Hi Everyone,

I've just gotton this preliminary news release in -- makes me sick to have to post it.

Melodie
Certified Aussie Specialist

"The Qantas board looks set to recommend its shareholders accept a AUD$5.60 takeover bid from the Macquarie Bank's Airline Partners Australia consortium, after the national carrier appeared close to ironing out any initial objections it had to the AUD$11 billion (USD$8.6 billion) offer last night.
The bid is led by Macquarie Bank (Australia) and Texas Pacific Group (USA). The split is said to be Macquarie Bank at 25%, other Australian investors at 25%, Qantas senior management at 1%, and the remaining 49% to Texas Pacific. This mix allows the consortium to get around ownership restrictions that limit one individual entity to no more than 25% of the airline, and international interests owning no more than 49%."

also today it looks like virgin blue has got trans pacific rights.

Looks like the heavy regulation of trans pacific flights could be breaking down....means cheaper flights and more north americans in downtown sydney.

Everybody is making soothing business-as-usual noises (i.e. talking crap). The consortium is paying a high price for Qantas, the purchase is heavily geared, and the only way they can generate the income needed to service their debt is to sell assets and cut costs (i.e., staff). Isn't this what used to be called asset-stripping?

The last soothing noise I heard on the radio was the Trade Minister, Mark Vaile, who led Australian negotations with the US over the free trade agreement. No wonder Australia lost out under the FTA - you wouldn't send Vaile to the corner shop to buy a bag of chips. He'd get lost.

The last people who bought an Australian airline without having any real interest in the air transport industry as such were Rupert Murdoch's News Corporation and TNT Ltd. They used Ansett as a cash cow, then sold it off to Air New Zealand, who then realised they'd bought a flightless turkey.

Yes Neil I heard Vaile saying this morning that everything was going to be " just fine " ( for whom? ). There goes my frequent flyer points!! Friends of mine lost all theirs with the death of Ansett.

Peter, I just heard a spokesman for the consortium with more reassuring words, and who was it but none other than "Hamburger Bob" Mansfield, who had a less than stellar career as CEO of Optus and chairman of Telstra after serving as CEO of McDonalds Australia. Bob is known to be a mate of the Prime Minister, in which case he should get along fine with Max (The Axe) Moore-Wilton, CEO of the Macquarie-owned Sydney Airport and the PM's former chief bureaucratic enforcer. Do I detect a touch of incest here?

Oh, we're told that Macquarie will own only 15% of Qantas, so that's all right then - no conflict of interest, none in the world.

And the Texan partner will own "only" 49% of Qantas. Only? That strikes me as about twice too much foreign ownership, Texan or otherwise, of a strategic national asset.

So did we Peter, have been assured this can't happen again, as airlines must hold them in trust - don't know if I believe that though.

Pat, I don't think we can trust anyone. I too, lost nearly 120,000 FF with Ansett and was just getting ready to utilise them when bang - all the wheels fell off.

Neil, you're very correct in saying that Qantas is going for a very high price. I'm not too au fait on high flying business - really what is it all going to mean for everyone, staff, passengers etc.

My guts are telling me that this just doesn't feel right and can only end in tears - can we expect any positives from the deal?

wow - what a heartening post (on the surface). A closer look shows that Melodie says it makes her sick but doesn't say why, just posts someone else's words. And joh's post is value and opinion free (is the easing of control on trans pacific routes a good thing or a bad thing? is more North Americans in Sydney a good thing or a bad thing?) no way of telling from that.

Then there are those who are only worried about their frequent flyer points.

So, there was I getting all engaged thinking Fodorites were clearly against or at least questioning liberal free market economics.

But maybe not - would the same outpouring happen over other equally greedy and opportunistic take overs - the market is King after all - or is Qantas a special case? if so, why?

How about Telstra, or the recent changes to the IR legislation? Or even worse, the new code of "non bias" for the ABC or the propoeed changes to cross media ownership rules? Will you all be up in arms about them?

