Qantas will remain a majority-owned Australianairline even if it merges with British Airways to create a global carrier to better cope with challenging market conditions, the government said.
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[headline] => Qantas will remain Aussie: Swan
[abstract] => Qantas will remain a majority-owned Australian airline even if it merges with British Airways, the government says.
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Qantas will remain a majority-owned Australianairline even if it merges with British Airways to create a global carrier to better cope with challenging market conditions, the government said.
The chief executives of the two iconic airlines have been in merger talks since August as they battle volatile fuel prices and shrinking passenger demand as the world economy creeps into recession.
Qantas Airways confirmed in a statement today it was "exploring a potential merger with British Airways plc via a dual-listed company structure" but said that there was no guarantee a transaction would be forthcoming.
But the airline has acknowledged that the industry was heading towards a period of consolidation and as recently as last week said that it would be in Qantas' interests to merge with a rival sooner rather than later.
Treasurer Wayne Swan said there was no proposal yet before the government but any merger would have to abide by the regulation that foreign ownership of Qantas be limited to 49 percent.
"Our bottom line is that the 'flying kangaroo' remains majority Australian owned and based," he told reporters in Canberra.
But the government has hinted it will alter other foreign ownership rules, which currently limit individual foreign airlines to a 25 percent holding and aggregate foreign airline interests to a 35 percent stake.
Talk of marriage between Qantas and BA, which formerly held a 25 percent stake in the Australian carrier but had sold out by 2004 to pay off debts, comes amid moves towards consolidation of the sector in Europe and the US.
Neil Hansford, chairman of Strategic Aviation Solutions said Qantas' rivals, including Singapore Airlines, would be unhappy with the news but said that a merger with BA made the most sense.
"Qantas has got a choice, it either gets into bed with somebody like BA or (German carrier) Lufthansa or it retreats to being an Asian carrier with a couple of routes to Europe," he told AFP.
"It will allow Qantas to stay servicing Europe meaning fully and it makes it (in combination with BA) about the third biggest fleet in the world."
Brent Shaw, research manager with Shaw Stockbroking, said Qantas had realised it had to "change and move with the times to survive."
But some traders said Qantas, one of the world's most profitable airlines, would be unwise to link itself to a carrier with a less robust bottom line.
"Qantas has low debt, a protected US-Australia route and an oligopoly on one of the most profitable short-haul legs in the world between Melbourne and Sydney," Goldman Sachs JBWere senior trader Patrick Crabb.
"If I am a shareholder of Qantas, my initial response is cold feet, as the potential groom has a good name but his short-term financial prospects look challenged," he told Dow Jones Newswires.
Last year an 11.1 billion dollar private equity bid for Qantas, which was supported by the airline's board, crashed after the Macquarie Bank-led consortium did not reach a minimum 50 percent of shareholders acceptances for its proposal.
[start_date] => 03 December 2008 | 04:52:15 PM
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[caption] => Qantas Airways Ltd and British Airways are in talks about a potential merger in a bid to navigate the economic downturn. (AAP)
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[label] => Airline industry 'in deep trouble'
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[label] => Job loss fear surrounds Qantas merger
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The potential merger between British Airways and Qantas underlies deeper troubles with the industry, as the global economic crisis weakens demand for air travel.
More than 25 airlines - most of them from the United States - have collapsed this year. Of these, the biggest are Britain's XL airline, and American ATA Airlines, who employed nearly 4000 people between them.
The lion's share of collapsed airlines are low-cost domestic carriers, but as the financial crisis continues to dampen demand, there are fears of further turmoil.
Media commentator Blake Fleetwood says in
a recent article that the fallout of the global economic crisis is bad news for air travellers.
"The world is heading for a two or three airline cartel, which will then systematically eliminate all remaining carriers, opening the way for astronomical price hikes," Fleetwood says.
"When a single carrier dominates a market, bad things happen."
And there's evidence to suggest the big players are cashing in on the grim economic forecast.
Before entering into merger talks with Qantas, BA had announced it was in discussions with several airlines, including Spain's Iberia.
If the merger between the two continues, it will form the third most valuable airline in the world.
BA Chief Willie Walsh has also indicated the airline is interested in buying troubled carrier Alitalia.
Likewise, earlier in the year German carrier Lufthansa made a bid for Brussels Airlines. The carrier has previously acquired Swiss International airlines.
