BA - QF merger?

[Sunfish]

I can think of no better way of helping to destroy the Australian economy than by giving QF and BA any more power to tax air transport than they already have.

[mrpaxing]

I agree

with mrs nomer,the pension liabilities of BA are a major factor. they owe billions and the yearly bill keeps getting higher. my source tells me Sir Rod is on a lifelong pension from BA north of 100 000.00, thats pounds not $. sounds good on paper but in reality its a financial negative for QFin the longterm.

[Carnage Matey!]

The BA pension fund deficit currently stands at GBP 1.9Bn. That's with the stock market on it's arse. The £1.9Bn doesn't have to be paid out all at once, more like over the next 50+ years. The deficit is itself only a problem because of changes to EU accounting rules that force companies to quantify their exposure at the present time rather than taking a long term view of the liabilities.

[lowerlobe]

In 2006 the scheme had reported a deficit of £2.1bn, which BA described at the time as a threat to the existence of the airline.

It's a possibility we may have to ask the company to make higher contribution, but it is too early to say
John Birch, BA pensions
But after a year of fraught negotiations and threatened industrial action, a deal was struck.
Staff would either work for longer, or pay higher pension contributions for service after April 2007.
In return, BA agreed to pay £850m into the fund as a special deficit payment, and to make further contributions of £131m in each year to 2016 - a move that reduced the pension black-hole.
But this year, following a mini-valuation, the scheme cut its estimate for how much its investments were likely to earn in the future.
"Clearly we haven't made any progress over the year as we would have expected as against the 10-year recovery plan," said John Birch, managing director of BA pensions.

Carnage Matey....
Why would any Australian or QF employee want to join another airline who's successive leadership has allowed such a huge debt to accumulate?
Your suggestion that the deficit is only a problem because of EU accounting laws is at odds with BA's own assessment of the situation...

Even with an injection of £850m the deficit is only slightly less than it was in 2006 and is only going to get worse with the current stock market problems.

[Led Zeppelin]

There was a figure floating around of BA's net worth being 1.85 billlion GBP.

Does anyone know if that includes the pension fund liability or not ? If it doesn't, the company (BA) brings nothing to the table.

The pension fund liability would have to be quarantined from any merger deal.

[StallBoy]

Does this mean that Qf flights will only be hours late leaving now.
At least with a star each they can become a two star airline

"Pompous" does it for me too, both failed airlines but at least I have never been late flying BA.

[lowerlobe]

both failed airlines but at least I have never been late flying BA.

I'm no fan of QF management but how do you come to that conclusion and by what standards is QF a failed airline?

[RedTBar]

The pension fund liability would have to be quarantined from any merger deal.

Jumping into bed with someone with a bad dose of 'debt' is bad enough but think about our flying for a bit.
What if the deal gets the green light and QF only fly's to BKK,SIN or HKG and BA takes over from there?

Will this be the end of us flying to London and Frankfurt?
We used to fly to Paris,Rome Athens,Manchester,Belgrade
Will QF just be looking at Asia and the Pacific from now on if this idea gets the nod.
I bet the boys on the top floor would like this idea so they don't have to buy as many aircraft and we can just fly around our area and meet up with BA aircraft in Asia and the US.
The more I think about what might happen the more I don't like the sound of it.

[Gingerbread]

Assuming any equity exchange between BA and QF is somehow based on the net tangible assets of both companies, the DB superannuation liabilities of both BA and Qantas should be taken into account.

If they are not, adversely affected shareholders aren’t likely to agree, or are they?

[RedTBar]

the DB superannuation liabilities of both BA and Qantas should be taken into account.

Mate,if I'm going to buy a car I want to know if any money is owed on it.

But I also want to know if buying the car is a good idea or not for what it does for me.I'm waiting for someone to talk about it's merits and what is good for us if this deal gets the greenlight.

[Capt Kremin]

It doesn't make commercial sense to send a 747 load of passengers to BKK, HKG or SIN from either OZ or the UK in the hope that a BA or QF 747 will be there waiting to take them on to their destination. There are too many variables to be able to deliver that consistently.
What does make commercial sense is to persuade the regulators to allow cabin crew and pilots to operate each others jets, if that can actually be done. (Big unanswered questions there.)
The other possbility is that BA and QF form a greenfields co-branded worldwide airline with the 787's on order (139 of them over both airlines). In which case they will try to keep BALPA and AIPA out of it, or play one off against the other.

[Carnage Matey!]

Originally Posted by lowerlobe

Why would any Australian or QF employee want to join another airline who's successive leadership has allowed such a huge debt to accumulate?

