BA - QF merger?
Bottums Up
Thread Starter
Déjàvu
Round 2:
BA & QF in advanced merger talks.
And on R&N, http://www.pprune.org/rumours-news/3...as-merged.html
BA & QF in advanced merger talks.
British Airways 'in merger talks' with Qantas
Posted 44 minutes ago
Updated 18 minutes ago
The merger would reportedly create an $8 billion global carrier. (ABC News: Giulio Saggin, file photo)
Related Story: Oppn voices concern over Qantas ownership proposals
British Airways (BA) has confirmed reports that it is exploring a potential merger with rival Qantas.
"In response to recent media speculation, British Airways Plc confirms that it is exploring a potential merger with Qantas Airways Limited via a dual-listed company structure," BA said in a statement.
Qantas says it will make a statement on the merger talks later this morning.
Shortly before BA's announcement there were reports the two airlines were in advanced merger talks to create an $8 billion global carrier.
The two airlines would each retain their names and branding under the agreement, an Australian Financial Review report said.
Ownership concerns
The Federal Opposition yesterday expressed concern by Government moves to relax ownership restrictions on Qantas.
The Government's aviation green paper released yesterday proposed lifting the 25 per cent limit on individual foreign ownership and the 35 per cent limit on ownership by a foreign airline.
But it does recommend maintaining the 51 per cent Australian ownership provision for the national carrier.
Meanwhile, BA has confirmed merger talks with Spanish airline Iberia are continuing.
In July, BA and Iberia announced they were holding merger talks to create the world's third largest airline in terms of income.
The aviation sector is seeking consolidation as airlines fight for survival having been crippled by record high oil prices and as the world faces a deep recession.
Posted 44 minutes ago
Updated 18 minutes ago
The merger would reportedly create an $8 billion global carrier. (ABC News: Giulio Saggin, file photo)
Related Story: Oppn voices concern over Qantas ownership proposals
British Airways (BA) has confirmed reports that it is exploring a potential merger with rival Qantas.
"In response to recent media speculation, British Airways Plc confirms that it is exploring a potential merger with Qantas Airways Limited via a dual-listed company structure," BA said in a statement.
Qantas says it will make a statement on the merger talks later this morning.
Shortly before BA's announcement there were reports the two airlines were in advanced merger talks to create an $8 billion global carrier.
The two airlines would each retain their names and branding under the agreement, an Australian Financial Review report said.
Ownership concerns
The Federal Opposition yesterday expressed concern by Government moves to relax ownership restrictions on Qantas.
The Government's aviation green paper released yesterday proposed lifting the 25 per cent limit on individual foreign ownership and the 35 per cent limit on ownership by a foreign airline.
But it does recommend maintaining the 51 per cent Australian ownership provision for the national carrier.
Meanwhile, BA has confirmed merger talks with Spanish airline Iberia are continuing.
In July, BA and Iberia announced they were holding merger talks to create the world's third largest airline in terms of income.
The aviation sector is seeking consolidation as airlines fight for survival having been crippled by record high oil prices and as the world faces a deep recession.
BA - QF merger?
What's this cr@p about the rat seeking to merge with BA?
I understand the the world economy is in recession, but surely with all the record profits shouldn't the Q be in a pretty solid position???
Someone seems solid on destroying a once world leading airline.
Qantas and BA in merger talks - Breaking News - World - Breaking News
I understand the the world economy is in recession, but surely with all the record profits shouldn't the Q be in a pretty solid position???
Someone seems solid on destroying a once world leading airline.
Qantas and BA in merger talks - Breaking News - World - Breaking News
Last edited by DUXNUTZ; 2nd Dec 2008 at 17:55. Reason: Add a link
I can't think of a better outcome. The worlds two most over managed airlines, each with a toxic corporate culture and disengaged staff. Both have Irish CEO's with not much of a reputation and Boards headed by people with no airline experience (BA's Chairman is an ex Tobacco company man, what does that say about him?)
The only thing that doesn't match is that QF hasn't botched an entry into service of a major terminal like BA did (T5.)
Still both have similar corporate strategies, trade on their brand name built up over decades and make sure you have your hands wrapped firmly around the privates of the Government of the day so that you can quickly squeeze them if anyone brings up the idea of more competition.
Between them they can dominate the Kangaroo route, and Qantas already dominates the trans pacific route, and the transport Minister is a true son of NSW. Now watch them build a second Sydney airport Thirty miles from town, route all domestic travel through it, and continue to make Brisbane, Melbourne and Adelaide less accessible to international travellers.
The only thing that doesn't match is that QF hasn't botched an entry into service of a major terminal like BA did (T5.)
Still both have similar corporate strategies, trade on their brand name built up over decades and make sure you have your hands wrapped firmly around the privates of the Government of the day so that you can quickly squeeze them if anyone brings up the idea of more competition.
Between them they can dominate the Kangaroo route, and Qantas already dominates the trans pacific route, and the transport Minister is a true son of NSW. Now watch them build a second Sydney airport Thirty miles from town, route all domestic travel through it, and continue to make Brisbane, Melbourne and Adelaide less accessible to international travellers.
