Opening up Qantas to increased foreign ownership could
provide benefits. Photo by Reuters.
Lifting the ownership restrictions on Qantas above 49%
would not be all bad for the Australian national airline,
Craigs Investments Partner broker Peter McIntyre said
The Australian Government earlier rejected a proposal to
provide Qantas with a debt guarantee. However, it indicated
it would support changes to the Qantas Sale Act, in effect
giving Qantas the ability to split its business operating
units in two, he said.
''While it is also unlikely that changes to the Act will
successfully pass the Senate, we do think Qantas management
has been given support to change its structure by the
The move comes at a time of rising Australian unemployment
and job insecurity - Holden and Toyota have announced
manufacturing shutdowns - and concern about the global
Last week, Qantas said it would axe 5000 jobs in a bid to
dramatically cut costs after posting a $A252 million ($NZ269
million) first half loss.
Over the next three years, Qantas would shed 1500 management
and non-operational positions, with the remainder to come
from changes to the fleet and network and the restructuring
of maintenance operations and catering facilities. Wages for
all employees would be frozen and the company's executives
have already taken a pay cut.
The airline was attempting to save $A2 billion by the 2016-17
financial year as it tried to return to profitability amid a
bitter, profit-draining battle with rival Virgin, Mr McIntyre
Cost reduction and restructuring was needed but Craigs also
believed capacity rationalisation in Australia was required
to bring the airline industry back to historic levels of
James Hogan, the chief executive of Etihad - a 19%
shareholder of Virgin Australia - had been quoted as saying
he would like to see an end to the damaging capacity war in
which Qantas and Virgin had engaged.
Mr McIntyre said a Qantas and Emirates Alliance could be
taken a step further, in his view, with Emirates investing
directly in Qantas' mainline domestic operation which would
probably need to be through a new joint venture structure.
The possible structure would have Emirates having an alliance
with Qantas International and owning half of a domestic joint
venture. Qantas would retain 100% ownership of the
international operation, Jetstar and the freight division.
A potential investment into Qantas by Emirates would be
attractive to investors as well as the airline, he said.
Emirates would have a direct interest in a profitable feeder
network with a dominant corporate market share and be part of
a feeder network into Qantas International.
The deal could possibly include an option over a future stake
for Emirates in the Qantas Frequent Flyer programme.
Qantas would benefit through raising capital to protect its
balance sheet and the cash could be used to restructure the
domestic operations cost base.
''This could be achieved by re-examining the structure of the
provision of assets and or labour into the new domestic
entity. We view a catalyst is needed to adjust Qantas'
domestic cost base to be more comparable with Virgin.''
Qantas and Emirates domestic alliance
Benefits: International change benefits delivered faster
than expected; better than expected economic recovery
resulting in improved demand from corporate travellers, in
particular; favourable interest rate and currency movements.
Risks: Increase in Brent crude price and changes in
jet fuel refinery margins; significant capacity growth and
yield dilution beyond projections; workforce relations worsen
with industrial actions grounding the airline; global shocks
such as terrorism or a health pandemic; any event causing
significant damage to the Qantas brand; adverse interest rate
and currency fluctuation concerns.