QANTAS being taken over by Macquarie Bank..

[Yada Yada]

Oww! Touche

No, not touché! OzJet did not go broke. They withdrew from their regular scheduled SYD-MEL services (much to my regret) but they still fly in and around Australia.

From May this year they began flying out of SYD and BNE to NLK on behalf of QF (Norfolk Air and Qantas codeshare arragement).

From Feb 2007 they will begin regular services within WA between PER and DRB.

 

[Wunala Dreaming]

No, not touché! OzJet did not go broke. They withdrew from their regular scheduled SYD-MEL services (much to my regret) but they still fly in and around Australia.

From May this year they began flying out of SYD and BNE to NLK on behalf of QF (Norfolk Air and Qantas codeshare arragement).

From Feb 2007 they will begin regular services within WA between PER and DRB.

Correct Yada Yada, and don't forget also, that OzJet lease a 737-200 to Airlines of PNG to operate their 5x weekly Port Moresby-Brisbane-Port Moresby service. They also operate charter flights to Honaria on behalf of the Commonwealth Government and also helped with services to Nauru and beyond when Air Nauru (Our Airline) was without an aircraft.

I believe also that OzJet regularly get contracts for touring stars/bands and shows.

Cheers

 

[macca172]

I for one totally endorse and support JohnK's views and value the comments and observations he has made to date. Keep them coming please. Now Costello has shown his hand and advised that if Qantas goes pear shaped, the Australian Government will not be handing out the dosh to bail them out. Not like our cousins across the ditch, if wasnt for the NZ government, AirNZ would have been history by now(I've always said the AirNZ was never held accountable for their part in the Ansett demise, however we all know that politics was involved in that decision.....thats another topic for another day).

I noted on the news this afternoon that there is a call for Qantas pilots to buy shares in the company, in an endeavour to scuttle this takeover. The spokesman for the pilots said on a TV interview said it was in the interest for the airlines continued safety! My response...BS...its inthe pilots interest to protect their current cushy wages and rostering system that they have protected at all costs to date. As I stated in an earlier post, if the takeover was to go ahead, they (the pilots) would end up on on IR contracts which would without debate, end up in considerable losses to their current perks.

 

[Tooner]

Correct Yada Yada, and don't forget also, that OzJet lease a 737-200 to Airlines of PNG to operate their 5x weekly Port Moresby-Brisbane-Port Moresby service. They also operate charter flights to Honaria on behalf of the Commonwealth Government and also helped with services to Nauru and beyond when Air Nauru (Our Airline) was without an aircraft.

I believe also that OzJet regularly get contracts for touring stars/bands and shows.

Cheers

Oops I should have know better - I only saw one of the fleet on the tarmac at SYD the other day.

So AN it is then....

 

[JohnK]

I saw a SkyNews poll on the tube a day or two ago and it about 75% against. Now I know that such polls are unlikely to be representative, but if I was a betting man I'd say most Australians would not like to see Qantas sold off to a private equity outfit and therefore would be against this move.

The poll I saw last night was around 85%. I have been reading lots of user comments in online newspaper articles and it is very hard to find anyone to support this takeover.

To me this would suggest an overwhelming majority of Australians are totally against the takeover.

 

[Dave Noble]

The poll I saw last night was around 85%. I have been reading lots of user comments in online newspaper articles and it is very hard to find anyone to support this takeover.

To me this would suggest an overwhelming majority of Australians are totally against the takeover.

It only suggests that those who are against it are the most vocal

Dave

 

[JohnK]

I still fail to see why their views are relevant. They arent shareholders (I agree some probably are but not the majority) and they dont have full facts about the acquisition. I wonder how many of these ordinary australians are members of superanuation funds that are going to benefit from this transaction unknowingly.

Have you seen the business plan that was put forward? What facts do you have about the acquisition? My guess is as much as I do. None!

I have superannuation funds and could not care less about any short term gains involving this deal. So does my brother, my best friend and his brother, most of the people I know through golf and darts, other friends and acquaintances.

Everyone of them against it. Not a single person with anything nice to say about this takeover. I wonder why! Are they ill informed? Or do they have some idea of what is going to happen with a private equity takeover.

Anybody that thinks private equity is planning on developing QF and leaving a success story for the float in 5-10 years is kidding themselves. All they care about is lining their pockets. The quicker people see this the quicker we can do something about it before it is too late.

 

[ozmerish]

I noted on the news this afternoon that there is a call for Qantas pilots to buy shares in the company...

Does QF have an ESOP (Employee Stock Ownership Program)? I would have thought there would have been a decent level of employees already owning stock?

 

[pacblue]

Anybody that thinks private equity is planning on developing QF and leaving a success story for the float in 5-10 years is kidding themselves. All they care about is lining their pockets. The quicker people see this the quicker we can do something about it before it is too late.

