Qantas Again a Target
 

Crikey! Those late night rumours may have substance after all. :ooh:

According to your Aussie National, Mr Walsh said: "In our discussions with colleagues in Iberia we have looked at airlines around the world to identify those that would be attractive to IAG" and has reignited merger speculation with Qantas after the UK carrier's CEO revealed he had a list of 12 potential targets.

Full report available from: http://www.theaustralian.com.au/business/aviation/british-airways-ceo-willie-walsh-sparks-qantas-merger-speculation/story-e6frg95x-1225914792701

The King may be dead, but long live the Empire.

The Qantas Sale Act might make that a bit hard and not only from the ownership angle.

"Aussie National"? Oh, you mean The Australian.

the QF board
 

waits patiently until a conservative government is in place. Then you see a move on the sales act.:E

Will BA Return to Qantas?

For what it's worth, Stephen Bartholomeusz says

"BA and Iberia are merging in a rather complicated deal that will see the creation of a new holding company, International Airlines Group, whose name and structure provide some indication of its ambitions.

The obstacle to mergers of international carriers, apart from the anti-trust hurdles, is that access to international routes is negotiated by governments, not airlines. For the national flag carriers in particular the imperative is to protect their status and the bi-lateral access arrangements.

When BA and Qantas last discussed a merger (to be executed via a dual listed entity structure) in 2008, that issue of the bi-laterals and the then web of restrictions on foreign shareholding in Qantas would have been a major topic. As it happened the deal fell over valuation issues.

BA had been talking to Iberia then – at one point a tri-partite merger was canvassed – and continued to negotiate after the Qantas talks ended. The two European carriers have received their regulatory clearances and are now in the process of executing a merger that will see BA shareholders owning 56 per cent and Iberia shareholders 44 per cent of IAG.

To get around the issues of nationality, both BA and Iberia will continue to operate as separately-branded and managed companies. While IAG will effectively have 100 per cent of the economic exposure to the underlying businesses, the airlines are using a separate class of shares held by trustees to maintain technical local majority (50.1 per cent) ownership.

If that structure holds up under scrutiny and in practice, it would appear to be able to accommodate any number of other airlines without jeopardising the bi-laterals.

Last year the Rudd Government removed the sub-caps that prevented individual foreigners owning more than 25 per cent and foreign airlines owning more than 35 per cent of Qantas, but retained the overall foreign ownership ceiling of 49 per cent. It is possible that requirement could be accommodated within the structure BA and Iberia are using for their merger.

Qantas may not be the initial priority for IAG given that Qantas and BA already have an alliance on the ‘’Kangaroo’’ route that enables them to co-ordinate scheduling, marketing, sales, freight and pricing and therefore extract synergies.

Another BA/Iberia ally, American Airlines, might be a higher priority given the strengthening of IAG’s position in the Americas that would produce. BA is strong on the trans-Atlantic route while Iberia has a strong network in Latin America as well as its southern European base.

If Qantas and American were brought more tightly into the fold, IAG would have a very strong foundation in Europe, the Americas, the Middle East and the Asia Pacific. It would also, through Jetstar, have access to an international low-cost-carrier brand and an expanding presence throughout Asia. While there would be some weak spots in the network, it would look like a truly global airline.

Qantas’ Alan Joyce, with his predecessor Geoff Dixon, ended the talks with BA. Joyce has said a merger with another carrier is not a priority and that he doesn’t expect a major transaction involving Qantas to occur for at least a decade.

While the expansion of Jetstar offers the prospect of a meaningful Asian hub, the strategic concern for Qantas has always been that as an ‘’end-of-the-line’’ carrier it might ultimately be left stranded and sub-scale if there were large-scale consolidation of the hub carriers. In Europe some of that consolidation has occurred, with Air France-KLM and Deutsche Lufthansa’s expansions prompting the BA/Iberia response.

Qantas, American, Cathay Pacific and the troubled Japan Airlines are, with BA and Iberia, the bigger members of the oneworld alliance which India’s Kingfisher has just joined. Members of that alliance would be the easier and more obvious targets among IAG’s hit list."