Me too, stormbird, about 25,000 Ansett frequent flyer points and then kaboom! Just like you, was about to spend them. Then Qantas had the monopoly, flight prices to other Australian destinations, from where I live in Cairns were outrageous, have to thank Richard there for Virgin Blue.

I guess Fuzzy we're upset because Qantas is/was truly so inconic. And this is a travel forum ....and they provide a means to travel..and well Telstra do not, nor does the ABC and the new IR legislation well I don't see the travel connection there either.

Can we please not get into an argument about our IR laws?

I'm just saddened that Qantas, an airline with such humble beginnings in outback Queensland has reached the end of an era. Hopefully, it will be business as usual but...well.. there it is that but! I'm just interested to hear where people think it will end up. Will they cut staff? Will our safety standards still be maintained?

Financial commentator Robert Gottliebsen (www.theaustralian.com.au, 15 Dec):

"This decision will set off a deluge of bids for companies that make up a large part of the investments of indexed super(annuation) funds. Private equity raiders are looking at around 50 Australian companies, and it’s these companies that will provide the return for Australian retirement funds in the future.

"Companies that are being targeted are the ones that provide the best returns for the future. Corporate raiders require a 20 per cent compound rate of return to make these deals work. I expect Macquarie Bank will make a fortune from Qantas, and that’s money that will come out of the pockets of long-term Qantas shareholders."

I think he's saying that the only way the new owners can recoup their investment is to gut the company, reducing future returns after they unload it.

The new industrial relations laws are relevant to the extent that they'll make it easier for Qantas to reduce staff pay and conditions to cut costs.

Thanks Neil,
I see you point regarding the IR Laws. Robert Gottliebsen's report sounds quite foreboding doesn't it. What else can we do but hold our breaths and wait and see?

Hi, stormbird - well, the deal still has to be approved by the government, so emailing government MPs is an option I suppose. One government senator, "Backflip" Barnaby Joyce, is expressing concern - but then, he does that all the time, and always caves in when it comes to the crunch. All talk, no action.

This episode shows that if nothing else, keeping a national asset like Qantas in public (i.e. government) hands ensures that it's not flogged to foreign interests looking for a quick buck.

Fuzzy,

I'm sick-ish because Qantas is an excellent airline, and I'd like to see stay purely Australian - let's face it, even the people running the show WITH airline experience in the US have managed to screw up nearly every airline. (At least the major carriers).

There are only THREE U.S. carriers that have made a profit in the past 3 years. (interestingly enough, all are deemed "low cost carriers&quot along with some small, regional carriers. All the "Big Boys" are in bankruptcy.

Nevertheless, United (bankrupt) is trying to buy Continental (bankrupt) and USAir (bankrupt) is trying to buy Delta (ditto for them).

Melodie

I guess I got off lightly there whilst stirring the pot.

Cos I am seriously angry about this.

I am angry that a well run company - well it must be, mustn't it - seeing as it is profitable in the current climate - and which has the best safety record in the industry and, what's more, is based in a small country, can be sacrificed to a bunch of faceless money men.

You see - given the current climate only money talks. It is totally against the rules to even consider the other factors. It can all be summed up by the phrase "knowing the price of everything and the value of nothing".

Your starter for ten - the provenance of above famous saying is ...?

Oh, and does anyone know who Macquarie Bank are? I mean I know the brand but who are the people running it? And is there any connex to their purchase of Sydney Airport a few years ago?

They seem to be milking that for all its worth. It's miles away from being the worst first world airport in the world (have you been to LAX recently) but it certainly hasn't got any better since they bought it - just more expensive to use.

Appreciate your input on the IR legislation, Neil - now how about the ABC? Reckon it won't be long before they are disuaded from examining issues like the Qantas buy out, because any criticism of same (even from a chat show caller) will be deemed to be anti government.

So sad - but what can we do?