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if the merger goes ahead it might be a good time to stick another level or two of management in
,and once done,one more level just to oversee this new level,OH WHERE WILL IT ALL END(might also be a good time for GEOFF to give himself another 7 million in super ,as he now oversees another and extra 5 or 6 levels of management )oh thats right Geoff gone,doesn't matter we will top his super up anyway,after all he is now a consultant for us
,and once done,one more level just to oversee this new level,OH WHERE WILL IT ALL END(might also be a good time for GEOFF to give himself another 7 million in super ,as he now oversees another and extra 5 or 6 levels of management )oh thats right Geoff gone,doesn't matter we will top his super up anyway,after all he is now a consultant for us
Last edited by employes perspective; 2nd Dec 2008 at 19:17.
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Are there any other examples of "dual listed company" airlines?
Would be interested to look at any other examples to understand what this would mean operationally... would SOP's be merged, or would each airline still operate under their own historical SOP's? Would pilot terms and conditions be merged? Would this result in QANTAS pilots losing their jobs?
Or is it simply a financial arrangement with each company still operating pretty much business as usual?
Would be interested to look at any other examples to understand what this would mean operationally... would SOP's be merged, or would each airline still operate under their own historical SOP's? Would pilot terms and conditions be merged? Would this result in QANTAS pilots losing their jobs?
Or is it simply a financial arrangement with each company still operating pretty much business as usual?
The important thing for Qantas is to do a very thorough "Due Diligence". As we know Rod Eddington sold all of Ansetts assets (at the behest of his employer, News Corp) to make the books look better and Air NZ walked in with their cash but failed to do an in-depth Due Diligence process - we know the outcome of that.
Eddington then moved on to BA, so it would be interesting to know what he did with the books while he was there. He also was involved with Allco and the APA bid for Qantas. Any company that he has been involved with - BUYER BEWARE.
Eddington then moved on to BA, so it would be interesting to know what he did with the books while he was there. He also was involved with Allco and the APA bid for Qantas. Any company that he has been involved with - BUYER BEWARE.
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yeah, what you do is lobby your hardest to stop a merge by your major domestic competitor with a large cashed up respected Asian based worldwide carrier.
When you have stopped that you make billions in profit by screwing your staff and largely captive market.
Then , when you are faced with reduced profits and increased competition ,you lobby like mad to create the type of merger that you successfully prevented your old competitor from doing.
That's business. I guess it will result in an even larger payout for G.D when he retires , less service for the punters and more job losses for the Q.F and B.A workers.
When you have stopped that you make billions in profit by screwing your staff and largely captive market.
Then , when you are faced with reduced profits and increased competition ,you lobby like mad to create the type of merger that you successfully prevented your old competitor from doing.
That's business. I guess it will result in an even larger payout for G.D when he retires , less service for the punters and more job losses for the Q.F and B.A workers.
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I see this as having little effect on QF pilots UNLESS the regulators are persuaded to allow QF and BA pilots to fly each others AC to and from Europe. That would be a huge productivity gain for both airlines.
Does BA have any 787's on order? Because QF sure does! AIPA better have a plan ready to go.
Does BA have any 787's on order? Because QF sure does! AIPA better have a plan ready to go.
Are there any other examples of "dual listed company" airlines?
From an economic and rights perspective, amalgamation of QF and BA makes sense and would be very attractive to share holders and staff, although expect some rationalisation in non operational areas.
And before all the uninformed hand wringing starts, read up on the very successful AF - KL amalgamation into two autonomous carriers.
Don't be surprised if Air New Zealand does not also join the QF - BA discussions.
I wonder if the various Virgin airlines around the world may not be next?
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Anyone fancy a London basing on BA T & C's?
I'm sure there would be a flood of BA staff wanting an Oz basing.
For cabin crew this would have to be far preferable to the present QF LHR base T & C's.
How about for pilots?
I'm sure there would be a flood of BA staff wanting an Oz basing.
For cabin crew this would have to be far preferable to the present QF LHR base T & C's.
How about for pilots?
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The only thing that doesn't match is that QF hasn't botched an entry into service of a major terminal like BA did (T5.)
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As a frequent passenger, I would not like to see the merger go ahead.
I was recently shunted onto a BA flight that had a QF codeshare;
Not since I flew with UA to SFO have I seen such a disinterested cabin crew - and that was in BA Business Class!.
I was recently shunted onto a BA flight that had a QF codeshare;
Not since I flew with UA to SFO have I seen such a disinterested cabin crew - and that was in BA Business Class!.
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Originally Posted by Skystar320
Ansett had the wrong buyer
The thing I find interesting is that this proposal is a merger of equals - similar sized operations with similar market value.
The much-reviled GD certainly did some things well, time was when QF was a fraction of BA..
From today's edition of crikey.com.au
Aviation Green Paper stuck in a timewarp Canberra correspondent Bernard Keane writes:
The Government's Aviation Green Paper made a minimal splash in today's media. If not for the Qantas-British Airways anti-competitive plot, the paper might have been reduced to what it meant for Sydney Airport. Perhaps it's the subject matter. Warren Truss gave a press conference in response yesterday afternoon with minimal turnout.
It should also be noted that the Green Paper shows the Government continues its approach of taking policy development seriously, through a formalised Green/White Paper process. This sort of thing doesn't mean much for voters, but it continues to demonstrate how, in many areas, this Government is demonstrably better than its predecessor.
