Wed "The Australian" Latest News
BA offloads Qantas stake
September 08, 2004
BRITISH Airways plc today said it had achieved a price of $3.24 per share on the sale of its 18.25 per cent stake in Qantas Airways for $1.09 billion.
Shares in Qantas, which were placed in a trading halt this morning ahead of the news, last traded yesterday at $3.33.
BA's London-based commercial director Martin George said the airline, which would complete the sale of its stake within 48 hours through Citigroup, had concluded it was time to realise its 11-year investment in Qantas.
"We just felt it was the right time," Mr George said. "It's a purely financially governed decision.
"As an airline we need to pay down our debt. We have net debt of STG3.8 billion and we are the most indebted airline in Europe.
"Whilst we have brought down our debt significantly over the last two years we still feel it needs to come down further and the funds raised today will help that."
Mr George said it was yet to be decided just how much of the $1.09 billion, or STG425 million, would be applied to debt reduction.
"But it will help us strengthen our balance sheet for any opportunities that come up in the future," he said.
Asked if BA might be inspired by the recent takeover of Dutch airline KLM by Air France, Mr George said BA, which has a 9 per cent stake in Iberia Lineas of Spain, was looking for consolidation opportunities in Europe.
"When the original (Qantas) investment was made in 1993 many people assumed that consolidation would be global, but now the wise sages in our industry think that the most likely consolidation will be regional consolidation.
"We will be looking at European opportunities."
BA was deterred from consolidating with Qantas by the Commonwealth Qantas Sale Act, which limits foreign holdings in the airline to 49 per cent.
"Ten years ago there was a sense that if that was to change then that might have been an transaction that would have been evaluated, but the focus now is more on regional consolidation," Mr George said.
Qantas has been lobbying the Federal Government to remove the cap, saying it restricts its access to foreign capital and increases its borrowing costs.
But Prime Minister John Howard said last month that the cap would not be removed.
Qantas has been pursuing an alliance with Air New Zealand but the plan has been blocked by competition regulators on both sides of the Tasman and is currently under appeal.
Mr George said BA's joint services agreement with Qantas on the so-called Kangaroo route to Europe won't be affected by the sale of its stake.
"We don't think that agreement is dependent on our having an investment in Qantas," he said.
"It is a very important relationship for us and it's one that we look forward to building upon."
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