Does anybody remember the mighty Pan American World Airways? There was a time when nobody could have imagined that Pan Am would be no more - then they started making losses, the losses grew, they struggled on for several years, then folded.

I don't want to frighten the pants off readers, but I recall that in 1973 (when I was working for Qantas) a Pan Am 707 went into the sea after takeoff from Papeete. As I remember the sole survivor reported hearing a sharp loud noise just before the aircraft lost control.

Some time later a loud bang was heard as another Pan Am 707 was taxiing from the terminal at Nadi, and I remember seeing the report and spares requisition signal sent by the local Qantas maintenance manager. The noise had been caused by a snapping control cable, and a full inspection had found that every such cable in the aircraft wash either moderately or severely corroded. The only conclusion you could draw was that the company had been skimping on maintenance.

I should mention that the Papeete crash is offically listed as 'cause unknown'. It's also fair to say that the whole airline industry has improved its safety act since those days. It's still food for thought, though.

wlzmatilida,

Where did you get your facts on US based airlines, a tabloid? Not all the airlines you listed are bankrupt. Also, more than three US based airlines have made a profit in the past three years. Relax on the drama and see how the Qantas takeover plays out. I just received an email from the CEO of Qantas (as probably did every Qantas frequent flyer or share holder) stating business as usual and no major changes for now.

<i>Nevertheless, United (bankrupt) is trying to buy Continental (bankrupt) and USAir (bankrupt) is trying to buy Delta (ditto for them).</i>

Of those, only Delta is in bankruptcy now. Continental hasn't been under bankruptcy protection since the early-mid 90s.

Quite, Miz: And his &quot;for now&quot; rang a very loud warning bell in my small brain. That $11b has to be amortised while keeping the profits up &amp; the shareholders happy. Given the competition in fares, the only way is cost cutting and or market expansion.
If Macq doesn't look at the areas of gratuities (FF's), staff &amp; maintenance as it's primary platform I'll be very surprised indeed.

For those thinking we who are concerned about the possible loss of FF's are shallow opportunists.... at an average of $1:1FF, it's a pretty fair investment we've made to acquire them. In my money, anyway. I wouldn't be kissing off $500k+ lightly &amp; I'm not overly thrilled with doing it for a second time in FF's. Given that QF's FF programme is more generous in its FF:flight miles ratio than any of the other Internationals I've looked at recently, I would think that this is the very area in poll position for pruning. &quot;Bringing into line with our competition&quot;

Next up, staff &amp; maintenance sourced offshore at cheaper rates.

I hope I'm wrong.

Yes, Neil Oz, who would have thought &quot;the mighty Pan Am&quot; would vanish like jet smoke?

MJZ,

no, I didn't get my information from a tabloid, or even off a cereal boxtop -- I got it from a travel industry magazine, which goes to travel professionals in the business.

Maybe the word &quot;bankrupt&quot; is confusing -perhaps I should have said &quot;filed Chapter 11&quot;. Some airlines -- including United Airlines, Continental Airlines, America West, US Airways, ATA Airlines Hawaiian Airlines, and Aloha Airlines --have reorganized under bankruptcy protection, and are still operating.

And sorry to disagree, and strange but true, only 3 US airlines have made a profit in the past few years.

Glad that you got a nice, warm fuzzy note from the CEO of Qantas - I believe something similiar was sent out to UA shareholders and frequent flyers - meanwhile, they still owe money to a bunch of &quot;little guys&quot; here in the Bay Area - people who have done things like printing, catering, dry cleaning, etc.

Btw, the other piece of disturbing news (same source) is that they are currently doing &quot;testing&quot; right now at 2 US airports to allow friends and family PAST the gate area and into the airport (as pre-911). Why? Because the restaurants and shops are 'suffering&quot; a decline in business!

I mean, really...do they have to do a test or study to know &quot;how this will effect the flow of passengers through Security&quot;? Grrr.

Melodie