Couldn't agree more, but you will not convince some on this site.

They will simply sit back and keep quoting verbatim from the economic rationalists bible.

They will only taste reality when they see first hand what private equity outfits actually do with their acquisitions.

 

[JohnK]

Couldn't agree more, but you will not convince some on this site.

They will simply sit back and keep quoting verbatim from the economic rationalists bible.

Couldn't care less what they think or whether we could convince them or not. The situation is very clear. Put a stop to it right now or at least another 50 companies will be ripe pickings for private equity takeovers.

They will only taste reality when they see first hand what private equity outfits actually do with their acquisitions.

This deal is almost laughable. A company is valued at $8 billion by the stock market, private equity bids $11 billion and hopes to return 20% profit in 5-10 years with no changes to the structure of the company and business as usual. There will only be a shell remaining once they have gutted QF and recouped their investment.

AEP has attempted 15 private equity takeovers on much smaller companies and failed in every attempt. They hold the highest voting rights in this new deal. What makes people think that they will/can succeed?

It is quite clear that APA has gone to great lengths to ensure that they avoid the scrutiny of ACCC, FIRB and the Federal Government. If this deal was above board they should have nothing to hide.

MBL stands to make a fortune from this deal and conveniently has reduced its stake to 14.9%. There is still a clear conflict of interest. Anyone trust MBL to make fair decisions?

I hope I am wrong but looking at the track record of private equity takeovers there is little chance of that happening. We can only hope that the damage is not too severe. There will be boycotts of the airline and there will be increased competition from DJ, EK and SQ on key international routes. And if events similar to Sep 11, SARS outbreak or increase in crude oil occur in the near future then expect private equity to bail out quickly leaving the carcass behind.

 

[Kiwi Flyer]

Earlier you said the bid was 10% too low. Now you are saying it is too high for new owners to make money out of. Can't have it both ways.

 

[Kiwi Flyer]

Not like our cousins across the ditch, if wasnt for the NZ government, AirNZ would have been history by now(I've always said the AirNZ was never held accountable for their part in the Ansett demise, however we all know that politics was involved in that decision.....thats another topic for another day)..

Air NZ management made some stupid decisions - helped along by Aussie government (remember the open skies promise?).

 

[Altair]

NZ did make some very stupid mistakes regarding AN. They should never have bought into the company in the first place as News and TNT had run that company down, I personally suffered from the AN collapse and it took a while to recover from it. I do support the NZ Government buying into NZ as New Zealand would not have coped with its collapse at the time. I do not support NZ's domestic policies and how they have stomped all over their competitors....
Now if QF collapsed I would benefit from it, due to ownership of TOL shares, but would it be good for Australia? No, there would a large gap in bringing visitors into the country, especially from the US, and the domestic market will have a huge hole. With AN QF was barely able to cope, with the help of leasing of AN planes, and DJ had to lease some AN 737 as well and after Septemeber 11 there were quite a few aircraft available as well. In the current market there is a large waiting time for aircraft and many airlines do not have the capacity to fill in QF's gap, of course EK and SQ would quickly try to fill that gap.....

 

[simongr]

Ok - so because they have structured the deal so that they dont breach various requirements under ACCC etc. they have done something wrong? So it would be better to have breached requirements - not sure I understand your logic.

And this deal might lead to increased competition:

There will be boycotts of the airline and there will be increased competition from DJ, EK and SQ on key international routes.

I thought people wanted more competition? Dont people frequently complain here about the lack of competition that has driven up prices, reduced standards etc.? This deal might get people what they want.

Interesting repeated comments about economic rationalism. It wasnt a phrase I was too familiar with - given that I wasnt in Oz in 1991 when Michael Pussey's book came out. The key phrase there is that "economic rationalists believe that the market will always provide better than the government". I certainly do believe that the market is a better option for running an airline than the government. The definition and concept that you are using to attack this transaction is an extremist view though.

I also dont understand the comment that "if this private equity purchase goes ahead it wil open the dor to 50 other transactions". What is the link? Is the assumption that if an overseas private equity firm manages to buy QF then other will decide that buying Oz businesses might be a good idea?

I am not blindly saying that this will be the best thing to happen to QF. I am just equally not decrying it without information. I dont know though why this is automatically bad for pax. The assumption is that more services will be outsourced and more overseas staff will be used. I think that is a safe assumption to make. I dont think we can assume that the FF program will be devalued or that services will be cut or that the on board services will change for the worse. We have no evidence to the latter and the business may in fact suffer if those happen so we have to assume a status quo potentially.

Has anyone done analysis of airlines to compare ownership, level of out sourcing, overseas staffing with customer enjoymen, level of serivces and in flight services. if someone could demonstrate that say Airline XX outsource everything and the FF program is shocking their staff are cheap labour and the planes are falling apart and that airline XX flies competitively on a similar profile to QF then we at least have a comparison to start with.

