Lew And Fox What Is Their Game? (Business Sunday)
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Lew And Fox What Is Their Game? (Business Sunday)
Was watching Business Sunday this morning up here on Channel 9, interesting comments on Lew and Fox. Sorry it took so long to post, had to find the Business Sunday web site and then work out how the hell to put it here.. . . .Is this fairly accurate? Or does this bloke have an axe to grind?
February 17, 2002 . . . . . .LEW & FOX WHAT IS THEIR GAME? . . . .17 February 2002 . . . .Terry McCrann . . . . . . . . . .Good morning,
At the start of what should be the third Week of the wonderful new Ansett of Solomon Lew and Lindsay Fox. Yet it was only on Friday that agreement in-principle was reached to get the all-important Sydney terminal. To stress not the actual purchase of its lease just an agreement in principal. And that came less than a week after a memorandum of understanding with Airbus. Again not a real deal to buy the planes just a piece of paper. So well after the actual date they were going to buy Ansett they’ve only just started to get around to getting two rather important assets the planes to fly the passengers and the main terminal to land them at.
And they still don’t have either or the airline itself. instead we still have two accountants named Mark, playing with planes and losing at least a million dollars a day. even if Lew and Fox weren’t talking to Virgin Blue you’d have to wonder just exactly what their game was.
The fact remains that it makes no sense to buy Ansett unless you intend to merge it with Virgin. But if you do It makes no sense to buy Ansett. especially an Ansett that is now carrying barely 4000 passengers a day at just one hundred bucks each even cheaper than the supposedly ultra-cheap Virgin. The difference is Virgin intends to carry them cheap and makes a profit. you’d do better to let it fall over completely you’d still get its terminals but without having to pick up the tab for the employee entitlements.
I wonder if our studio guest today the CBA’s David Murray thinks the new Ansett would be a good credit risk if it was going to go head-to- head with Virgin. Indeed what he thinks of credit risk much more broadly if interest rates do start to rise this year.
I'm Terry McCrann
February 17, 2002 . . . . . .LEW & FOX WHAT IS THEIR GAME? . . . .17 February 2002 . . . .Terry McCrann . . . . . . . . . .Good morning,
At the start of what should be the third Week of the wonderful new Ansett of Solomon Lew and Lindsay Fox. Yet it was only on Friday that agreement in-principle was reached to get the all-important Sydney terminal. To stress not the actual purchase of its lease just an agreement in principal. And that came less than a week after a memorandum of understanding with Airbus. Again not a real deal to buy the planes just a piece of paper. So well after the actual date they were going to buy Ansett they’ve only just started to get around to getting two rather important assets the planes to fly the passengers and the main terminal to land them at.
And they still don’t have either or the airline itself. instead we still have two accountants named Mark, playing with planes and losing at least a million dollars a day. even if Lew and Fox weren’t talking to Virgin Blue you’d have to wonder just exactly what their game was.
The fact remains that it makes no sense to buy Ansett unless you intend to merge it with Virgin. But if you do It makes no sense to buy Ansett. especially an Ansett that is now carrying barely 4000 passengers a day at just one hundred bucks each even cheaper than the supposedly ultra-cheap Virgin. The difference is Virgin intends to carry them cheap and makes a profit. you’d do better to let it fall over completely you’d still get its terminals but without having to pick up the tab for the employee entitlements.
I wonder if our studio guest today the CBA’s David Murray thinks the new Ansett would be a good credit risk if it was going to go head-to- head with Virgin. Indeed what he thinks of credit risk much more broadly if interest rates do start to rise this year.
I'm Terry McCrann
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I would think that the gentleman concerned is very bias for some reason. He has not let up on Ansett for some time now. Perhaps Business Sunday management should change his needle, as the record is pretty well worn out.
[ 17 February 2002: Message edited by: Dog One ]</p>
[ 17 February 2002: Message edited by: Dog One ]</p>
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Okay, thanks, thought that may be the case.
Although we did hear up here, about 10 days ago, that Ansett would be finished soon, probably today or tomorrow, there seemed to be all good news the last few days, then this bloke came out with this??
Although we did hear up here, about 10 days ago, that Ansett would be finished soon, probably today or tomorrow, there seemed to be all good news the last few days, then this bloke came out with this??
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The author's name says it all.