The lack of media interest is a pity, because the Paper is one of the more outright protectionist documents that has emanated from an Australian Government for some years. Qantas' David Epstein, who committed not to undertake lobbying activities for his new employer for twelve months, needn't be too worried. Based on the Green Paper, Anthony Albanese is intent on keeping the aviation sector as the most anti-competitively regulated industry in the country along with the broadcasting sector.
Many Australian industries have a strong tendency to consolidation and oligopoly. Normally the role of government is to prevent that through the Trade Practices Act and the ACCC. In aviation, the role of government is quite the reverse -- to stymie competition in the interests of the domestic sector and one company in particular.
The mooted BA-Qantas merger deal shows that even with extensive government protection, too much consolidation is never enough. A Qantas-BA merger would be emblematic of the mindset of so many Australian companies: forget about innovation, quality products and service and building brand loyalty -- just eliminate competitors, exploit regulation and rentseek.
"The Government is committed to pursuing the liberalisation of international aviation to benefit consumers and to provide Australia’s airlines with the opportunity to compete effectively with their global rivals," says the Paper. The "and" is critical, because on international routes the interests of consumers come way below the desire to "provide Australia’s airlines with the opportunity to compete effectively."
But what's fascinating about the paper is how it trots out the same clumsy protectionist arguments that you can see demolished in Year 11 Economics textbooks.
"...liberalisation needs to be balanced with what is in the nation’s interest, as our aviation industry competes in an environment where not all countries apply the same rules."
That is, because other countries protect their aviation industries, we should too. Our farmers and manufacturers would love to see that logic extended to them.
Oddly enough, this cosseting is not applied to the aviation cargo sector, where the Paper supports "fully open arrangements". Plainly there's some distinction between flying passengers and flying cargo that means normal economics doesn't apply.
Aviation policy exists within a timewarp -- government thinking is hopelessly hamstrung, sounding like something from the 1960s. There's even a proposal for local production and investment requirements to blackmail foreign airlines into exchanging investment for access to international routes:
While the Coalition had a brief flirtation with aviation liberalisation under John Anderson, it never amounted to much, and Mark Vaile reverted to type as the Minister for Qantas. Albanese is following a bipartisan tradition. For the Coalition, it was always the trade-off between regional services and protecting Qantas, which warned that it would not operate on "unprofitable" regional routes if foreign competitors were allowed to compete on lucrative international routes, where regulation ensured Qantas could gouge travellers. For Labor, it's the heavy union presence in the Qantas workforce to be protected. Either way, international travellers and the tourism industry are the victims of the racket.
It's been nearly a decade since the Productivity Commission considered international aviation. It’s time it was again asked to apply its forensic gaze to how much aviation protectionism is costing Australia and whether the claimed benefits actually exist. But unlike the Bracks automotive and TCF reviews, there is no formal role for the PC in the Green Paper.
And if international aviation issues are stuck in a timewarp, when it comes to a second Sydney Airport, it's Groundhog Day. The Paper proposes to "initiate a process" to identify a second Sydney airport. To the extent this upsets the gouging monopolists who currently run KSA, that’s a good thing, but we’ve all been through this process before and we know that the politician has not yet been born who will build an airport close enough to Sydney to actually make a difference. The 2020 Aviation Green Paper will doubtless make exactly the same announcement about looking for where to put the new airport.
Aviation Green Paper stuck in a timewarp Canberra correspondent Bernard Keane writes:
The Government's Aviation Green Paper made a minimal splash in today's media. If not for the Qantas-British Airways anti-competitive plot, the paper might have been reduced to what it meant for Sydney Airport. Perhaps it's the subject matter. Warren Truss gave a press conference in response yesterday afternoon with minimal turnout.
It should also be noted that the Green Paper shows the Government continues its approach of taking policy development seriously, through a formalised Green/White Paper process. This sort of thing doesn't mean much for voters, but it continues to demonstrate how, in many areas, this Government is demonstrably better than its predecessor.
The lack of media interest is a pity, because the Paper is one of the more outright protectionist documents that has emanated from an Australian Government for some years. Qantas' David Epstein, who committed not to undertake lobbying activities for his new employer for twelve months, needn't be too worried. Based on the Green Paper, Anthony Albanese is intent on keeping the aviation sector as the most anti-competitively regulated industry in the country along with the broadcasting sector.
Many Australian industries have a strong tendency to consolidation and oligopoly. Normally the role of government is to prevent that through the Trade Practices Act and the ACCC. In aviation, the role of government is quite the reverse -- to stymie competition in the interests of the domestic sector and one company in particular.
The mooted BA-Qantas merger deal shows that even with extensive government protection, too much consolidation is never enough. A Qantas-BA merger would be emblematic of the mindset of so many Australian companies: forget about innovation, quality products and service and building brand loyalty -- just eliminate competitors, exploit regulation and rentseek.
"The Government is committed to pursuing the liberalisation of international aviation to benefit consumers and to provide Australia’s airlines with the opportunity to compete effectively with their global rivals," says the Paper. The "and" is critical, because on international routes the interests of consumers come way below the desire to "provide Australia’s airlines with the opportunity to compete effectively."
But what's fascinating about the paper is how it trots out the same clumsy protectionist arguments that you can see demolished in Year 11 Economics textbooks.
