Geoff Dixon and Bob Mansfield reportedly wowed 40 Coalition backbenchers yesterday with a “compelling” presentation on why the private equity takeover of Qantas is a good thing.

The ducks are indeed progressively being lined up and yesterday’s independent expert’s report was broadly welcomed, although The Age’s Stephen Bartholomeusz is spot on for criticising the failure to break down the figures for the domestic and international airline operations.

Sure, Qantas didn’t have to commission Grant Samuel to produce its report but having gone to the trouble and the expense, they should have included some decent forecasts for the 2006-07 result and a divisional breakdown of earnings.

The two most interesting revelations in the report were that the frequent flyer program is the most obvious initial asset to sell and that Australia Post has pre-emptive rights to take Qantas out of their freight joint venture.

Given the Howard Government has flogged everything that wasn’t bolted down over the last 11 years, it was strange indeed that they allowed Australian Post to participate in a 50-50 joint venture with Qantas to buy Greg Poche’s Star Track Express for $750 million three years ago.

It’s been an excellent acquisition but the change of control at Qantas triggers pre-emptive rights that would allow taxpayers to shell out more than $400 million taking out the Qantas stake in the joint venture.

Given the legendary lobbying powers of Qantas in Canberra, it’s hard to imagine this happening if the Australia Post board, led by the recently gonged chairman Linda Nichols, wanted to take the step.

Pre-emptive rights in joint ventures are often poorly disclosed and serve as an effective poison pill against takeovers, so it would be interesting to know the exact terms in which Australia Post could move to 100%.

If it’s attractive then maybe they should go for it, even if it generates some bleating from the private equity consortium. That would prove an interesting test for the Coalition in an election year as Aussie Post really will be the last significant business left to privatise once Medibank Private and Telstra are fully disposed of.

Peter Fray

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