Is there any truth to the story that a certain Melbourne businessman successfully sued a certain journalist and that this and similar articles might be a weak attempt at revenge?
Watch out for some more court room intrigue.
Is there any truth to the story that a certain Melbourne businessman successfully sued a certain journalist and that this and similar articles might be a weak attempt at revenge?
Watch out for some more court room intrigue.
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OK so any of you guys care to answer the question that he poses.
Trust me, I and most of the businessmen and creditors around this country are hanging out for the answer.
It's going to have to be something really amazing, that eeerie silence you hear is the same eerie silence that you get before an earthquake or Tsunami hits.
Whether it brings gold or doom is moot, I know that I for one would, like the rest of us, be heading for high ground.
Trust me, I and most of the businessmen and creditors around this country are hanging out for the answer.
It's going to have to be something really amazing, that eeerie silence you hear is the same eerie silence that you get before an earthquake or Tsunami hits.
Whether it brings gold or doom is moot, I know that I for one would, like the rest of us, be heading for high ground.
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Gaunty,
I believe there is a different agenda running here. Are these questions being asked in the interests of Ansett, the administrators or the creditors, or are they directed more personally?
I'll leave it to others to make that judgement.
I believe there is a different agenda running here. Are these questions being asked in the interests of Ansett, the administrators or the creditors, or are they directed more personally?
I'll leave it to others to make that judgement.
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Sat "Australian Financial Review"
Dealers make a meal of joining forces. .Feb 16. .Jane Boyle
. .The courtship between Tesna and Virgin Blue began over a dinner in early December. At the table were Solomon Lew; Alastair Walton, the head of investment banking at Virgin Blue's adviser Goldman Sachs; and a mutual friend, Liberal powerbroker Michael Kroger.
Lindsay Fox and Solomon Lew's Tesna had been anointed the preferred buyer of Ansett, while Goldman Sachs was sounding out potential investors to take a stake in Virgin Blue to fund its expansion plans.
In the preceding eight months two Australian airlines - Impulse, then Ansett - had collapsed in a brutal four-way battle for market share against Virgin and Qantas.
With Ansett's relaunch threatening to spark a new air-fare war, the three men decided over dinner it would be smart to look at ways to join forces.
There was sporadic contact between the parties during December and January. Fox, a former director of Continental Airlines, approached Virgin Blue deputy chief executive Rob Sherrard - who was known to him through Melbourne aviation circles - for a coffee and there were a few telephone conversations between the parties.
The discussions between the airlines became public when Fox, Lew and United States partner David Bonderman had a meeting with Richard Branson at his London home last weekend.
Fox and Lew warned Branson that a relaunched Ansett would severely damage Virgin Blue and asked what it would take for him to sell or go away.
Branson argued that Virgin had successfully competed against Impulse, a larger Ansett and Qantas, so why should he fear Tesna's slimmed-down Ansett?
But he was sufficiently interested to continue talks.
Over the past week, talks between Virgin Blue chief executive Brett Godfrey, Sherrard and a team from Tesna have continued in Sydney, with Fox and Lew dialling in between meetings with Ansett's administrators and nervous unions.
Key to the talks is what a return to a two-airline market is worth to the respective valuations of the airlines, and who has most to lose in a three-way battle that most airline analysts believe would result in one of the two airlines collapsing or a merger anyway.
Fox and Lew claim Tesna's advantages are a $400million war-chest, control of Ansett's terminal facilities - in particular the $250 million-plus Sydney terminal - and a 25 per cent lower cost base than that of Qantas.
They believe their bargaining strength is the pressure for cash Branson faces from his other global businesses, and his presumed unwillingness to pour additional funds into Virgin Blue.
But Virgin claims it has the financial wherewithal to withstand another discounting war.
It is now a net creditor to Branson's Virgin Group. In October it paid a dividend of more than $15million back to the Virgin group to fund a new telecommunications venture in the US. The dividend compared with the $11million in start-up costs it had written off earlier in the year.
Branson's cash pressures from Virgin Atlantic - which was highly exposed to the drop-off in the US market after the September 11 attacks - are said to have abated. Five months after Branson "ripped up" a $250 million cheque from Ansett's parent, Air New Zealand, for Virgin Blue, the discount carrier claims to have about $85million in cash and draw-down facilities.