"...liberalisation needs to be balanced with what is in the nation’s interest, as our aviation industry competes in an environment where not all countries apply the same rules."
That is, because other countries protect their aviation industries, we should too. Our farmers and manufacturers would love to see that logic extended to them.
One of the few competitive rights Australia does have is access to the trans-Pacific route between Australia and the United States. The Australian Government has made it clear that it has no immediate plans for additional third country access to the route at this time to allow V Australia a reasonable opportunity to establish its operations.
So Singapore Airlines, which wants to compete on the trans-Pacific route, will continue to be prevented from offering competition on the route, until some indefinite point in the future. That's called the "infant industry" argument, and the classic response is "infant industries never grow up." The Paper offers no indicators of how "a reasonable opportunity" will be assessed or who will assess it.Oddly enough, this cosseting is not applied to the aviation cargo sector, where the Paper supports "fully open arrangements". Plainly there's some distinction between flying passengers and flying cargo that means normal economics doesn't apply.
Aviation policy exists within a timewarp -- government thinking is hopelessly hamstrung, sounding like something from the 1960s. There's even a proposal for local production and investment requirements to blackmail foreign airlines into exchanging investment for access to international routes:
The Government will maintain the legal requirement for majority Australian ownership of Australia’s international airlines, including Qantas, to ensure a strong, Australian-based aviation industry continues into the future. It may, however, be timely to consider whether the additional ownership restrictions currently imposed on Qantas remain appropriate. The Government will consider removing the intermediate caps under the Qantas Sale Act of 25 per cent on individual foreign airlines and 35 per cent on aggregate foreign airline interests.
Well, that’s a start, but we’re still wedded to this obsession with a national flag carrier. At a time when international capital is becoming harder to access, we're still placing irrational nationalistic obstacles in the way of foreign investors. Ownership of Qantas could be assessed under the "national interest" provisions of the FATA like most other sectors.While the Coalition had a brief flirtation with aviation liberalisation under John Anderson, it never amounted to much, and Mark Vaile reverted to type as the Minister for Qantas. Albanese is following a bipartisan tradition. For the Coalition, it was always the trade-off between regional services and protecting Qantas, which warned that it would not operate on "unprofitable" regional routes if foreign competitors were allowed to compete on lucrative international routes, where regulation ensured Qantas could gouge travellers. For Labor, it's the heavy union presence in the Qantas workforce to be protected. Either way, international travellers and the tourism industry are the victims of the racket.
It's been nearly a decade since the Productivity Commission considered international aviation. It’s time it was again asked to apply its forensic gaze to how much aviation protectionism is costing Australia and whether the claimed benefits actually exist. But unlike the Bracks automotive and TCF reviews, there is no formal role for the PC in the Green Paper.
And if international aviation issues are stuck in a timewarp, when it comes to a second Sydney Airport, it's Groundhog Day. The Paper proposes to "initiate a process" to identify a second Sydney airport. To the extent this upsets the gouging monopolists who currently run KSA, that’s a good thing, but we’ve all been through this process before and we know that the politician has not yet been born who will build an airport close enough to Sydney to actually make a difference. The 2020 Aviation Green Paper will doubtless make exactly the same announcement about looking for where to put the new airport.
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originally posted by Twiggs...
Just like the office to try and put a positive spin on this...
Twiggs,either the London base is working financially or it's not...
If it's doing it's job and saving money by giving crew lower pay and conditions why on earth would any management want to get rid of it by giving crew more money and conditions to be based in LHR....
Or the base as we suspect is not saving money for the company.In that case why would the company want to spend or lose any more money by basing crew on better pay and conditions?
If you look at any deal you have to ask yourself what is the benefit of the deal and who exactly are the beneficiaries of the deal...
Firstly,this is a takeover offer not a merger.The larger of the two organisations will eventually take over and that is where we should be looking..
Who definitely wins...
Management and Board members who are kept on...
Who potentially loses out of the deal..
Australians....
Staff....
Shareholders....
The Customer....
Anyone fancy a London basing on BA T & C's?
I'm sure there would be a flood of BA staff wanting an Oz basing.
For cabin crew this would have to be far preferable to the present QF LHR base T & C's.
How about for pilots?
I'm sure there would be a flood of BA staff wanting an Oz basing.
For cabin crew this would have to be far preferable to the present QF LHR base T & C's.
How about for pilots?
Twiggs,either the London base is working financially or it's not...
If it's doing it's job and saving money by giving crew lower pay and conditions why on earth would any management want to get rid of it by giving crew more money and conditions to be based in LHR....
Or the base as we suspect is not saving money for the company.In that case why would the company want to spend or lose any more money by basing crew on better pay and conditions?
If you look at any deal you have to ask yourself what is the benefit of the deal and who exactly are the beneficiaries of the deal...
Firstly,this is a takeover offer not a merger.The larger of the two organisations will eventually take over and that is where we should be looking..
Who definitely wins...
Management and Board members who are kept on...
Who potentially loses out of the deal..
Australians....
Staff....
Shareholders....
The Customer....
More from crikey...including a hysterical (as in "wildly uncontrolled") comparison to World War 1.