Thats not actually what happened. The deficit built in a slow but manageable with successive UK chancellors stripping tax benefits from share dividends that contributed a significant amount of income, then ballooned almost overnight with Gordon Browns smash and grab raid on the funds combined with the almost simulaneous introduction of the new FRS 17 accounting rules.
BA's mananagement certainly weren't negligent in their running of the scheme and the schemes overall position is similar to the vast majority of other DB schemes in the UK. In other words, it would only take a few Aussie politicians to shift the goalposts and Qantas (along with many other Australian companies) could find themselves in a similar position.

Your suggestion that the deficit is only a problem because of EU accounting laws is at odds with BA's own assessment of the situation...

When did you last hear an airline say "Times are great, no need for savings!"? Despite the 'threat to BA's existence' and the 'inaccessibility of finance' caused by the pension deficit the management still managed to line up some competitive finance deals for a whole fleet of new aircraft. In other words, it's in BAs interest to overstate the problem and use it as a cosh to beat their staff with.

Even with an injection of £850m the deficit is only slightly less than it was in 2006 and is only going to get worse with the current stock market problems.

Do you think we'll still be at the bottom of a bear market in ten years time? If BA is such a bad company how come it made £1Bn profit last year?

[Sunfish]

If BA is such a bad company how come it made £1Bn profit last year?

Perhaps because, like Qantas, it is good at rent seeking?

[mrs nomer]

The £1.9Bn doesn't have to be paid out all at once, more like over the next 50+ years.....

In the normal course of BA's day to day business, that is correct.

The problem arises when the company is sold. The fund then becomes part of the assets and liabilities. It has a "net value" (positive or negative), just the same as the aircraft and other assets or liabilities that are part of the BA group.

My understanding is that the reported BA valuation of GBP 1.85 billion does not include the fully funded pension liability.

[kotoyebe]

I'm waiting for someone to talk about it's merits and what is good for us if this deal gets the greenlight.

I agree. All we have had are words like "synergy" and "inevitable". Show us some real information that shows that it is good for the customer, staff, shareholders and ultimately, Australia.

[lowerlobe]

Carnage Matey!...You can blame whoever you like for BA's position but the reality is that BA has a higher cost base than QF and owes a lot of money.

At this point I can't see any real and valid reason for a takeover...sorry merger.

Do you think we'll still be at the bottom of a bear market in ten years time?

Carnage....Who knows?

But if you remember more than a few people running QF told us the APA bid was the bees knees.....then only after it didn't go through did we find out about the amount of debt that one of the takeover partners had....

It seems as though the only people who like this idea are BA and a few at the top of QF....I wonder why?

If BA and QF want to save money with something like aircraft purchases they can go into Boeing or Airbus together and strike a deal.They don't have to merge for that to happen.

[speedbirdhouse]

Quote-
"It seems as though the only people who like this idea are BA and a few at the top of QF...."

______________

LL,

don't forget the bum sucking parasitic law/brokerage firms and the massive fees they leverage for acting as advisors in such matters.

All without any conflict of interest of course

Michael Pascoe on just who benefits from mergers and takeovers

[packrat]

Pie in The Sky

This merger will not happen.
A merger between Qantas and Iberian would make more sense.
Give BA the flick and a little way down the road look for an Asian Carrier to buddy up with.
JAL would be a nice fit...but there are hurdles there as well

[Led Zeppelin]

This from Joyce yesterday:

QF's Joyce: 'No guarantee' of BA merger, no three-way union
Tuesday December 9, 2008

Qantas CEO Alan Joyce warned that there is "no guarantee" of any deal with British Airways and there will be no three-way combination including oneworld partner and BA merger target Iberia.

In his first public speech since taking over as CEO, Joyce told attendees at the Australia-Israel Chamber of Commerce luncheon in Sydney yesterday that there are "a number of significant matters that still need to be resolved, including agreeing on an appropriate merger ratio and resolving issues around BA's pension fund and the broader economic outlook."

He claimed that the potential tie-up would give Qantas "global scale," allowing it to "grow and enhance" its services and "deliver significant revenue and cost synergies." But the carrier does not need BA, he added. "Qantas comes to these negotiations from a position of strength. We will only proceed with this transaction if we are assured that it will maximize value for Qantas shareholders."

The new CEO also moved to allay Australian concerns regarding foreign influence at QF. "There's been a bit of fear and loathing about what participating in global consolidation might mean for Qantas. What I can say to all Australians is this: Whatever happens, Qantas will remain majority Australian-owned. The vast majority of our employees will always be Australian, and Australia will remain our headquarters."

[QFinsider]

Naturally QF management can be taken at their word.

Rather similar to politicians in that you know they are telling a lie when their mouth is open.