:ok:

Steve Creedy on The Australian finds out that wee Willie is pissing in the wind.

Flying Roo says BA merger proposal has got Buckley's | The Australian

Word on the street is Investors are without a doubt, worried about Qantas being left stranded and sub-scale if there were a large-scale consolidation it is not part of.

However speculators wanting to buy airline shares will have to wait to see whether or not BA is hungry enough to want to buy QF should your Government allow foreign airlines to buy 49%.

Us Brits used to use white paper use to wrap our fish and chips, but in the case of Australian aviation, the ‘White Paper’ might be used to wrap up a deal.

Gentlemen, I'd like to tell you about the "Poison Pill" defence against corporate takeover, just in case you never heard of it before.....

The poison pill defence is used when management really likes the idea of staying in control of the target company, no matter what the shareholders want. To put it another way; "Damn maximising shareholder value, I want to keep my management job / Board seat!".

The "poison pill" is designed to kill the company (or make it valueless) should the current management not be running the show.

The first one I saw (which I don't think was ever made public) involved a businessman by the name of George Herscu. He made a takeover bid for an appliance company by the name of Email Limited. Now Email built refrigerators and other appliances under the American Brand name "Frigidaire" and one or Two others, and was the market leader in Australia in Fridges, dishwashers, washing machines and dryers. The company was a watchword in penny pinching, lack of investment, bullying employees, outdated technology etc. etc. that was why it was a takeover target. George wanted to get in there, clean house of inefficient management, etc. etc.

However unfortunately for George he hadn't quite been thorough enough in his research before he made his on market bid.

So Georgie boy makes his bid, and a week later, through various channels I won't go into, Georgie was apprised of a very serious problem: Email Limited had no licence agreement with the owners of the Frigidaire Brand, or with any others of the owners of the brands it used.... Just a "Gentlemans agreement" between them and Email Limited management.

Since the Value in the company was the brands, this was very bad news. If Georgie wanted to remove them, they would go elewhere, taking their "Gentlemans agreement" with them. All Email owned were a few extremely outdated and primitive factories. Georgie was very lucky that he had pitched his offer a teensy bit low and the bid thankfully expired in due course. If Georges bid had succeeded he would have been left with a rotting carcass.

Now we come to Qantas. What is it worth? Well, it has the brand recognition. BA would get that. It also has Forty years of experience lobbying the Federal Government. Is BA going to get that? Not unless QF management thinks they should have it in my opinion. Can you say "Open Skies Agreement?"

..And without QF's lobbying capability, what's it worth? Peanuts.

I have a lot of trouble taking much written in The Australian too seriously. It has become pretty standard News Ltd fare.

Crosswords and sudokos are good though.

The above Journalists seem to have missed the fact that BA and QF both need to attract lots of fresh capital to concurrently reequip and come out of the aftermath of the GFC profitable enough to fend off the continued growth of LCC's.

To get the necessary investment, suspect they are going to have to come up with business plans attractive to investors typically sceptical of airlines.

Fortunately there are business models out there that don’t pit capital against labour and/or Australia against other countries, which would provide as yet untapped synergies, but thus far there is no public evidence that these kinds of globalisation strategies are getting the traction they deserve.

There is a lot more at risk than reducing career opportunity for pilots, which is but a worrying symptom of the airlines collective inability to attract capital at competitive rates.

Nevertheless, no reason not to continue to live in hope. As someone said on Q&A last night, in the new Federal Parliament, national decisions, like changes to the Qantas Sale Act, will no longer be made in back rooms between Ministers & Lobbyists.

Bugger the Empire Snoopy, long live the Independents and their potential to stop the off shoring of Australia’s aviation industry.

Apologies if mentioning the Empire offended. A poor attempt to indicate that BA risks the same fate as the British Navy if it can’t quickly globalise.

Ineptitude aside, Chaps in the City are conscious that takeover opportunity is often created by companies that penny pinch, bully employees and continue to use of outdated technology. Know they would like to have Willie deal them in.

Reuters is saying

Quote:

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"it will be surprised if something does not happen within the first year of the IAG merger.”

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Poison pills may save poor management, but don’t go down well with shareholders seeking value Sunfish.