Thurs "Australian Financial Review" 5/9/02
Singapore talk puts Qantas stock into a spin
Sep 5
Jane Boyle
Shares in Qantas and Virgin Blue's half owner Patrick Corporation slipped yesterday amid speculation that Singapore Airlines could launch a third domestic carrier.
Qantas shares fell 6¢ to $4.09, sparking concerns for the retail component of its $800 million rights issue, which opens on September 9 and closes on the 27th.
The airline is seeking to raise $200 million at $4.20 a share, the same price as institutions paid in a heavily oversubscribed $600 million bookbuild, before which the stock was trading above $4.60. The retail issue is underwritten to $100 million.
Patrick shares dived 59¢ to $15.
A Singapore Airlines spokesman said the airline was keeping all options open.
"Yes, we are interested in the [Australian] market, obviously, but that interest doesn't equate to us doing anything immediately," he said.
The airline is monitoring other potential opportunities to establish a presence in the Australian market, including a partnership with Qantas if cornerstone shareholder British Airways sells out.
Patrick chief executive Chris Corrigan is understood to be interested in bringing in Singapore Airlines as a partner in Virgin Blue.
Industry observers believe Singapore Airlines could be dangling the prospect of a third carrier as a tactic to put pressure on the incumbents, particularly since Qantas is in talks to buy 25 per cent of Air New Zealand, which could result in Air NZ leaving the Star Alliance, of which Singapore Airlines is a member.
Airport operators said talks with Singapore about setting up a third domestic carrier were continuing, and the airline's board was receiving regular status reports. But many industry experts were sceptical, saying a start-up would take at least six months, potentially cost billions and would be a high risk strategy.
While the collapse of former partner Ansett has hurt Singapore Airlines , the airline's spokesman said yesterday its load factors out of Australia were "pretty full".
And Virgin Blue, which does not have sufficient maintenance capacity to cope with a fleet expansion, will bring in two senior maintenance specialists from Boeing to work on a solution.
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Thurs "Sydney Morning Herald" 5/9/02
Singapore Air not an airhead
September 5 2002
Edited by Mark Todd
Of course not. So why would they want to start another airline in Australia?
The words of Sir Humphrey Appleby spring to mind when it comes to Singapore Air entering the domestic aviation market: such a move would certainly be a"courageous" decision.
The talk of Singapore Air starting up down under was rife again yesterday. But tellers of the tale have overlooked a few little details, such as the lack of substance to the speculation.
For a start, Singapore Air hasn't approached a single key supplier, such as unions or fuel companies, about an Australian service. It has had some very preliminary talks with Sydney and Melbourne airports, but that's about it.
The Civil Aviation Safety Authority has no applications before it for an air operators' certificate, and it takes 12 months anyway to issue one of those things. If Singapore Air is to decide at this month's board meeting that it will go ahead with a new domestic carrier, it will do so from a distinct state of unreadiness.
At best, you'd say Singapore Air is doing a rough back-of-the-envelope job on the alternatives to taking a stake in Qantas.
The real concern is that if Singapore Air did establish a domestic service it would tend to suggest they're not completely rational. And no one wants to compete against madmen, hence the 6c fall in Qantas yesterday to $4.09.
It would need at least $2 billion and a minimum 20 aircraft to make the idea fly. Merrill Lynch has noted before that the story only works if the start-up can win 30 per cent of the corporate market in double time. But Qantas has 100 per cent of that market locked up in two and three year deals.
And there's really no incentive for Singapore Air, especially as it already has an interlining deal with Qantas. It allows Singapore customers to buy seats on Qantas planes at the same price as can passengers of Qantas's Oneworld alliance partners British Airways and Cathay Pacific.
If all that weren't enough, Qantas is sitting on about $800 million in new equity and is more than ready for a price war.
Good luck, Singapore Air.
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Last edited by Wirraway; 4th Sep 2002 at 18:55.