Low-cost giant Ryanair is also in negotiations with rival Aer Lingus.
Some analysts say consolidation of the industry is overdue.
Heymann says government regulation has stopped a much-needed contraction of the sector.
"Mergers have been hampered by numerous bilateral agreements."
"The state should make a faster and more consistent exit from the aviation market and allow also former flag carriers to fail instead of repeatedly propping up such hopless cases," he says.
Despite the consolidation of the sector, industry leaders warn of tough times ahead.
The International Air Transport Association predicts the industry will be more than $5 billion in debt by the end of the year.
The body says there is a drop in the number premier and business clients flying. They also note a downturn in the short-haul market, though the long-haul market has remained constant.
Moreover, unpredictablity in determining oil prices has created further turmoil for the industry.
"Just ten years ago jet fuel costs accounted for ten percent of airlines' total expenditure," Heymann says. "This year the figure will rise to around 33 percent."
Heymann says the "deadly cocktail" of high overheads and low demand will mean the industry is likely to stay in debt well into 2009.
[content_type_id] => 3
[site_name] => World News Australia
[articledate] => 3 December 2008
[articletime] => 3 December 2008
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[headline] => Job loss fear surrounds Qantas merger
[abstract] => Talks between Qantas and British Airways over a possible merger have sparked debate over possible job losses.
[content] =>
Talks between Qantas and British Airways over a possible merger have sparked debate over possible job losses.
Transport Workers 'Union secretary Tony Sheldon has called for "transparency" in negotiating the possible merger, which he fears could affect the employment conditions of 38,000 Australian workers.
"The announcement regarding the potential merger between BA and Qantas raises a whole series of important questions for both the government and also 38,000 working families that make Qantas the most profitable airline in the world," Mr Sheldon told reporters on
Wednesday.
"What's critically important is about issues of job security for those families and to make sure the national icon does remain in control, in all senses of the word, in Australian hands.
"It's critically important with this situation we are now in, with the financial markets being at such a delicate stage internationally, that the new arrangements that have been proposed don't put the new entity into substantial debt," Mr Sheldon said.
"Debt is really the quagmire for the world economy at the moment and we want to make sure that BA and Qantas won't fall into that same trap."
The TWU will seek urgent talks with both airlines as well as its UK counterpart, the Transport and General Workers Union, to discuss the protection of Australian jobs.
"There needs to be a transparent community interest test put into this bid and if it's appropriate, and it stacks up, there is a strong argument for it to go ahead," Mr Sheldon said.
"But at this point it's not transparent, there's no detail made clear to make that assessment, shareholders and, most importantly, 38,000 working Australians or the government who can say `This is in our national interest.'"
Government after 'national interest'
The federal government says any merger between Qantas and British Airways would have to be in the national interest.
Federal Treasurer Wayne Swan says Qantas will remain in majority Australia ownership even if it merges with British Airways.
The news came as the federal government indicated it was considering lifting from 35 per cent to 49 per cent the holding foreign airlines can have in Qantas.
But it won't budge on a requirement that insists the airline be 51 per cent locally-owned.
"Our bottom line is that Qantas remains in majority Australian ownership," Mr Swan told ABC Radio.
Foreign Affairs Minister Stephen Smith says the merger with British Airways may ensure the Australian airline remains competitive,
"The airline industry is a very tough industry," Mr Smith told ABC Radio.
Consolidation, through mergers or partnerships had kept some airlines in business.
Qantas was a competitive, world-class airline, Mr Smith said.
"But like a lot of airlines in recent times it's ... been through tough times, so it's no surprise that it may be looking for a partnership."
Deputy Prime Minister Julia Gillard says the government will ensure any deal is made in the national interest.
We would work through a process ... everything we do is about protecting Australian jobs," she told ABC Radio.
Opposition need convincing
However the federal opposition is yet to be convinced about plans to allow foreign airlines a bigger stake in Australian carriers.
Opposition transport spokesman WarrenTruss wants the government to explain why the move would benefit Australia.
Mr Truss said British Airways once had a significant shareholding in Qantas and that did not
work.
"In the end BA sold down that shareholding in the interest of both airlines," he told ABC Radio.
"We'd need to know why this deal was better than the arrangement that was proposed previously, and most importantly why it's better for Australia."
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[site_name] => World News Australia
[articledate] => 3 December 2008
[articletime] => 3 December 2008
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