Since Ansett's collapse its financial position has strengthened and it is targeting a profit of $32million to $35million for the year to March.
Tesna is paying Ansett's administrators $270million for the airline's assets and has committed to provide $400million.
Where Tesna's money is coming from remains unclear. Fox and Lew claim they will retain a controlling stake and invest what it takes, with their US backers Bonderman and Bill Franke investing a sum commensurate with a 35 to 49 per cent share of Tesna.
Fox and Lew have repeatedly vowed they will complete the Ansett purchase regardless of the outcome of talks with Virgin, but some of Ansett's suppliers have begun to question the commitment of Bonderman and Franke.
Each of Australia's four major banks claims not to be involved in Tesna's funding. The Victorian Government is said to have agreed to a hefty support package but has denied reports of a $90million incentive deal.
The two parties are exploring options ranging from a full merger to sharing of costs or aligning their networks, but there are some major sticking points.
Fox and Lew want control. For them, the jewel in the Ansett deal is its terminals. They are also attached to the idea of taking on Qantas in the full service market, creating opportunities to add value to the terminal facilities such as converting them to international Star Alliance terminals.
Virgin Blue also wants control. Godfrey believes his low-cost, single-class product is a winning formula.
It is believed Virgin's preference would be to take over Ansett's terminals and take on some of its staff, and ramp up Virgin's operations.
Tesna has budgeted to lose $120million in the first year of operation, near break-even in the second year and turn a $50million profit in the third year. If it goes it alone it faces a major battle. To justify its full service cost base it must prise back the premium corporate market from Qantas, a task that proved impossible for the old Ansett.
Most corporations are not bound by long-term contracts to Qantas and Tesna believes it can woo them with its yet-to-be-revealed frequent flyer program and top service and on-time reliability.
But Qantas, which has announced a $50million upgrade of its lounge facilities, pitched at the premium market, will match any frequent flyer initiative, and its much larger fleet gives it a major advantage in providing the network breadth and frequency crucial to business travellers.
How Ansett, with initially just 16 jets to operate between 11 ports, will match that is unclear.
Tesna's other claimed advantage is costs. It commissioned Airbus, supplier of the 29 new jets it is acquiring, to prepare a report comparing the old Ansett's cost base with world's best practice.
It has reviewed the old Ansett's deficiencies - such as a productivity rate in line maintenance of 4.5 to 5 person hours per flight hour compared with world's best practice of 1.5 person hours and addressed them in the enterprise bargaining agreements it has struck with key unions, as well as in outsourcing and supply deals.
Tesna got close to the three-year wage freeze it wanted, in return for offering staff 5 per cent of the airline. The only guaranteed distribution, of $4million to staff in the second year after a performance review, amounts to an average $1,333 for the 3,000 staff it says it will employ. A further review in the third year is also subject to performance.
Discussions between Tesna and Virgin will continue over the weekend.
Even if they do agree to join forces, any merger would require the approval of the Australian Competition and Consumer Commission.
The watchdog might not like such a deal, but if Ansett and Virgin slug it out in the market there's a strong chance that one will fall over, putting thousands more staff out of work and leaving Qantas once again with most of the market.
. .--------------------------------------------------------------------------------
Dealers make a meal of joining forces. .Feb 16. .Jane Boyle
. .The courtship between Tesna and Virgin Blue began over a dinner in early December. At the table were Solomon Lew; Alastair Walton, the head of investment banking at Virgin Blue's adviser Goldman Sachs; and a mutual friend, Liberal powerbroker Michael Kroger.
Lindsay Fox and Solomon Lew's Tesna had been anointed the preferred buyer of Ansett, while Goldman Sachs was sounding out potential investors to take a stake in Virgin Blue to fund its expansion plans.
In the preceding eight months two Australian airlines - Impulse, then Ansett - had collapsed in a brutal four-way battle for market share against Virgin and Qantas.
With Ansett's relaunch threatening to spark a new air-fare war, the three men decided over dinner it would be smart to look at ways to join forces.
There was sporadic contact between the parties during December and January. Fox, a former director of Continental Airlines, approached Virgin Blue deputy chief executive Rob Sherrard - who was known to him through Melbourne aviation circles - for a coffee and there were a few telephone conversations between the parties.
The discussions between the airlines became public when Fox, Lew and United States partner David Bonderman had a meeting with Richard Branson at his London home last weekend.
