Airbubba
29th May 2001, 08:15
05/28 23:31
Qantas Eyes Air N.Z. Stake; SIA May Take Over Ansett (Update4)
By Darren Boey, Emily Parkinson, Angela Jones, and Tansy Harcourt
Sydney, May 29 (Bloomberg) -- Qantas Airways Ltd. is in talks to buy a "significant stake'' in Air New Zealand Ltd. after the Auckland-based airline's shares plunged on maintenance troubles at its Ansett unit. Singapore Airlines Ltd. would buy Ansett under the proposal.
Shares in all three airlines rose on hopes Air New Zealand's results will improve without the burden of upgrading Ansett's fleet -- lifting the value of any Qantas stake -- and Singapore Airlines would be better placed to profit from direct control of Ansett as a rival to Qantas, Australia's largest carrier.
"It's a long-term solution that's very good for the market and which makes sense,'' said Chin Y. Lim, an analyst at Morgan Stanley Dean Witter in Singapore. Qantas and Singapore Airlines "both get what they want.''
A shakeout of Australia's aviation industry has been expected after the arrival of two discount carriers dented earnings at Qantas and Air New Zealand at a time when both need money to buy new planes. Singapore Airlines, which owns a quarter of Air New Zealand, may now emerge with the Ansett unit it initially wanted, only to be blocked last year by Air New Zealand's first right to buy.
Qantas approached Air New Zealand with an offer that includes buying part of the 55 percent combined stake held by Brierley Investments Ltd. and Singapore Airlines, Air New Zealand said in a statement to the Australian stock exchange. Singapore Air would emerge as the owner of Ansett, which may allay regulators' worries about Qantas' excessive market control.
Competitive Position
"The key issues will be Qantas' competitive position -- that will be quite a big hurdle with the regulators,'' said Pano Raftopoulos, who manages A$600 million ($254 million) at Challenger Professional Investment Ltd. "It is obviously a bold move and shows Qantas' management is certainly proactive in terms of trying to improve the industry structure.''
The Air New Zealand statement did not disclose the price Qantas offered, nor how much of the Brierley and Singapore Airlines stakes it is interested in buying.
Air New Zealand's Class A for domestic investors rose as much as 10 percent to NZ$1.10, and its B shares gained as much as 12 percent to NZ$1.54. Qantas shares gained 6.3 percent to A$3.56, while Singapore Airlines gained 5.5 percent to S$13.40. Brierley's shares gained as much as 5.5 percent to S$0.48.
Benefits
Qantas may have been attracted by Air New Zealand's share price. Both Class A and Class B shares are the worst performing stocks on New Zealand's benchmark Top 40 Index, having lost almost a third this year. The shares are now 56 percent of their book value per share, according to Bloomberg analytics. That suggests Qantas could make money even if it sold off all of the airline's assets.
"Qantas will be happy, they will increase their influence over the area, that would be good for them,'' said Reg Montgomery, who holds Air New Zealand shares as part of the NZ$130 million ($55 million) he manages for BNZ Investment Management Ltd.
Other analysts doubt Qantas, Asia's fourth-biggest carrier, has much to gain from buying into a weak rival that will allow Singapore Airlines a direct role in its main market, Australia.
"For years Qantas has been using (domestic operations) to support and make it easier in the international sector,'' said Jim Eckes, managing director of consultancy Indoswiss Aviation Ltd. in Hong Kong.
Eckes said Singapore Airlines had already caused "real headaches'' for Qantas through its role in shoring up Air New Zealand, a problem that will grow if Singapore Air owns Ansett.
Qantas is one-quarter owned by British Airways Plc, one of Singapore Airlines' main international competitors.
Stepping Stone
"Singapore Airlines is targeting Ansett as a good stepping stone into the region,'' said Albert Hung, who helps manage A$800 million of stocks as head of Australian equities at Tower Asset Management Ltd. "If they own Ansett, they can control the eastern seaboard routes of Brisbane, Sydney and Melbourne and between Sydney and London, and Sydney and'' Los Angeles.
Singapore Airlines said in a statement the talks were "exploratory'' and at a management level. Brierley, which owns 30 percent of Singapore Airlines, said in a statement Selwyn Cushing would step down as chairman "pending the outcome of a proposal'' by Qantas. Cushing also stepped down as chairman of Air New Zealand.
An acquisition of Ansett by Singapore Airlines, Asia's biggest airline by market value, would give the unprofitable Australian carrier access to funds to upgrade its aging fleet, part of which was grounded at Easter because of faults.
Ansett and Qantas were forced to cut ticket prices after the arrival of discounters Impulse Airlines and Virgin Blue, a carrier backed by U.K. entrepreneur Richard Branson.
Domination
Antitrust regulators in Australia and New Zealand will scrutinize the plan because of the potential for Qantas to dominate routes in both countries. The Australian Competition and Consumer Commission said it hasn't yet received a proposal from the airlines.
"We'd definitely be interested in taking a look at the proposal,'' said Lin Enright, an ACCC spokeswoman.
New Zealand's Commerce Commission also said it would want to assess any proposal involving the nation's biggest carrier.
The move comes less than two weeks after Qantas won ACCC approval to take over the business of Impulse Airlines, further strengthening its lead in Australia's domestic market. Impulse's investors include the Singapore government's investment arm.
Qantas expects talks with Air New Zealand to continue this week, Qantas spokesman Michael Sharp said. "We're waiting to hear from the board of Air New Zealand.'' An investment bank first approached Qantas with the plan, Sharp said, declining to identify the bank.
