowing them to walk away or be paid a breakup fee if the deal collapsed. They also increased the offer by ten cents to A$5.60 a share cash, Sydney-based Qantas said in a statement yesterday.

The buyers will get control of an airline that’s forecast a 14th straight annual profit, withstanding an industry slump that triggered $40 billion of losses by global carriers since 2001. The bid extends the busiest year of aviation deals since at least 2000. UAL Corp.’s United Airlines and Continental Airlines Inc. are in discussions to create the world’s largest carrier, people familiar with the talks said.

“Qantas has a strong position in the domestic market and no other airline in the world has that kind of franchise,” said Jason Teh, who helps manage the equivalent of $4.3 billion at Investors Mutual Ltd. in Sydney, including Qantas shares. “There’s other assets within Qantas that the market doesn’t value appropriately.”

The airline’s shares rose 19 cents to A$5.28, a 6 percent discount to the offer price on concern the government may block the takeover as being against the national interest. Qantas carries two out of three domestic passengers and has sent planes to evacuate Australians from Asia after terrorist attacks and the 2004 tsunami.

“Public support will be critical,” said Fabian Babich, a transport analyst at BBY Ltd. in Sydney. “If the public can’t see the benefits from the bid, the federal treasurer will likely have a bias toward blocking it.”

Treasurer Peter Costello last invoked national interest powers to block a bid by Royal Dutch/Shell Group, now known as Royal Dutch Shell Plc., for Woodside Petroleum Ltd., which controls Australia’s largest natural gas reserves.

Costello said in a statement today that the Foreign Investment Review Board will examine the proposal.

“I don’t believe that aviation policy which is set by governments should take any consideration into the ownership of a particular entity provided it conforms itself to the regulations of a country,” chief executive officer Geoff Dixon said in an interview today. “Qantas is still the same company.”

The airline, known as “The Flying Kangaroo” for its red tail logo, has become an Australian icon since it was founded in the Queensland outback in 1920.

“You might as well put a lone star on the tail instead of the kangaroo,” Barnaby Joyce, a Nationals party senator from Queensland, said in a phone interview. “We used to look after our own but that’s no longer the case with Qantas.”

Dixon, who has run Qantas since 2001, will remain in the job for a further three years. The airline’s executives will take a one percent stake in the buyout group. Dixon, 67 next week, stands to earn up to A$60 million in bonuses, which he says will be put into a charitable trust.

He said the new owners have no plans to break up the airline, send maintenance jobs overseas or cut regional services.

“It’s probably the most recognisable brand in the country and there’s no doubt that Australians want to make sure that the brand stays and isn’t tarnished,” said Michael Birch, who manages the equivalent of $120 million at Wallace Funds Management in Sydney. Qantas will keep its existing logo.

Macquarie, Australia’s largest investment bank, will have a stake of less than 15 percent in Qantas to avert competition concerns. Macquarie’s airport investment fund is the biggest shareholder in Sydney Airport, where Qantas is based.

David Bonderman’s Texas Pacific and Canada’s Onex Corp. will hold a 37.5 percent stake between them. Bonderman bought Continental in 1993, returned the carrier to profit in 1995 and sold out for a ten-fold return three years later. Other foreign investors will hold 11.5 percent.

Sydney-based Allco Finance Group and Allco Equity Partners will take a 35 percent stake, ensuring Qantas remains majority Australian owned, as required by law.

UBS AG and Carnegie, Wylie & Co. advised Qantas. The buyout group was advised by Macquarie Bank.

The offer values Qantas at 17.5 times forecast earnings for 2007, compared with Singapore Airlines Ltd., which trades at 13.4 times forecast earnings, and Cathay Pacific Airways Ltd. at 15.4 times, according to data compiled by Bloomberg.

The perceived risk of owning Qantas bonds rose today on concern the buyout group will load the airline up with debt. Credit-default swaps based on $10 million of Qantas bonds rose to $203,000 from $125,000 at the close in Sydney yesterday, prices from UBS show.

An increase in the cost of the contracts indicates a deterioration in the company’s perceived credit quality.

Moody’s Investors Service yesterday said it may cut the Baa1 rating assigned to Qantas if the bid succeeds.

More than $12 billion of takeovers have been announced this week as companies rush to get deals done before the Christmas break, capping a record year for acquisitions in Australia.