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Dixon's incompetence almost ruined the company

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Dixon's incompetence almost ruined the company

Old 4th May 2009, 14:45
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Dixon's incompetence almost ruined the company

Yet he still walks away with millions.

Near miss almost tipped Qantas into oblivion

Adam Schwab

May 5, 2009
IT WAS the $11 billion mega-deal that promised blue skies ahead for all involved. But its failure by the slimmest of margins exactly two years ago has saved not only Qantas, but billions of dollars of debt finance
IT WAS the $11 billion mega-deal that promised blue skies ahead for all involved.
But its failure by the slimmest of margins exactly two years ago has saved not only Qantas, but billions of dollars of debt finance - supplied by foreign and Australian banks - which would have likely been lost had the private equity-led Airline Partners Australia bid succeeded.
Tourism may also have suffered. The privately owned airline would have taken the axe to unprofitable routes.
The APA consortium - consisting of Texas Pacific Group, Macquarie Bank, Allco Finance and Onex Partners - managed to garner acceptances for only 45.7 per cent of Qantas shares by the close of the takeover. APA would have reached the 50 per cent threshold but for a US billionaire, Samuel Heyman, who over-slept and submitted acceptances for his 4.9 per cent stake in Qantas a few hours too late.
The audacious takeover landed at the zenith of the frenzy in mergers and acquisition. As 2006 drew to a close, the private equity and sharemarket boom was in full swing. Debt was plentiful as companies were encouraged to "gear-up" their balance sheets to boost returns for shareholders.
In this environment one of the largest private equity players, Texas Pacific Group - whose founder, David Bonderman, turned a $US66 million investment in Continental Airlines into a profit of more than $US600 million - decided to team up with Macquarie Bank and Allco Finance.
One of APA's trump cards was its plan to retain Qantas's senior management team. They would oversee a multibillion-dollar capital investment program over five years, along with the introduction of 70 planes to increase capacity by 40 per cent.
Based on the $5.45 a share offer, the acquisition would have cost APA about $10.8 billion. Of that, the consortium had secured commitments from lenders to provide senior secured term facilities worth $US6.1 billion.
APA members would have tipped in some $3 billion in equity but the bidder's statement noted that the company planned capital reductions of about $4.5 billion and the payment of dividends up to 100 per cent of Qantas's retained earnings during the term of its ownership.
The onset of the global financial crisis has turned what looked to be a marginal takeover proposition into what would have been a diabolical mess. To carry out the buyout, APA had planned to assume a debt burden of more than $10 billion. Two years later, Qantas's current market value is $4.6 billion.
But even before APA's mooted capital investment program, courtesy of the company's expanded debt load, Qantas would have been hemorrhaging about $1 billion a year in interest payments alone. Coupled with its expected operating losses, it is highly unlikely the private equity consortium would have been able to meet its financial obligations
Lenders to the consortium included Morgan Stanley, Citigroup, Deutsche, Goldman Sachs, Royal Bank of Scotland and Greenwich Capital Markets: a who's who of the financial crisis.
In its bidder's statement, APA confirmed binding commitments from lenders for $10.7 billion. The financing package even contained a provision for Qantas to "to make interest payments in kind, in lieu of cash".
Little wonder there is a feeling the lending consortium dodged a bullet. But APA's banks are not the only ones breathing a sigh of relief.
The consortium also included equity participation from 11 Qantas managers, including former chief executive Geoff Dixon, former chief financial officer Peter Gregg, the recently retired human resources boss, Kevin Brown, and the current Qantas chief executive, Alan Joyce.
Under the participation agreement, management would have used limited-recourse loans to acquire "time" and "incentive" based shares under a long-term incentive share plan, representing up to 4.5 per cent of the company.
Given Qantas's subsequent financial performance, it is almost certain the equity instruments granted to senior management would have been worthless.
Fortunately for Dixon and Gregg, not only did the bid fail, but the Qantas board graciously offered them significant retention payments, primarily in the form of Qantas shares, to remain with the company. These made Dixon the highest-paid airline executive in the world in cash terms before his retirement at the end of November. In 2007-08 he received $11.9 million, which included his $4.5 million retention payment.
The retention payment to Dixon involved the allocation of 1 million free Qantas shares. The stock was notionally subject to a 10-year holding lock, but Dixon was still able to sell all the free shares within two years.
Allco, of which APA's main spokesman Bob Mansfield later became chairman, has slipped into administration, crippled by its own debt burdens and controversial related-party transactions involving its founder, David Coe, who was also at the forefront of the Qantas takeover.
Had the APA bid succeeded, Allco would have held an 8.4 per cent economic interest in Qantas, while its listed offshoot, Allco Equity Partners, would have owned 25.9 per cent. AEP, a separate ASX-listed entity, has since run a mile from Allco and wants to change its name to Oceania Capital Partners. Macquarie, of course, has survived and moved on, albeit having just experienced a rough year in which its profits halved.
The previously invincible Texas Pacific Group has also had a difficult patch. It headed an ill-fated equity injection into US bank Washington Mutual last year that led to losses of $US1.3 billion for the group.
And Qantas? While its shares rose shortly after the takeover failed, reaching $6.06 in December 2007, it has since fallen to $2.13 - 60 per cent less than the APA offer price after fuel prices and then the global recession shredded its bottom line.
It faces a second half loss in its current financial year. As a result, Joyce has said 1750 Qantas workers will lose their jobs.
But one suspects that had the APA bid succeeded, far more Qantas employees would be seeking work, there would be some very sorry financiers, several far poorer former Qantas executives and most likely a renationalised icon.
Adam Schwab is a corporate lawyer.
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Old 4th May 2009, 22:30
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........ and Macquarie isn't looking to good at the moment either according to my sources.
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Old 4th May 2009, 22:46
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It wasn't the incompetence of dickson and his cronies that almost ruined the company.