Qantas throws a match into bonfire of the airlines
Ben Sandilands writes:
The bonfires of airline consolidation are well and truly burning around the world today after the match was thrown by Qantas.
The QF+BA "merger of equals" discussion, which sources credit to former Qantas CEO Geoff Dixon, is to consolidation what the assassination of Archduke Ferdinand was to world peace in 1914.
It’s on.
Airlines with an arsenal of cash or rich backers are trying to seize the opportunities to get bigger by taking out the weak, either in pincer movements like a Qantas/British Airways combination, or by just driving them into a wall, like Lufthansa’s decision last week to start an Italian subsidiary, because Alitalia is such a basket case it isn’t worth buying.
BA has been struggling with efforts to merge with Iberia, especially since the Spanish made it clear they would be on top giving the orders, and with yet another limp-wristed effort to do a merger with American Airlines, which is itself in dire financial straits and put largely off limits by US restrictions on meaningful foreign equity in its airlines.
The UK media, which usually indulges in BA baiting, has lurched into indignation about a Spanish takeover of a forgiven national icon, especially after the Spanish took control of London Heathrow airport and succeeded in making it even more abominable than was thought humanly possible.
It is too early to know whether Qantas exerting influence over BA will lead to similar vilification. But until QF came along with a proposition that appeared even remotely possible, BA was looking flat footed in the consolidation race where Air France KLM and Lufthansa were miles ahead of them.
Lately it has been Lufthansa doing most of the running, mopping up control of struggling UK carrier bmi, buying a minimal stake in Jetblue, the US equivalent to Virgin Blue, and cornering a number of struggling smaller European carriers.
Richard Branson’s overtures to Lufthansa have been ignored.
However, the biggest blaze in monetary and strategic terms is in the Middle East, where Emirates is feeling the heat from Abu Dhabi, which sees getting control of the aggressively expanding carrier as part payment for bailing out the suddenly deflated Dubai economy.
Abu Dhabi has its own carrier, Etihad. A merger in any form with Emirates has devastating negative potential for Singapore Airlines and its hub at Changi Airport. Dubai is well and truly on the way to becoming the world’s leading super hub.
It can connect any city on earth non-stop, and is building a massive maintenance and overhaul aviation city as well. The announced investments in new fleet that will be deployed exclusively on Australian routes by Emirates and Etihad exceed the A380s on order by Qantas and Singapore Airlines.
Having spurned Qantas overtures to merge in the past, Singapore Airlines and Changi are under siege, not just by a QF+BA tie up, but super hub Dubai. Its investment at a seat in the table in future consolidation in Australia is as pathetic 5 jet narrow body fleet flown by its loss making Tiger Airways subsidiary.
The poor investment record of Singapore Airlines is discussed in more detail along with other aspects of any QF+BA merger in Plane Talking.
It is clear that Singapore Airlines, Virgin Blue, Air New Zealand and other SE Asian players with strong market shares and brands will be compelled to consider all options in the coming months.
Ben Sandilands writes:
The bonfires of airline consolidation are well and truly burning around the world today after the match was thrown by Qantas.
The QF+BA "merger of equals" discussion, which sources credit to former Qantas CEO Geoff Dixon, is to consolidation what the assassination of Archduke Ferdinand was to world peace in 1914.
It’s on.
Airlines with an arsenal of cash or rich backers are trying to seize the opportunities to get bigger by taking out the weak, either in pincer movements like a Qantas/British Airways combination, or by just driving them into a wall, like Lufthansa’s decision last week to start an Italian subsidiary, because Alitalia is such a basket case it isn’t worth buying.
BA has been struggling with efforts to merge with Iberia, especially since the Spanish made it clear they would be on top giving the orders, and with yet another limp-wristed effort to do a merger with American Airlines, which is itself in dire financial straits and put largely off limits by US restrictions on meaningful foreign equity in its airlines.
The UK media, which usually indulges in BA baiting, has lurched into indignation about a Spanish takeover of a forgiven national icon, especially after the Spanish took control of London Heathrow airport and succeeded in making it even more abominable than was thought humanly possible.
It is too early to know whether Qantas exerting influence over BA will lead to similar vilification. But until QF came along with a proposition that appeared even remotely possible, BA was looking flat footed in the consolidation race where Air France KLM and Lufthansa were miles ahead of them.
Lately it has been Lufthansa doing most of the running, mopping up control of struggling UK carrier bmi, buying a minimal stake in Jetblue, the US equivalent to Virgin Blue, and cornering a number of struggling smaller European carriers.
Richard Branson’s overtures to Lufthansa have been ignored.
However, the biggest blaze in monetary and strategic terms is in the Middle East, where Emirates is feeling the heat from Abu Dhabi, which sees getting control of the aggressively expanding carrier as part payment for bailing out the suddenly deflated Dubai economy.
Abu Dhabi has its own carrier, Etihad. A merger in any form with Emirates has devastating negative potential for Singapore Airlines and its hub at Changi Airport. Dubai is well and truly on the way to becoming the world’s leading super hub.
It can connect any city on earth non-stop, and is building a massive maintenance and overhaul aviation city as well. The announced investments in new fleet that will be deployed exclusively on Australian routes by Emirates and Etihad exceed the A380s on order by Qantas and Singapore Airlines.
