Quote:
QANTAS has told the Federal Government it has no option but to merge with another big airline if it is to survive as an international carrier.
While its favoured partner is British Airways, Qantas has canvassed a deal with a range of players including Cathay Pacific and Malaysia Airline Systems, and previously Singapore Airlines.
Qantas and BA understand they need to bulk up to meet not only economic demands but also competition from cashed-up airlines such as Emirates and the giant Air France-KLM combination.
BusinessDaily believes Hong Kong-based Cathay Pacific, Singapore Airlines and MAS all rejected the Qantas overtures.
Qantas and BA, which yesterday confirmed they are talking, need to address a huge fall in passenger numbers, new competition from the bigger carriers and rapidly deteriorating industry conditions.
This year 30 airlines worldwide have gone bankrupt.
If Qantas is unable to do a deal it is likely to be forced to scale back from global routes and focus on regional routes in Asia.
BA was a cornerstone investor when Qantas floated in 1995 but sold out in 2004, although it has retained a close relationship with the Australian carrier.
The talks between the two at the moment focus on the possibility of a dual-listed company structure.
However, a high-level Qantas source insisted a BA deal was not the only option and that other possibilities were still available.
"We think we are an attractive partner to a lot of people," the source said.
BA's CEO Willie Walsh conceded last night there was still "a lot of detail to go through".
But Mr Walsh saw a possible $8 billion join-up as "a merger of equals".
"This is an exciting step towards the creation of the first truly global airline," he told a British newspaper.
"We have complementary networks and similar views about consolidation."
News of the talks triggered a sharp rise in the price of Qantas and BA shares on the Australian and London markets.
Qantas stocks closed up 10 or 4.5 per cent at $2.35 yesterday and BA climbed 12 per cent after the talks were revealed.
In early trading in London last night BA opened lower, falling 4 per cent to 150 pence.
A deal is now possible because the Australian Government has decided to consider revoking existing rules that limit foreign investment in Qantas to 25 per cent by a single airline and 35 per cent by any group of airlines.
However, Federal Treasurer Wayne Swan made clear that the Government would not budge on the requirement that Qantas remain 51 per cent Australian-owned.
A merged Qantas-BA would have a combined fleet of more than 400 aircraft and would give Australians direct access to destinations throughout Europe and to many cities in the US.
Qantas flies to only one city in Europe, Frankfurt in Germany, and relies on codeshare with BA and Air France KLM.
BA and Qantas have been talking about a merger since mid-August.
New Qantas CEO Alan Joyce, who replaced Geoff Dixon last Friday, is a close friend of Willie Walsh.
They met while working at Aer Lingus in Dublin before Mr Joyce migrated to Australia.
BusinessDaily believes both carriers face significant political and regulatory hurdles before they can declare a deal done.
They are believed to be focused on establishing a holding company which would oversee Qantas and BA operations, while retaining separate listings on the Australian and London stock exchanges - similar to the arrangement Air France and Holland's KLM entered into when they merged in 2003.
Air France KLM operates under an open-skies agreement that applies to European carriers where a single competition regulator oversees the market. If the Qantas-BA deal proceeds approval will have to be sought from the Australian and British governments as well as their respective regulators.
The great unknown is how other governments would view the prospect of a new mega-carrier which could well disadvantage their smaller airlines.
It raises the question of whether a merged BA-Qantas would have the same rights to operate to the US as Qantas now does under Australia's bilateral air services agreement with the US.
Qantas has fallen out of the top 10 international carriers, as measured by kilometres flown by passengers, in the past year or so.
BA, which ranked a clear first in 1998, last year was third behind the Air France-KLM and Lufthansa-Suisse on that measure.
During that time BA and Qantas spent tens of millions of dollars on new aircraft and increased the size of their fleets.
But they are now being outspent by Middle East airlines Emirates and Etihad.
With a market cap of $4.6 billion and a share price multiple of 12 times earnings, Qantas is bigger and more productive than debt-laden BA.
BA's share price has been in a tailspin for most of this year as investor confidence in the company has dissipated.
BA is trading on a price multiple of only three times earnings and is valued at pound £1.8 billion($4.1 billion).
The British carrier desperately needs to merge with a financially stronger partner to address strategic weaknesses in its business, including a heavily geared balance sheet.
Qantas is the ideal candidate.
The two companies already collaborate under a joint services agreement in which they pool maintenance services and share profits and costs on the "kangaroo" route.
But Mr Clifford will need to ensure that any deal delivers significant value to Qantas' active institutional shareholder base.
|
Source:
http://www.news.com.au/business/stor...-14334,00.html
Hearld Sun - Dec 4 2008
This message appearing that Qantas suffering from surviving a fience competition against other carriers around itself that QF is facing a possible network back-cut to be disappearing from Europe/further parts of Asia, as possibly most of its international services are making loss.
I think QF's failure to attract more commutors in their Intl routes is possibly because of JetStar and QF's poor regional connection OUT of Australia. Commutors terminating in Europe/Middle East may not choose QF because SQ, TG (and their Star Alliance partners) or EK etc already have very good connection via SIN (which you can't take QF than change OW partners to CDG, ARN, MAD etc.)
Commutors terminating in Asia may not choose QF because QF cannot take them to some regional destinations eg LGA, KUL etc. Furthermore, QF did not codeshare KA/CX for their Chinese service (even selling them on QF's website)hence commutors heading there will consider CX/KA because of better connection. Meanwhile, leisure commutors may choose JQ instead since it is cheaper, or take Asian carriers for better service and connection.
To solve the problem, here are some of my suggestions (maybe edited later):
- Rather to merge QF to CX, QF should consider selling 3K & BL to CX instead. Change 3K & BL to a premium airline (with full service), adding it to OW so as to improve OW's regional connectin in SE Asia.
- Try to pursuade CX & KA to allow QF codesharing HKG - China service by opening some domestic/trans-tasman services to CX in exchange. On the other hand, QF can try to work with CX to launch more European direct destinations eg. ARN, CPH, ZRH, VIE, MAD, MAN, FCO, OSL, ATH etc (It can possibly done by co-marketing like QF 301/2 with BA etc, or to use QF's plane and CX co-market on them) that to strengthen QF's Kangaroo Route connection towards more European cities.
Could you name any possible airline except the failed to merge with QF like CX, SQ, MH, BA etc that it could possibly merge with QF under current economic situations? What do you think QF can do to maintain its International Routes?
3rd January 2009, 02:55 AM
Not option but a deal with British Airways for Qantas
Linear Mode