Fox and Lew warned Branson that a relaunched Ansett would severely damage Virgin Blue and asked what it would take for him to sell or go away.
Branson argued that Virgin had successfully competed against Impulse, a larger Ansett and Qantas, so why should he fear Tesna's slimmed-down Ansett?
But he was sufficiently interested to continue talks.
Over the past week, talks between Virgin Blue chief executive Brett Godfrey, Sherrard and a team from Tesna have continued in Sydney, with Fox and Lew dialling in between meetings with Ansett's administrators and nervous unions.
Key to the talks is what a return to a two-airline market is worth to the respective valuations of the airlines, and who has most to lose in a three-way battle that most airline analysts believe would result in one of the two airlines collapsing or a merger anyway.
Fox and Lew claim Tesna's advantages are a $400million war-chest, control of Ansett's terminal facilities - in particular the $250 million-plus Sydney terminal - and a 25 per cent lower cost base than that of Qantas.
They believe their bargaining strength is the pressure for cash Branson faces from his other global businesses, and his presumed unwillingness to pour additional funds into Virgin Blue.
But Virgin claims it has the financial wherewithal to withstand another discounting war.
It is now a net creditor to Branson's Virgin Group. In October it paid a dividend of more than $15million back to the Virgin group to fund a new telecommunications venture in the US. The dividend compared with the $11million in start-up costs it had written off earlier in the year.
Branson's cash pressures from Virgin Atlantic - which was highly exposed to the drop-off in the US market after the September 11 attacks - are said to have abated. Five months after Branson "ripped up" a $250 million cheque from Ansett's parent, Air New Zealand, for Virgin Blue, the discount carrier claims to have about $85million in cash and draw-down facilities.
Since Ansett's collapse its financial position has strengthened and it is targeting a profit of $32million to $35million for the year to March.
Tesna is paying Ansett's administrators $270million for the airline's assets and has committed to provide $400million.
Where Tesna's money is coming from remains unclear. Fox and Lew claim they will retain a controlling stake and invest what it takes, with their US backers Bonderman and Bill Franke investing a sum commensurate with a 35 to 49 per cent share of Tesna.
Fox and Lew have repeatedly vowed they will complete the Ansett purchase regardless of the outcome of talks with Virgin, but some of Ansett's suppliers have begun to question the commitment of Bonderman and Franke.
Each of Australia's four major banks claims not to be involved in Tesna's funding. The Victorian Government is said to have agreed to a hefty support package but has denied reports of a $90million incentive deal.
The two parties are exploring options ranging from a full merger to sharing of costs or aligning their networks, but there are some major sticking points.
Fox and Lew want control. For them, the jewel in the Ansett deal is its terminals. They are also attached to the idea of taking on Qantas in the full service market, creating opportunities to add value to the terminal facilities such as converting them to international Star Alliance terminals.
Virgin Blue also wants control. Godfrey believes his low-cost, single-class product is a winning formula.
It is believed Virgin's preference would be to take over Ansett's terminals and take on some of its staff, and ramp up Virgin's operations.
Tesna has budgeted to lose $120million in the first year of operation, near break-even in the second year and turn a $50million profit in the third year. If it goes it alone it faces a major battle. To justify its full service cost base it must prise back the premium corporate market from Qantas, a task that proved impossible for the old Ansett.
Most corporations are not bound by long-term contracts to Qantas and Tesna believes it can woo them with its yet-to-be-revealed frequent flyer program and top service and on-time reliability.
But Qantas, which has announced a $50million upgrade of its lounge facilities, pitched at the premium market, will match any frequent flyer initiative, and its much larger fleet gives it a major advantage in providing the network breadth and frequency crucial to business travellers.
How Ansett, with initially just 16 jets to operate between 11 ports, will match that is unclear.
Tesna's other claimed advantage is costs. It commissioned Airbus, supplier of the 29 new jets it is acquiring, to prepare a report comparing the old Ansett's cost base with world's best practice.
It has reviewed the old Ansett's deficiencies - such as a productivity rate in line maintenance of 4.5 to 5 person hours per flight hour compared with world's best practice of 1.5 person hours and addressed them in the enterprise bargaining agreements it has struck with key unions, as well as in outsourcing and supply deals.
