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Gregg, Dixon, Carnegie, Singo make a play on QF

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Gregg, Dixon, Carnegie, Singo make a play on QF

Old 18th Nov 2012, 13:18
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Gregg, Dixon, Carnegie, Singo make a play on QF

Could be interesting.....


ANDREW CLEARY AND JAMES CHESSELL
Former Qantas Airways finance chief Peter Gregg and venture capitalist Mark Carnegie have held discussions with key investors and unions as they consider a rival plan to challenge chief executive Alan Joyce’s strategy for the national carrier.

It is understood the pair, who have been linked to a loose consortium including advertising mogul John Singleton, former Qantas chief Geoff Dixon and trucking billionaire *Lindsay Fox, would push for the sale of   Qantas Frequent Flyer and a *partial float of Jetstar to return capital to shareholders if the plan was *formalised.

While the situation remains “very fluid” according to market sources and no firm proposal has been formed, Mr Carnegie and Mr Gregg have talked to key unions which may help in gaining the support of superannuation funds. They are believed to have told people in the meetings that they were approached by disenchanted investors and have the *support of about 20 per cent of the *Qantas register to agitate for a rival strategic plan.

Mr Dixon, Mr Gregg and Mr Carnegie worked on the failed private equity bid for Qantas in 2006 pitched at $5.60 a share. The stock has fallen 26 per cent over the past 12 months compared with a 2 per cent rise in the broader benchmark index.

A full takeover of Qantas is not being considered by the group. It is more likely it would consider buying a stake that would allow it to push** *for an alternative strategy that would     include a more aggressive expansion of the mainline carrier into Asia.

The plan would add more direct routes and frequencies between Australia and Asia’s booming business capitals. The group of investors is understood to recognise the benefits of the recent alliance with Emirates for solving Qantas’s network issues in Europe, but questioned the financial returns. They are more focused on securing a tie-up with an Asian carrier such as Cathay Pacific to lock down the regional market. They would also give priority to delivery of the fuel-efficient Boeing Dreamliner to Qantas International rather than Jetstar.

Sources close to the plan have said the decision on whether to proceed was not dependent on funding. It is more about whether the group can gain enough support to formulate a new strategy for the struggling carrier. A 10 per cent stake in Qantas would cost $284.3 million based on Friday’s closing price.

It is believed Mr Gregg and Mr Carnegie about two months ago held a series of briefings with union groups, including those representing Qantas pilots, engineers and ground workers, in a bid to secure their support. Core Qantas investors to have been briefed on the plan include Balanced Equity Management. It is understood the asset manager stressed its support for Mr Joyce and his five-year restructuring program for the loss-making Qantas International division.

Mr Gregg, who is now the chief financial officer at Leighton Holdings, and Mr Dixon declined to comment. Mr Fox did not return calls. Mr Fox is the financial backer most recently linked to the group, while Mr Singleton is a long-term associate and co-investor of the trio. Qantas shares closed at $1.26 on Friday.

Qantas head of government and corporate affairs Olivia Wirth said the airline had received no formal or informal approaches regarding a takeover of any description. “Qantas is often the subject of speculation and there has been takeover speculation for at least the past 12 months,” Ms Wirth said.

She said the company’s strategy was “geared towards sustainable shareholder value”, citing the $100 million share buyback and early debt repayment announced last week. Qantas is considered vulnerable to a destabilisation strategy because of its weak share price. The stock is trading at roughly half book value and touched a record low in June after a surprise profit warning. Qantas posted its first loss since privatisation in 2012, with one-off restructuring costs and losses at the international unit tipping the company to a $244 million net loss.

“Management remains focused on building a stronger Qantas, which it is doing through the proposed Emirates partnership, investing in new aircraft, growing Jetstar in Asia, maintaining a profit-maximising domestic market share of 65 per cent and tackling its legacy cost base.”

With close to $4 billion in cash on its balance sheet, the company has ample room to continue buying its own shares should the share price remain near current levels. Mr Joyce is in the second year of a five-year turnaround strategy that he has said will restore Qantas International to profit by the end of year three and return its cost of capital on an ongoing basis on conclusion.