Rather, it was their pathological greed.
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Old 4th May 2009, 23:03
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So many including myself made efforts to get the bid to fall over as we could see the writing on the wall.We all saw what happens when money is stripped out of an airline by owners with a different agend.Read Ansett.

Now if the worker ants at qantas could see the likely result surely those at the top could also see what may happen?
Given that, one could be well agree with the above conclusions.
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Old 5th May 2009, 00:33
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Geez and Aunty Marge thought we were all stupid!

"Stupid is what stupid does..." thanks Forrest...
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Old 5th May 2009, 00:43
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Now that the heat is off Pratt for collusion and price fixing, how about another scalp for the ACCC? I nominate.............what's his name, old scrotum face.

If nothing else it would help revive morale at the Q for awhile.
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Old 5th May 2009, 00:53
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It was only ever about GREED.
There should be a government level investigation into the whole Qantas operation during Dixon's tenure.
QF management and board escaped from this whole episode with almost no questions asked, not to mention the bucket loads of money they received. Even after publically admitting they didn't have their eyes on the ball for six months, they still received massive bonuses. Then there was that little episode with the freight business that management didn't know was happening. How much other creative accounting was going on in the years leading up to the APA take over?
Why has it taken so long for the media to speak out on this issue?
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Old 5th May 2009, 01:14
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Thumbs down

Dixon's incompetence almost ruined the company.
Even worse were those that appointed him and continued to support his tenure.
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Old 5th May 2009, 01:37
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Dead right, after being involved up to his armpits in the destruction of Ansett and secured favour of the Howard govt by having them in his pocket through cronyism with Anderson, "trickie dickie" was now elevated to messiah status, he had jurno's all falling overthemselves to interview this so called worlds greatest CEO of an airline in all of world history, when really he was just a slime of the first order. So now there was no stopping this pariah, he could hood wink anyone into just about anything and fill his filthy pockets with as much cash as possible, if I was a Q employee I would everyday thank the aviation gods that Q had been saved from this most despicable disease named dicko.
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Old 5th May 2009, 05:17
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Richard Kranium,

Ansett went under due to a lot of reasons. GD was not one of them. I work for QF and have NO time for him, but to say that he is one of the main reasons that AN went under is just a tad overboard.

Yes he is slimy. Yes he is greedy. Yes he is narcosystic and full of his own self worth, but blaming him for the demise of AN is a little extreme.
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Old 5th May 2009, 08:47
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I am a simple type of guy twho likes to try and understand things, and this is my favourite subject because everyone knows about GD but noone will do anything.

I am sitting here reading about a serious issue with Emirates that was an obvious error, that took just seconds, involved no deliberate intent, by some highly skilled, intelligent individuals who made a mistake (yep it was serious) and then performed to perfection (despite the obvious circumstances), that seems to me should have been detected by proper systems before it happened, and they get to walk the plank almost on the spot before anyone has a chance to see the facts or true underlying causes.

Then we have a CEO who embarks on a deliberate strategy, that involved significant self enrichment, which even on first reading could have jeopardised the entire company and he gets paid out millions to leave after it fails, and all of the acts were on company paid time.

Seems like there is something wrong with the system to me.