Tesna got close to the three-year wage freeze it wanted, in return for offering staff 5 per cent of the airline. The only guaranteed distribution, of $4million to staff in the second year after a performance review, amounts to an average $1,333 for the 3,000 staff it says it will employ. A further review in the third year is also subject to performance.
Discussions between Tesna and Virgin will continue over the weekend.
Even if they do agree to join forces, any merger would require the approval of the Australian Competition and Consumer Commission.
The watchdog might not like such a deal, but if Ansett and Virgin slug it out in the market there's a strong chance that one will fall over, putting thousands more staff out of work and leaving Qantas once again with most of the market.
. .--------------------------------------------------------------------------------
Nunc est bibendum
Lets say that McCann is running a vendetta against FLEW.
Does that make the questions he asks any less relevant?
FLEW were supposed to have this airline on 1 Feb. Here we are nearly three weeks later and a terminal lease still isn't signed for Sydney (let alone the rest of the network), a lease for aircraft still isn't signed, all murmurings out of FLEW indicate that numbers employed may not meet the 4000 target. These guys wanted this airline THREE WEEKS AGO!!!
Now we are 'talking' with Virgin. If these blokes really ARE fair dinkum you would have to be concerned at the way they have gone about this thing!
Does that make the questions he asks any less relevant?
FLEW were supposed to have this airline on 1 Feb. Here we are nearly three weeks later and a terminal lease still isn't signed for Sydney (let alone the rest of the network), a lease for aircraft still isn't signed, all murmurings out of FLEW indicate that numbers employed may not meet the 4000 target. These guys wanted this airline THREE WEEKS AGO!!!
Now we are 'talking' with Virgin. If these blokes really ARE fair dinkum you would have to be concerned at the way they have gone about this thing!
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I agree keg.
Terry M's little spurt on Bus Sunday this morning may sound quite harsh, but really where is he incorrect???????????????
3 weeks after they were going to take control, they have an understanding for the Sydney Terminal (with heavy restrictions) and with Airbus, but they must not have any firm business plan. Their plan seems to change or made up on a daily basis.
I personally find it difficult to see where they're going!!!!!!!!!
Terry M's little spurt on Bus Sunday this morning may sound quite harsh, but really where is he incorrect???????????????
3 weeks after they were going to take control, they have an understanding for the Sydney Terminal (with heavy restrictions) and with Airbus, but they must not have any firm business plan. Their plan seems to change or made up on a daily basis.
I personally find it difficult to see where they're going!!!!!!!!!
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I've said it before and I'll say it again. All these blokes want is the terminal leases. Once they're secured and squirrelled away into a separate company, AN will go the way it probably should have done in September, when the long-suffering staff should have got their payouts without the bleeding off of 6 mill a week we've seen since.
edited by spelling police
[ 17 February 2002: Message edited by: Wiley ]</p>
edited by spelling police
[ 17 February 2002: Message edited by: Wiley ]</p>
Keg & cruz350 - I agree with you both and there are some questions that need answering here! Why hasn't the sale of AN to Tesna gone through?? Why haven't the terminal/aircraft contracts been sorted out? Is it an indication that the sale was . .misconceived in the time frame of 3 months, and that Tesna have very limited knowledge of airline operations??
Further on reading the weekend papers, it reads as if the administrators are doing all the negotiations on behalf of Tesna, which doesn't gel. If FLEW want AN to operate, why aren't they making all the announcements about signed contracts and negotiations. Or do the two M & M's have their backs against the wall, and are desperate to push the deal through??
Whatever happens, its beginning to look untidy!. . <img src="confused.gif" border="0">
Further on reading the weekend papers, it reads as if the administrators are doing all the negotiations on behalf of Tesna, which doesn't gel. If FLEW want AN to operate, why aren't they making all the announcements about signed contracts and negotiations. Or do the two M & M's have their backs against the wall, and are desperate to push the deal through??
Whatever happens, its beginning to look untidy!. . <img src="confused.gif" border="0">
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What have Fox & Lew done to show they are really interested in buying Ansett? [apart from no money up front]
They have a MOU with Airbus for 30 aircraft - so what? [no money up front]
They have an agreement "in principle" for terminal space in Sydney - so what? [no money up front]
They were given the all clear to purchase the airline on the 1st February - nothing has happened. [no money up front]
Do Fox & Lew really want Ansett or did they back the wrong horse in the federal election? You see, nothing so far has indicated to me, that they want to spend one single $ of their own money to get Ansett back in the air.
