One person who would be having mixed feelings about Qantas’ recent share price rise would be retiring chairperson, Margaret Jackson.

Ms Jackson wouldn’t quite know whether to reach for the champagne or the valium, as the Qantas share price edges towards $6.00, spurred by a revenue seat factor in excess of 82 percent for Qantas branded flights. Jackson, who is retiring from the Qantas board next month, famously encouraged shareholders to accept a private equity bid for Qantas in March, because:

If anyone thinks this will happen without affecting the (share) price then they have a mental problem with how the market works.

Sadly for Jackson (who bizarrely noted during the takeover that she “would be disappointed if the bid failed”), the Macquarie-led bid for Qantas was rejected by institutional holders, Andrew Sisson (of Balanced Equity Management) and Paul Fiani (then of UBS Global Funds Management). Coupled with some too-smart tactics from a US-hedge fund, the bid narrowly failed to reach the required acceptance threshold.

Jackson, who was previously a partner in KPMG’s consulting group would no doubt be feeling not a little embarrassed by Qantas’ recent strong performance. Not only did Qantas shares not drop as Jackson confidently claimed, but they have actually increased.

On 20 March 2007, when Jackson made the infamous “mental problem” claim, Qantas shares were trading at around $5.05 per share. Qantas shares hit $5.87 this morning, an increase of 16.2 percent in just under seven months since Jackson’s infamous “mental problem” remark – that is equivalent to an annual rate of around 27.8 percent.

During that same time period, the S&P200 Industrials Index has increased by approximately 13.2 percent (or an annual rate of around 22.7 percent). Therefore, not only did Qantas shares not drop as foreshadowed by Jackson, but they actually outperformed a rampaging index.

The directors of a company are appointed and very generously paid (on an hourly basis) to act in the interests of the company (which has generally been held to mean the interests of the shareholders). However, during their enthusiastic endorsement of the private equity bid, Jackson, and her fellow directors, didn’t appear to be overly concerned about Qantas shareholders.

As The SMH’s leading business writer, Kate Askew, noted:

…from the moment the image of a beaming Jackson locked in an embrace with the key proponents of the private equity grab for Qantas was flashed across television screens and newspapers last December, the same question was asked: in whose interest was the chairman of Qantas acting?

Today, Qantas load factors are so high that the airline is able to charge upwards of $18,000 for a business class return flight to the United States. Fuel price rises are being offset to a large extent by surcharges and many of the wealth creating strategies that would have been adopted by the private equity consortium are being taken up by Qantas management. Qantas shareholders would be very thankful for Sisson and Fiani’s courage and foresight when the people who they pay to look after their interests (the Qantas directors) got it hideously wrong.

After retiring from Qantas, Jackson remains a director of ANZ and Billabong, and chairperson of FlexiGroup. However, one suspects that Ms Jackson won’t be making too many more share price observations in the years to come.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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