Having spurned Qantas overtures to merge in the past, Singapore Airlines and Changi are under siege, not just by a QF+BA tie up, but super hub Dubai. Its investment at a seat in the table in future consolidation in Australia is as pathetic 5 jet narrow body fleet flown by its loss making Tiger Airways subsidiary.
The poor investment record of Singapore Airlines is discussed in more detail along with other aspects of any QF+BA merger in Plane Talking.
It is clear that Singapore Airlines, Virgin Blue, Air New Zealand and other SE Asian players with strong market shares and brands will be compelled to consider all options in the coming months.
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Stephen Bartholomeusz
Airlines plot a difficult course
There are two key questions raised by the confirmation that Qantas and British Airways are exploring a potential dual listed company merger. The first is whether it can be done. The second is whether it should be done.
The first question is quite complex, given that there are several layers of complexity that would have to be negotiated before a merger, even a dual listed company (DLC) merger could be consummated.
Airlines, particularly international carriers, carry their national flags. They are closely regulated by their governments and their routes are negotiated on a bilateral, government-to-government basis.
To protect their national carrier status and those bilateral access arrangements governments generally legislate shareholding restrictions to ensure they remain majority owned and controlled by their home market. In Qantas’ case there has been a 49 per cent ceiling on foreign ownership, with sub-ceilings in the form of a 25 per cent limit on the shareholdings of individual airlines and a 35 per cent cap on the aggregate holdings of foreign airlines.
Yesterday’s green paper on aviation policy flagged the removal of the sub-ceilings but the 49 per cent overall limit on foreign ownership will remain.
Even if it were removed, however, it is unlikely a true merger could be executed without massive risk because of the bilaterals. Qantas and BA could lose access to routes if they lost their national carrier status – if their "Australianness" or "Britishness" were seen to be diluted.
If they can structure their way around that problem they would still confront the probability that other carriers and their governments will attempt to exploit the merger to their own advantage.
It would not be a surprise, for instance, if the US not only sought an open skies agreement with Australia in exchange for leaving the existing bilaterals in place but again sought so-called "fifth freedom" rights – the ability to fly, not only to Australia but through Australia to third-country destinations – on behalf of its carriers.
If it could be done – and DLCs are very complex structures and the governance arrangements for a Qantas/BA DLC would be further complicated because of the need to protect the bilaterals – the remaining question would be whether it should be done.
BA may no longer have a shareholding in Qantas – BA had a cornerstone shareholding in Qantas for just over a decade, before the need to reduce a threatening debt burden led it to sell in 2004 – but the carriers do have a joint services agreement (JSA) on the "Kangaroo" route between Australia and the UK.
That agreement allows them to coordinate their scheduling, marketing, sales, freight, customer services and pricing on the route. The arrangement has competition policy authorisation.
Thus, the core conventional synergies from a merger are already available through the JSA.
The airlines are complementary. BA is very strong in Europe, on the transatlantic routes and in the Middle East. Qantas dominates Australasia, and routes between Australia and Europe and Australia and the US. It is also very strong within the wider Asia Pacific region.
A merger would give them global network coverage, although exploiting that with different brands and products could be quite difficult.
Both have opted for the Airbus A380s as their core long haul product and have reasonably complementary fleet strategies, which might proffer some cost synergies in the engineering and maintenance areas.
Ultimately, however, a merger would be driven by strategic issues rather than by simple synergies.
Former Qantas chief executive, Geoff Dixon, has argued for years that the industry has to consolidate and would eventually find a way through the maze of obstacles, including the bilaterals. He foresaw a future in which there would be a handful of global mega-carriers.
Qantas has tried for years to negotiate a merger or an alliance supported by cross-shareholdings with regional carriers including Singapore Airlines, Malaysia Airlines and, it is suggested, quite recently with Cathay Pacific. So far it has been unable to do the deal that would create a dominant regional player.
In an era of major consolidation – and the financial crisis and the creeping spread of open skies agreements in the northern hemisphere – Qantas’ status as arguably the world’s strongest airline would be irrelevant. It would ultimately be stranded as a small end-of-the-line carrier.
The negotiations with BA, initiated by Qantas, are clearly a way for Qantas to try to exploit its strength while it can. This moment, with the global industry under severe pressure as a result of the crisis, the impact of high jet fuel prices and the global economic slowdown, probably provides it with the best leverage it has ever had.
A merged group would have scale, a far more comprehensive and strong global network, access to two capital markets and some ability to finesse its deployment of capacity across the larger network. It would also have the third low-cost carrier brand in Jetstar to expand onto routes that don’t make sense for the parent brands.
It would be well-placed, particularly if it subsequently brought one of the North American carriers, and perhaps a mainland European group, into the structure, to create the kind of mega carrier Dixon envisaged.
The complexities of merging the two carriers, the involvements of governments, the inevitable opportunism from rival carriers, the potential for a third party to gate-crash the discussions and the "social issues" that are elevated in a DLC and would be intense in a merger of two national carriers/icons means there is no certainty that the discussions will lead to a deal.
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Alan Kohler
A British leg for Qantas
Now we know one of the reasons Leigh Clifford was chosen to be chairman of Qantas: the former CEO of Rio Tinto knows all about dual listed companies.