Qantas Eyes Air N.Z. Stake; SIA May Take Over Ansett (Update4)
By Darren Boey, Emily Parkinson, Angela Jones, and Tansy Harcourt
Sydney, May 29 (Bloomberg) -- Qantas Airways Ltd. is in talks to buy a "significant stake'' in Air New Zealand Ltd. after the Auckland-based airline's shares plunged on maintenance troubles at its Ansett unit. Singapore Airlines Ltd. would buy Ansett under the proposal.
Shares in all three airlines rose on hopes Air New Zealand's results will improve without the burden of upgrading Ansett's fleet -- lifting the value of any Qantas stake -- and Singapore Airlines would be better placed to profit from direct control of Ansett as a rival to Qantas, Australia's largest carrier.
"It's a long-term solution that's very good for the market and which makes sense,'' said Chin Y. Lim, an analyst at Morgan Stanley Dean Witter in Singapore. Qantas and Singapore Airlines "both get what they want.''
A shakeout of Australia's aviation industry has been expected after the arrival of two discount carriers dented earnings at Qantas and Air New Zealand at a time when both need money to buy new planes. Singapore Airlines, which owns a quarter of Air New Zealand, may now emerge with the Ansett unit it initially wanted, only to be blocked last year by Air New Zealand's first right to buy.
Qantas approached Air New Zealand with an offer that includes buying part of the 55 percent combined stake held by Brierley Investments Ltd. and Singapore Airlines, Air New Zealand said in a statement to the Australian stock exchange. Singapore Air would emerge as the owner of Ansett, which may allay regulators' worries about Qantas' excessive market control.
Competitive Position
"The key issues will be Qantas' competitive position -- that will be quite a big hurdle with the regulators,'' said Pano Raftopoulos, who manages A$600 million ($254 million) at Challenger Professional Investment Ltd. "It is obviously a bold move and shows Qantas' management is certainly proactive in terms of trying to improve the industry structure.''
The Air New Zealand statement did not disclose the price Qantas offered, nor how much of the Brierley and Singapore Airlines stakes it is interested in buying.
Air New Zealand's Class A for domestic investors rose as much as 10 percent to NZ$1.10, and its B shares gained as much as 12 percent to NZ$1.54. Qantas shares gained 6.3 percent to A$3.56, while Singapore Airlines gained 5.5 percent to S$13.40. Brierley's shares gained as much as 5.5 percent to S$0.48.
Benefits
Qantas may have been attracted by Air New Zealand's share price. Both Class A and Class B shares are the worst performing stocks on New Zealand's benchmark Top 40 Index, having lost almost a third this year. The shares are now 56 percent of their book value per share, according to Bloomberg analytics. That suggests Qantas could make money even if it sold off all of the airline's assets.
"Qantas will be happy, they will increase their influence over the area, that would be good for them,'' said Reg Montgomery, who holds Air New Zealand shares as part of the NZ$130 million ($55 million) he manages for BNZ Investment Management Ltd.
Other analysts doubt Qantas, Asia's fourth-biggest carrier, has much to gain from buying into a weak rival that will allow Singapore Airlines a direct role in its main market, Australia.
"For years Qantas has been using (domestic operations) to support and make it easier in the international sector,'' said Jim Eckes, managing director of consultancy Indoswiss Aviation Ltd. in Hong Kong.
Eckes said Singapore Airlines had already caused "real headaches'' for Qantas through its role in shoring up Air New Zealand, a problem that will grow if Singapore Air owns Ansett.
Qantas is one-quarter owned by British Airways Plc, one of Singapore Airlines' main international competitors.
Stepping Stone
"Singapore Airlines is targeting Ansett as a good stepping stone into the region,'' said Albert Hung, who helps manage A$800 million of stocks as head of Australian equities at Tower Asset Management Ltd. "If they own Ansett, they can control the eastern seaboard routes of Brisbane, Sydney and Melbourne and between Sydney and London, and Sydney and'' Los Angeles.
Singapore Airlines said in a statement the talks were "exploratory'' and at a management level. Brierley, which owns 30 percent of Singapore Airlines, said in a statement Selwyn Cushing would step down as chairman "pending the outcome of a proposal'' by Qantas. Cushing also stepped down as chairman of Air New Zealand.
An acquisition of Ansett by Singapore Airlines, Asia's biggest airline by market value, would give the unprofitable Australian carrier access to funds to upgrade its aging fleet, part of which was grounded at Easter because of faults.
Ansett and Qantas were forced to cut ticket prices after the arrival of discounters Impulse Airlines and Virgin Blue, a carrier backed by U.K. entrepreneur Richard Branson.
Domination
Antitrust regulators in Australia and New Zealand will scrutinize the plan because of the potential for Qantas to dominate routes in both countries. The Australian Competition and Consumer Commission said it hasn't yet received a proposal from the airlines.
"We'd definitely be interested in taking a look at the proposal,'' said Lin Enright, an ACCC spokeswoman.
New Zealand's Commerce Commission also said it would want to assess any proposal involving the nation's biggest carrier.
The move comes less than two weeks after Qantas won ACCC approval to take over the business of Impulse Airlines, further strengthening its lead in Australia's domestic market. Impulse's investors include the Singapore government's investment arm.
Qantas expects talks with Air New Zealand to continue this week, Qantas spokesman Michael Sharp said. "We're waiting to hear from the board of Air New Zealand.'' An investment bank first approached Qantas with the plan, Sharp said, declining to identify the bank.