The alternative strategy promoted by Mr Gregg and Mr Carnegie and their backers revisits some of the tenets of the failed private equity buyout of Qantas in 2007.

When asked last week about the prospect of a group of former Qantas executives and related parties taking a stake in the airline, Emirates president Tim Clark backed Mr Joyce’s strategy and said many of the problems the Qantas CEO was tackling were the legacies of his predecessors. “They will always be in the wings,” Mr Clark said of the group. “If they have retired, retire.”

Under the strategy, the company has slashed capital expenditure at the unit, pushing back or cancelling aircraft deliveries and cut jobs across engineering, catering, cabin crew and lower management to bridge the cost gap between Qantas and its offshore-based competitors such as Singapore Airlines, Emirates and Cathay Pacific.

Mr Clark said he expects other groups may be considering a destabilisation strategy given how low the share price is. “If this is one, it will definitely not be the last,” he told reporters in Dubai last week.

“They will gain traction I suppose if they talk to the union organisations who don’t necessarily agree with what is going on. But I assure you, within three years someone will be eating their words because within three years, given the Qantas strategy, given the link to Emirates and us to them, things will be completely different.”
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Old 18th Nov 2012, 19:59
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Hmmmm, go with one psychopath or go back to another? I can feel morale SOARING in the Qantas group!

That said, putting the 787s on the premium side of things looks better than what is happening now. I wonder what the unions said?
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Old 18th Nov 2012, 20:59
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Told yer so. Qantas has been "in play" since before the APA bid.

The assets these guys see are:

1) The brand name.

2) The cash flow.

3) The slots and airside real estate (that stops market entry by others).

4) The Chairmans lounge and Qantas superlative lobbying ability with both sides of Government. (ties also to #1)

5) The huge political power inherent in manipulating schedules to the benefit of certain capital cities and the detriment of others.

That is all. The actual "service delivery" is not a factor in their heads. That can be left to a multitude of the cheapest contractors. They care nothing for the actual business of running an airline.

The problem for Joyce is that all he knows about is running LCC......so the solution is to turn QF into an LCC...because that is all he knows.
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Old 18th Nov 2012, 21:06
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Hmmm! Expect who said what, if anything, will be another 'best kept secret'.

If the Unions were approached, can only hope their response was something along the lines of:
· We’ll support a Pay Freeze for X % of the Company and for Votes in determining the Strategy.

Last edited by WorthWhat; 18th Nov 2012 at 21:35.
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Old 18th Nov 2012, 21:23
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Ben Sandilands' take:

The detailed insight into an alternative survival strategy for Qantas in a report in the Australian Financial Review appears to have powerful friends among pilots and shareholders, but can a revolt against the failing strategies of the current management come fast enough to save the carrier?

No-one knows the answer to this question, not even the plotters said to include former CFO Peter Gregg, and vulture, er, venture capitalist Mark Carnegie.

But let’s consider the reasons for urgency.

The Joyce strategy of stopping investment in Qantas international until it achieves whatever the current board sees as an acceptable return on investment is like stopping in the fast lane on a freeway to change a tire.

The rest of the sector isn’t going to wait for Joyce, who has been a total failure at Qantas, and who has brought ruin on the share price, the carrier’s reputation and its relationship with its most valuable asset, its people, to get it right.

Joyce calling time out on Qantas long haul in terms of new investments is making a call no one else, including proposed strategic partner, Emirates, is going to hear or heed.

Adding a fare and capacity war to domestic Qantas activities is scarcely the stuff of genius either. The market needs to know how Jetstar in its own right is faring, and why there appears to be a problem with yields and scheduling with Qantas mainline.

It isn’t a legitimate investment to shuffle around A330s and refurbish aged fuel guzzling high maintenance 767s in the full service supposedly premium product when brand new Dreamliner 787-8s are consigned to a Jetstar international wide body operation that lacks total transparency in reporting and has been reducing some of its scheduling.

