tip off

Qantas at acute risk of sharemarket raid

The last time calls for direct government invention to save an airline were voiced in Australia was after the collapse of Ansett on September 14, 2001.

Now it’s the turn of Qantas, the airline that massively benefited from Ansett’s demise, and had fiercely opposed it getting any government bail out.

But with its share price under severe pressure, and many of its smaller investors and employees angry and baffled by last week’s late and shocking guidance that it was headed for a real money full-year loss, Qantas is being supported by calls around the fringes of political discussion for intervention ranging from handouts to full re-nationalisation of an airline that was privatised and listed on the ASX in 1995.

In 2001, the push to save the Ansett jobs and preserve its services at public expense, but short of outright nationalisation, were made by the-then leader of the Nationals, John Anderson.

He was promptly sat on by the PM John Howard and prominent Liberals, urged on publicly and privately by a Qantas led by CEO Geoff Dixon, which was the major beneficiary of Ansett’s demise, as Virgin Blue had only seven jets in service and the 9/11 terrorist attacks had collapsed the demand for Qantas international flights, just as they found a new role helping Qantas domestic handle millions of displaced Ansett customers.

No one should mistakenly conclude that Qantas today is going to collapse Ansett-style tomorrow, but despite recovering above $1 in early trading today, the airline is at acute risk of a sharemarket raid, the pointers to which were abundantly apparent in the large volumes attributed to hedge-fund trades last Friday in particular, and for whom the poster boy in terms of likely suspects for a hostile bid is the same Geoff Dixon who “saved” it from any risk of an Ansett resuscitation.

A Dixon-led bid is a real chance, provided the opportunity is matched by his getting the necessary finance. The multiple scenarios for what Dixon or Alan Joyce, his successor at Qantas might do, include break-ups or spin-offs, full or partial. They range through a Jetstar sold off to a Singapore-based entity, or a Qantas international division consigned to receivership to effectively evade the Qantas Sale Act by killing the overseas carrier, and so on, ad infinitum.

While these concepts get thrown about amid much uncertainty as to the future, the calls for handouts or the fanciful extreme of re-nationalisation are certain to fail.

Since Ansett, lobbying by Qantas against “unfair” air treaty liberalisation allowing foreign carriers open access to what then perforce became the fastest-growing international routes between Australia and the rest of the world has been resolutely crushed by the Howard government and its Rudd and Gillard successors on the basis that “protecting” Qantas would compromise the country’s free trade credentials and put in jeopardy far more by way of access to its mineral, agricultural and manufacturing exports than Qantas and any other Australian flag carrier such as Virgin Australia were worth.

It is inconceivable that any Australian government would re-invent a government-owned Telstra, and kill the private telco investments running into billions.

It is just as unimaginable that Canberra would subsidise Qantas/Jetstar just so it could enrich those who engineer a sell-off, and kill off Virgin Australia in the process, plunging the country into a one-airline policy setting that would collapse the growth in air travel driven by cheaper fares, making flying the province of the rich and privileged like it was in the protectionist ’50s, ’60s and ’70s, and decimating pilot and airline support jobs.

But the populist calls for re-nationalisation don’t grasp the functionality that cheaper, mass air travel has brought to business or leisure. They are about confusion and concern as to how Qantas could get itself into such a shambles, and these are the questions that a compromised media, an inattentive polity,  and mislead shareholders need to keep asking.

Qantas under the Leigh Clifford/Alan Joyce-led management has a culture of not delivering on bold statements of intent such as the Asian premium single-aisle carrier, and resorting to attention-grabbing shocks like unnecessarily stranding 100,000 passengers worldwide without warning or wasting NSW police resources on bogus death-threat stunts in place of engaging its staff Virgin Australia-style in dealing with the realities of the cruel, cruel world of aviation.

PR-led shock tactics have done nothing to address these realities, and they could destroy Qantas with a terrible finality that no government is ever going to be able to prevent.

2
  • 1
    zut alors
    Posted Tuesday, 12 June 2012 at 3:46 pm | Permalink

    And Qantas is actually PAYING Joyce to put it in this position? We live in strange times.

  • 2
    eric
    Posted Tuesday, 12 June 2012 at 7:25 pm | Permalink

    The government should treat Qantas just like ANSETT was!

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