It won’t be impossible to create a DLC between Qantas and British Airways, but it will be complicated – especially since it’s likely that three airlines will be involved, not two (BA is still in merger talks with Spain’s Iberia), and therefore three governments. Leigh Clifford’s experience with DLCs will be crucial.
It seems talks between Qantas and BA have been going on for some time, although in truth they have probably never stopped.
BA sold its remaining 18 per cent shareholding in Qantas in 2004 but they have continued to run a joint venture on the 'kangaroo route' between London and Australia, and code share generally through the Oneworld alliance.
The revelation that they are now discussing a DLC comes just a day after the Australian government released a green paper on aviation policy, in which it aired the possibility of dropping the 25 per cent restriction on individual foreign shareholdings in Qantas and simply allowing any foreign ownership up to 49 per cent.
But ironically that could be a problem for Qantas and BA, not a benefit; in fact there would be good cause for them to finalise any deal before the Green Paper turns White, and then becomes law.
A DLC doesn’t rely on cross-shareholdings, just co-operation between two boards and approval by shareholders. Opening up Qantas to 49 per cent foreign ownership might encourage another airline to spoil the party and look to initiate some consolidation of its own with Qantas.
The Rio Tinto DLC structure that Leigh Clifford understands so well is now 13 years old and clearly works very well indeed.
It was modelled on the structure of Royal Dutch Shell, which is similar but different. The two companies remain distinct legal entities with their own shareholders and annual meetings but the boards of directors and management teams are the same. Accounts are drawn up for the whole group and one dividend is declared for both companies.
With airlines, however, the governments are effectively partners in the deal. Airspace and safety regulations are, and would probably remain, different. That means the two parts of the DLC could not be identical: each would have to comply with its own local regulations.
But this is simply a difference of degree – the two ends of the other DLCs, Rio Tinto, BHP Billiton and Brambles, have also been subject to a variety of different corporate laws and regulations.
The potential merger between BA and Iberia adds a complication that will no doubt extend the negotiations between the airlines and the various government officials well into 2009 and probably beyond. In fact the BHP bid for Rio could look like a picnic compared to this.
That said, a merger between BA and Qantas, however arranged, makes a lot of sense, and always has. They are almost exactly the same size in every respect and know each other well.
An important addition to the mix this time around is that Qantas has a successful discount airline – Jetstar – which did not exist when BA was a major shareholder in Qantas previously.
Jetstar would become a third airline in the DLC, making it effectively a TLC (triple listed company). Iberia would make it a QLC if that merger went ahead, which could hold the whole thing up till next century as they explain it to Spanish aviation officials.
BA is struggling with the competition from European discount carriers, including Qantas CEO Alan Joyce’s old employer Aer Lingus, which is now 30 per cent owned by BA’s nemesis, Ryanair.
No doubt there would be healthy competition between Joyce and BA’s CEO Willie Walsh to be head of the group, but bringing a quality discount carrier management team into BA is probably a big factor driving the renewed talks between the two boards.
Airlines plot a difficult course
There are two key questions raised by the confirmation that Qantas and British Airways are exploring a potential dual listed company merger. The first is whether it can be done. The second is whether it should be done.
The first question is quite complex, given that there are several layers of complexity that would have to be negotiated before a merger, even a dual listed company (DLC) merger could be consummated.
Airlines, particularly international carriers, carry their national flags. They are closely regulated by their governments and their routes are negotiated on a bilateral, government-to-government basis.
To protect their national carrier status and those bilateral access arrangements governments generally legislate shareholding restrictions to ensure they remain majority owned and controlled by their home market. In Qantas’ case there has been a 49 per cent ceiling on foreign ownership, with sub-ceilings in the form of a 25 per cent limit on the shareholdings of individual airlines and a 35 per cent cap on the aggregate holdings of foreign airlines.
Yesterday’s green paper on aviation policy flagged the removal of the sub-ceilings but the 49 per cent overall limit on foreign ownership will remain.
Even if it were removed, however, it is unlikely a true merger could be executed without massive risk because of the bilaterals. Qantas and BA could lose access to routes if they lost their national carrier status – if their "Australianness" or "Britishness" were seen to be diluted.
If they can structure their way around that problem they would still confront the probability that other carriers and their governments will attempt to exploit the merger to their own advantage.
It would not be a surprise, for instance, if the US not only sought an open skies agreement with Australia in exchange for leaving the existing bilaterals in place but again sought so-called "fifth freedom" rights – the ability to fly, not only to Australia but through Australia to third-country destinations – on behalf of its carriers.
If it could be done – and DLCs are very complex structures and the governance arrangements for a Qantas/BA DLC would be further complicated because of the need to protect the bilaterals – the remaining question would be whether it should be done.
BA may no longer have a shareholding in Qantas – BA had a cornerstone shareholding in Qantas for just over a decade, before the need to reduce a threatening debt burden led it to sell in 2004 – but the carriers do have a joint services agreement (JSA) on the "Kangaroo" route between Australia and the UK.
That agreement allows them to coordinate their scheduling, marketing, sales, freight, customer services and pricing on the route. The arrangement has competition policy authorisation.
Thus, the core conventional synergies from a merger are already available through the JSA.
The airlines are complementary. BA is very strong in Europe, on the transatlantic routes and in the Middle East. Qantas dominates Australasia, and routes between Australia and Europe and Australia and the US. It is also very strong within the wider Asia Pacific region.