And cutting off access to real Qantas flights all the way to Europe and the UK for travellers boarding in Perth, Adelaide and Brisbane in favour of urging them to join the other ex Qantas customers who have already switched loyalties to Emirates brings no obvious benefit to Qantas shareholders.

The current board seems fearful of being in the business of long haul flight, and complicit in actions that are now seriously undermining Qantas domestic.

Neither the board nor the CEO have served Qantas with distinction. How much longer can this self harm persist?
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Old 18th Nov 2012, 21:38
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Ben Sandilands:

Neither the board nor the CEO have served Qantas with distinction. How much longer can this self harm persist?
Ben is making an assumption here that must be questioned:

Is the purpose of the Board and CEO to serve each and every shareholder equally?

Last edited by Sunfish; 18th Nov 2012 at 21:39.
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Old 18th Nov 2012, 22:13
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The Part Time CFO

"Mr Gregg, who is now Chief Financial Officer at Leighton Holdings"......
very odd, who would have thought that gig was only part time?

Tell you what, Leightons struck gold with his appointment??

Let's face it, this is only ever going to be a money deal.

Everyone in finance knows there's no better game in town than finance. Try getting a finance guy to leave finance to build a business..... almost never happens.

Now do we see why Joyce got the gig and JB was sent packing? These people are like despot dictators who 'step down' & simply install puppets.

Surely an opportunity for Obeid Consulting to get in on this?
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Old 18th Nov 2012, 22:19
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Sunny, is it not the role of the CEO to manage the organisation and the role of the Chairman/Board to ensure it is well managed? Therefore, Ben Sandilands is spot on in his description of the current Chairman, Board, CEO and Executive Management.

This description of roles comes from Jim Leslie a previous QF Chairman who was an excellent Chairman and had no trouble pulling his CEO into gear.

Safe Flying
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Old 18th Nov 2012, 23:37
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Jim, was a good chairman. His MC never went to his head, my Dad and I liked him a lot.
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Old 18th Nov 2012, 23:44
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Share holders are only interested in value returns.

During his tenure, Dixon made it VERY clear that the #1 priority was shareholder return. Joyce believes he is enhancing Dixon's model, but we all know he has failed.

After getting a caning on the share price, shareholders are looking to ANYONE that will get them a return of some kind, so along comes Dixon and friends......

I just can't see that things will change under them either. They are interested only in what they can get out of it for themselves BEFORE the shareholder and try to make it seem like they are doing everyone a favour.

There won't be any significant change in employee relations either, so the ship will just continue to get tossed and turned on this particular stormy sea.

What I'd give for some good news.....
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Old 19th Nov 2012, 00:20
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As a rationale shareholder base, they should have taken the $5.50. It was a large premium on an industry that was making cyclically high profits, it was always downhill from there (albeit no-one quite imagined the GFC).

And what would have happened???
For shareholders $5.50 versus $1.20 today with no dividends last few years

As for the airline and employees, well its all crystal ball but here goes.
QFF, Terminals, Owned planes flogged off quickly - quick reduction of the massive debt taken on and nice dividend to the privateeer guys. Maybe even separation of Jetstar.
Then the music would have stopped as GFC hit and Qantas started bleeding.
New owners would have lost control, the banks/other hedge funds taken control and no doubt ended up with a debt for equity swap (much like just happened in Nine). Those leased plans - probably recalled by lessors (like Mexicana, Kingfisher), future orders cancelled, so QF would have shrunken massively and huge number of employees laid off -- far far worse than under Joyce.

And one of the key guys behind it, expects union support now.
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Old 19th Nov 2012, 00:29
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Amazing.

A rumour like this has seen the share price rise more than the share buy back.

Nobody has talked to us about it. Sounds like rubbish.
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Old 19th Nov 2012, 00:37
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Spot on Moa, the Dixon plan involved all the above. The unions would want do do all they can to keep These crooks out of the business. That said I'd certainly flog JQ before it's worth absolutely nothing. The faster Virgin moves into the premium market the less value there is in JQ.
Joyce got handed the shit sandwich by Dixon and I reckon he only realised it about February this year. Poor sap
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Old 19th Nov 2012, 00:38
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A week ago the Qantas Board approved a share buy back of $100 million and a reduction of debt (ahead of time ) of $650 million.
Another attempt to block any potential take-over manoeuvre ?