I think the reality has also hit home that they will not receive any credit when operations start. It will be a cash only basis and who can blame new ceditors? Refuelling,catering,cleaning services will ALL require cash up front. BIG ask for a fledgling airline in it's early days. Mind you, they did it to Compass,[much money up front] so welcome aboard FLEW !
Finally, after bearing his ass in a symbolic gesture as to what Ansett was going to do to Virgin - Fox now has to eat humble pie, as he grovels to Sir Richard to help them get started!. .It ain't gonna happen.
Everything ,thus far, has been done with mirrors and a bit of very poor car salesmen rhetoric from the two Marks and the help from a couple of union stooges! I can't see them getting up IMHO! [without some money up front!]
[ 17 February 2002: Message edited by: Whiskery ]</p>
They have a MOU with Airbus for 30 aircraft - so what? [no money up front]
They have an agreement "in principle" for terminal space in Sydney - so what? [no money up front]
They were given the all clear to purchase the airline on the 1st February - nothing has happened. [no money up front]
Do Fox & Lew really want Ansett or did they back the wrong horse in the federal election? You see, nothing so far has indicated to me, that they want to spend one single $ of their own money to get Ansett back in the air.
I think the reality has also hit home that they will not receive any credit when operations start. It will be a cash only basis and who can blame new ceditors? Refuelling,catering,cleaning services will ALL require cash up front. BIG ask for a fledgling airline in it's early days. Mind you, they did it to Compass,[much money up front] so welcome aboard FLEW !
Finally, after bearing his ass in a symbolic gesture as to what Ansett was going to do to Virgin - Fox now has to eat humble pie, as he grovels to Sir Richard to help them get started!. .It ain't gonna happen.
Everything ,thus far, has been done with mirrors and a bit of very poor car salesmen rhetoric from the two Marks and the help from a couple of union stooges! I can't see them getting up IMHO! [without some money up front!]
[ 17 February 2002: Message edited by: Whiskery ]</p>
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I believe a condition of the Sydney airport terminal lease agreement, is that Tesna actually operates an airline in its own right. This would prevent them from merely becoming landlords.
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The info I have received is that Virgin is moving into Ansett terminals nationwide with an anouncement due very soon. Virgin will be sharing with Ansett by way of renting space.
It is my belief that Sydney Airport wanted this and this was the pre condition for Tesna getting the lease. . .Virgin wanted their Sydney terminal expanded by SACL but SACL were holding out. Why spend money on Virgin's terminal when there is plenty of room down the road.. .Tesna was forced into this by SACL, thats why Fox and Lew rolled up in London to see RB. They did not and still do not want Virgin in the AN terminals but have no choice.. .Not sure about any commercial arrangement between the parties. Fox and Lew would be better off offering RB $400 mil for VB and then walk into unused terminals with a profitable airline.. .Does any one else agree this makes better business sense.
It is my belief that Sydney Airport wanted this and this was the pre condition for Tesna getting the lease. . .Virgin wanted their Sydney terminal expanded by SACL but SACL were holding out. Why spend money on Virgin's terminal when there is plenty of room down the road.. .Tesna was forced into this by SACL, thats why Fox and Lew rolled up in London to see RB. They did not and still do not want Virgin in the AN terminals but have no choice.. .Not sure about any commercial arrangement between the parties. Fox and Lew would be better off offering RB $400 mil for VB and then walk into unused terminals with a profitable airline.. .Does any one else agree this makes better business sense.
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Statorblade
I don't believe I'm hearing what you say, the strength of a question depends in who is asking it??
. .OK I'll ask the question? blah blah, whatever he said, does that make you feel any better.
In say again does anybody have any answers that discredit the validity of McCranns question, so far I haven't heard or seen any.
As Jerry McGuires client said "SHOW ME THE MONEY"
I don't believe I'm hearing what you say, the strength of a question depends in who is asking it??
. .OK I'll ask the question? blah blah, whatever he said, does that make you feel any better.
In say again does anybody have any answers that discredit the validity of McCranns question, so far I haven't heard or seen any.
As Jerry McGuires client said "SHOW ME THE MONEY"