I am an old fart like TG and many years ago an IBM guy made a mistake that cost the company a shiteload and when asked if he was going to fire him, the then CEO said something along the lines, god why would I do that I have just paid $100m to train him.More tolerance I say, accountability is fine, but let it be equitable.

ps I have deliberately not repeated other and numerous public failings by GD as well which seem never to have been put on his report card or his bonus calculations for some reason.
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Old 5th May 2009, 08:56
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this is a problem with our legal system which provides no way for the company lower ranks to question and scrutinize board decision.

In a company like qantas, it would appear management very quickly silence any staff who open their mouth.

and to think Margaret Jackson was one of the 2000 nations brightest and most successful in their field to be invited to canberra 2 years ago for the prime minister brainstorming session just makes the whole country a laughing stock.
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Old 5th May 2009, 11:01
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.....I read in the SMH yesterday that Brad Cooper (HIH) is still serving time ( 8years) for that whole debacle.

Darth and his Goon squad would get 30 years if we follow the same rationale.

But no......easy does it from his journo mates at Fairfax and News.

As my Grand pa would say:

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Old 5th May 2009, 12:32
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Oh "normasars"...yes! "trickie dickie" was one of the reasons Ansett went down...but I don't want this thread to go down that path, as the title is "trickie dickies" incompetence.

However, I did take the trouble to get a quote from the aviation convention in Adelaide Nov 2002 by Tom Ballantyne who said..."...

The answer is that Qantas played a major role in Ansett's downfall, both through the acumen of its management and its ability to get itself into a position where Ansett was virtually unable to properly compete"...

Thats why I draw the conculsion and I know from what was said to me at the time, that trickie was up to his armpits in Ansett's demise, but he was not the instigator.

That privilege belongs to Air New Zealand, the gov of NZ, the gov of Australia, and last but not least "trickie dickie" who just loved being a stirer and muddying the water.

But this thread is about what could have happened to Qantas if "trickie" got his way and got it sold to that other obomination Macquarie Bank, how he manipulated everyone and that poor excuse for a "chaiman" (not woman) was out there telling every shareholder this is the way to go...how sick this whole episode is.

I'm convinced, that todays CEO's are basically modern day criminals, they lie to the shareholders and get away with murder, while the silly old buggers and others sit at the ASX watching the stock market go up and down and demand more and more, basically I'm sick of the greed...
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Old 5th May 2009, 15:59
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Maybe Andrew Denton could do a "Get Skase (read Dixon)" thing .
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Old 7th May 2009, 15:56
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My mum could've coached Thorpie to numerous Gold Medals..

the same degree of difficulty as taking the credit at Qantas by a marketing consultant that dreamed up that annoying song and once ran a pub and was also up a bow ties arse..
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Old 7th May 2009, 16:23
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Its mongrels like this that keep hell on fire! He and his cuddled princess, smiles a blazing, judgement day! Do you believe?
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Old 20th Oct 2010, 00:34
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From the SMH today, Smooth ride was down to the vehicle


The union with the highest number of Qantas members, the Australian Services Union, has a very long memory - far longer than that of the airline, which quickly tried to wash its hands of the botched Macquarie-led takeover attempt of 2007.
The union has recommended its members who hold Qantas shares to vote against the re-election of three directors. They include the airline's chairman Leigh Clifford and directors Patricia Cross and Paul Rayner. The union recommended Cross be voted off due to her role in supporting the failed Macquarie-led private equity bid for Qantas in 2007. ''We won't let them forget that,'' said the union's assistant national secretary, Linda White.
The union said Clifford and Rayner were on the board when the airline's board approved its massive $11 million golden parachute to its former chief executive Geoff Dixon in 2008. ''We think a vote against these directors sends a message about these remuneration strategies which reward those at the top of the corporate tree at the expense of ASU members,'' the union said.
The union has also urged a vote against the long-term incentive plan the airline proposes to pay its chief executive, Alan Joyce. Qantas plans to grant Joyce 1.08 million performance rights for this financial year.
A dispatch from the union to its members yesterday said: ''You have to ask yourself why Alan Joyce deserves such a significant possible bonus when ASU-covered staff got one staff travel voucher worth $250.''
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Old 20th Oct 2010, 07:32
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Here here!

What a tops idea.
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Old 20th Oct 2010, 10:47
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It was pure and simple white collar crime. Had it gone ahead QF would now be cactus, propped up by govt. to save jobs. Meanwhile Dixon and Jackson would have been 120 million richer. And laughing their heads off. Somehow the wheels fell off, it was so close. Still gives me the creeps.
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