It makes me furious that rather than spend money on product improvement and aircraft upgrades/expansion to enhance and the grow the business enabling us all profit (Staff, shareholders, paying public), these guys are focussed only on protecting their jobs through the prevention of any leadership change.
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Old 19th Nov 2012, 00:41
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They should probably sell off Frequent Flyer regardless while it is still worth something, before it is all given away to Emirates.
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Old 19th Nov 2012, 00:44
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You know what they say...... buy the rumor,sell the fact.
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Old 19th Nov 2012, 01:04
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@ moa999

As for the airline and employees, well its all crystal ball but here goes.
QFF, Terminals, Owned planes flogged off quickly - quick reduction of the massive debt taken on and nice dividend to the privateeer guys. Maybe even separation of Jetstar.
That was going to happen had the APA bid succeeded back in late 06/early 07

Then the music would have stopped as GFC hit and Qantas started bleeding.
QANTAs would have bled instantaneously, as their, at the time, $4.5billion in cash holding would have been swapped for APA's debt, and the company would have folded. Not to mention that the board at the time were to share in almost $200million windfall if the sale went through, and maintained their positions on the board of the "New" QANTAS.

New owners would have lost control, the banks/other hedge funds taken control and no doubt ended up with a debt for equity swap (much like just happened in Nine).
The new owners would have had control of the whole of the cash holdings, paying off their debts, sold off parts off the business, and let it go under, and the Australian taxpayer would have had to pick up the pieces

Those leased plans - probably recalled by lessors (like Mexicana, Kingfisher), future orders cancelled, so QF would have shrunken massively and huge number of employees laid off -- far far worse than under Joyce.
No different under Joyce. QF is shrinking massively as we speak, orders of the A380 deferred/cancelled, no replacements for the 747's as they leave one by one on an almost monthly basis, and huge numbers of employees being laid off as we speak.

The buy back of shares has nothing to do with improving share price and returning dividends to shareholders. This gives the board the chance to hold on to the company shares and sell them off to Gregg, Singleton and Dixon at a very favourable price less than a quarter of the price achievable back in 2006/07.

If you look at the current share price to the number of shares, that almost equals the CASH holdings of QANTAS, plus assets such as planes, lounges, FF program, engineering facilities (what's left of them), etc., etc.

QANTAS is well and truly undervalued for what it has in cash and assets, and this will be given to the matey club of Dixon, Singleton and Gregg. This is why AJ was installed as CEO of QANTAS, and Dixon was installed by James Strong. The rot goes back a long way and is well an truly set in.
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Old 19th Nov 2012, 01:11
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@ Helmut Smokar

That said I'd certainly flog JQ before it's worth absolutely nothing.
Why flog off JQ? Repaint them into QANTAS colours, keep the staff and have a premium only product. There'll be no loss of passengers from QANTAS, they charge a premium price, and have a great deal of market share, dwarfing Virgin's. They could even keep the staff on JQ payments. They do it with Jetconnect from NZ. Pay local NZers local NZ pay, dress them up in QANTAS uniforms and fly in QANTAS coloured aeroplanes. Works a treat.

Why would you sell something you own, that has a great deal of market share? Let the others sell cheap tickets, because when there's not enough seats at the low prices, and you want to fly, you either don't go on your holiday, or you pay the premium and get a premium class flight.

Last edited by QF94; 19th Nov 2012 at 12:37.
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Old 19th Nov 2012, 01:23
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@ AEROMEDIC

What I'd give for some good news.....
May be not good news, but something to cheer you up a bit!!

The Spoof : Kangaroo Closes Heathrow For 2 Hours! funny satire story
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Old 19th Nov 2012, 03:15
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"Good job, Skippy."

(cut to rest of cast giggling and laughing)

(Roll credits)

.............nice.
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