A merger would give them global network coverage, although exploiting that with different brands and products could be quite difficult.
Both have opted for the Airbus A380s as their core long haul product and have reasonably complementary fleet strategies, which might proffer some cost synergies in the engineering and maintenance areas.
Ultimately, however, a merger would be driven by strategic issues rather than by simple synergies.
Former Qantas chief executive, Geoff Dixon, has argued for years that the industry has to consolidate and would eventually find a way through the maze of obstacles, including the bilaterals. He foresaw a future in which there would be a handful of global mega-carriers.
Qantas has tried for years to negotiate a merger or an alliance supported by cross-shareholdings with regional carriers including Singapore Airlines, Malaysia Airlines and, it is suggested, quite recently with Cathay Pacific. So far it has been unable to do the deal that would create a dominant regional player.
In an era of major consolidation – and the financial crisis and the creeping spread of open skies agreements in the northern hemisphere – Qantas’ status as arguably the world’s strongest airline would be irrelevant. It would ultimately be stranded as a small end-of-the-line carrier.
The negotiations with BA, initiated by Qantas, are clearly a way for Qantas to try to exploit its strength while it can. This moment, with the global industry under severe pressure as a result of the crisis, the impact of high jet fuel prices and the global economic slowdown, probably provides it with the best leverage it has ever had.
A merged group would have scale, a far more comprehensive and strong global network, access to two capital markets and some ability to finesse its deployment of capacity across the larger network. It would also have the third low-cost carrier brand in Jetstar to expand onto routes that don’t make sense for the parent brands.
It would be well-placed, particularly if it subsequently brought one of the North American carriers, and perhaps a mainland European group, into the structure, to create the kind of mega carrier Dixon envisaged.
The complexities of merging the two carriers, the involvements of governments, the inevitable opportunism from rival carriers, the potential for a third party to gate-crash the discussions and the "social issues" that are elevated in a DLC and would be intense in a merger of two national carriers/icons means there is no certainty that the discussions will lead to a deal.
-------------------------------------------------------------------------------------------------------
Alan Kohler
A British leg for Qantas
Now we know one of the reasons Leigh Clifford was chosen to be chairman of Qantas: the former CEO of Rio Tinto knows all about dual listed companies.
It won’t be impossible to create a DLC between Qantas and British Airways, but it will be complicated – especially since it’s likely that three airlines will be involved, not two (BA is still in merger talks with Spain’s Iberia), and therefore three governments. Leigh Clifford’s experience with DLCs will be crucial.
It seems talks between Qantas and BA have been going on for some time, although in truth they have probably never stopped.
BA sold its remaining 18 per cent shareholding in Qantas in 2004 but they have continued to run a joint venture on the 'kangaroo route' between London and Australia, and code share generally through the Oneworld alliance.
The revelation that they are now discussing a DLC comes just a day after the Australian government released a green paper on aviation policy, in which it aired the possibility of dropping the 25 per cent restriction on individual foreign shareholdings in Qantas and simply allowing any foreign ownership up to 49 per cent.
But ironically that could be a problem for Qantas and BA, not a benefit; in fact there would be good cause for them to finalise any deal before the Green Paper turns White, and then becomes law.
A DLC doesn’t rely on cross-shareholdings, just co-operation between two boards and approval by shareholders. Opening up Qantas to 49 per cent foreign ownership might encourage another airline to spoil the party and look to initiate some consolidation of its own with Qantas.
The Rio Tinto DLC structure that Leigh Clifford understands so well is now 13 years old and clearly works very well indeed.
It was modelled on the structure of Royal Dutch Shell, which is similar but different. The two companies remain distinct legal entities with their own shareholders and annual meetings but the boards of directors and management teams are the same. Accounts are drawn up for the whole group and one dividend is declared for both companies.
With airlines, however, the governments are effectively partners in the deal. Airspace and safety regulations are, and would probably remain, different. That means the two parts of the DLC could not be identical: each would have to comply with its own local regulations.
But this is simply a difference of degree – the two ends of the other DLCs, Rio Tinto, BHP Billiton and Brambles, have also been subject to a variety of different corporate laws and regulations.
The potential merger between BA and Iberia adds a complication that will no doubt extend the negotiations between the airlines and the various government officials well into 2009 and probably beyond. In fact the BHP bid for Rio could look like a picnic compared to this.
That said, a merger between BA and Qantas, however arranged, makes a lot of sense, and always has. They are almost exactly the same size in every respect and know each other well.
An important addition to the mix this time around is that Qantas has a successful discount airline – Jetstar – which did not exist when BA was a major shareholder in Qantas previously.
Jetstar would become a third airline in the DLC, making it effectively a TLC (triple listed company). Iberia would make it a QLC if that merger went ahead, which could hold the whole thing up till next century as they explain it to Spanish aviation officials.
BA is struggling with the competition from European discount carriers, including Qantas CEO Alan Joyce’s old employer Aer Lingus, which is now 30 per cent owned by BA’s nemesis, Ryanair.
No doubt there would be healthy competition between Joyce and BA’s CEO Willie Walsh to be head of the group, but bringing a quality discount carrier management team into BA is probably a big factor driving the renewed talks between the two boards.