At the moment all we have is - private equity firms are bad.

 

[Dave Noble]

I am not blindly saying that this will be the best thing to happen to QF. I am just equally not decrying it without information. I dont know though why this is automatically bad for pax. The assumption is that more services will be outsourced and more overseas staff will be used. I think that is a safe assumption to make. I dont think we can assume that the FF program will be devalued or that services will be cut or that the on board services will change for the worse. We have no evidence to the latter and the business may in fact suffer if those happen so we have to assume a status quo potentially.

Has anyone done analysis of airlines to compare ownership, level of out sourcing, overseas staffing with customer enjoymen, level of serivces and in flight services. if someone could demonstrate that say Airline XX outsource everything and the FF program is shocking their staff are cheap labour and the planes are falling apart and that airline XX flies competitively on a similar profile to QF then we at least have a comparison to start with.

At the moment all we have is - private equity firms are bad.

Completely agree with you. I am ambivalent about it until more information about it is provided

Dave

 

[bravoecho1]

As for the "experts" in the market who believe that QF should be sold at $6.00 to $7.00, a certain thing called economic reality must come into play.

At an offer price of $5.60, they are pricing QF on a PE of 15.8 times 07E earnings. When you compare that to our Asian competitors (Singapore 12.3x 07E and Cathay 17.5x 07E) you will see that it is a fair and reasonsable price. You can't expect to achieve a top price just because another airline is trading at a higher PE. In CX's example, they run a very extensive cargo operation which is more profitable than their passenger services. QF doesn't have this capacity.

As for delivering 20% ROE over the next 3-5 years, it is very easy to achieve when you gear up the balance sheet. Now, if they weren't going to use extra debt, then those cost savings and margin growth would have to come from somewhere.

As for my opinion regarding the deal, well that will remain private and I will examine the facts as they develop to form that opinion.

 

[JohnK]

Ok - so because they have structured the deal so that they dont breach various requirements under ACCC etc. they have done something wrong? So it would be better to have breached requirements - not sure I understand your logic.

It had been questioned repeatedly since the offer was announced last week that APA has gone to great lengths to avoid scrutiny from ACCC, FIRB and Federal Government. You do not do this if your intentions are above board.

I also dont understand the comment that "if this private equity purchase goes ahead it wil open the dor to 50 other transactions". What is the link? Is the assumption that if an overseas private equity firm manages to buy QF then other will decide that buying Oz businesses might be a good idea?

There are at least 50 other Australian companies on the watch list.

I dont think we can assume that the FF program will be devalued or that services will be cut or that the on board services will change for the worse. We have no evidence to the latter and the business may in fact suffer if those happen so we have to assume a status quo potentially.

I cannot see how private equity will make money out of QF without job cuts (which will lead to reduction in levels of service, less FA's per flight etc), shifting maintenance overseas, devalue and/or sell the FF program, sell the catering business, AEP to buy all aircraft that QF/JQ owns and lease back to QF/JQ at greater cost.

At the moment all we have is - private equity firms are bad.

Only because of their track history. A private equity firms sole intention is to make money. They are in the business of developing their own company not the companies that they takeover. Again I hope I am proven totally wrong.

 

[QF WP]

bravoecho, excellent summary of the pertinent differences between the airlines - however, I would expect nothing less from you given your job.

Like you and Dave Noble, I haven't finalised my opinion yet, at least until I read the Part A and Part B documents. That should be light bedtime reading for me :shock: . Perhaps the shareholdings that I control can be part of a blocking stake . Of course, should the offer fail, the share price would probably drop to just above the last price before the offer happened.

Some media from this mornings mail:

Unions representing Qantas staff will today consider an audacious plan to join the pilots in buying a stake in the airline as part of an attempt to block the sale, as Peter Costello warns he will not bail out the carrier if it gets in trouble...


Qantas faces $50 million class action from disgruntled travel agents who claim the airline has short-changed them by not paying commissions on fuel surcharges...

 

[simongr]

It had been questioned repeatedly since the offer was announced last week that APA has gone to great lengths to avoid scrutiny from ACCC, FIRB and Federal Government. You do not do this if your intentions are above board.

You may also do it to avoid the cost involved and delays that would cause. If you can construct a compliant offer why put yourself at risk of delaying a deal. The only people that would gain from an investigation would be lawyers.

 

[Dave Noble]

It had been questioned repeatedly since the offer was announced last week that APA has gone to great lengths to avoid scrutiny from ACCC, FIRB and Federal Government. You do not do this if your intentions are above board.
.

A do what? The fact that they structured a deal such that it would comply with regulations and to make the purchase as straightforward as possible means that what they were doing is not above board?

That has to be some of the most screwy logic I have come across

Dave