Qantas-MAS Merger Talk: Since When?

[Eugene Koh 4]

Qantas a keen suitor

December 4, 2008

 

QANTAS has committed itself to forging a tie-up with a foreign carrier even if its planned $9 billion merger with British Airways falters.

 

Qantas has pitched its biggest proposal since the botched Macquarie Group-led buyout last year, confirming it is in merger talks with its former cornerstone shareholder, British Airways. Qantas said the merger could involve the formation of a dual-listed holding company.

 

But given the numerous obstacles the deal faces, Qantas admitted "there is no guarantee that any transaction will be forthcoming". Some of its institutional shareholders are already ruling out accepting a merger of equals, emphasising that Qantas is a better franchise than British Airways.

 

British Airways is expected to lose money this year and next. Qantas is forecasting a $500 million pre-tax profit. Shares in Qantas surged as much as 9 per cent yesterday before closing up 10c, or 4 per cent, at $2.35 as investors took a sceptical view of the benefits of a planned tie-up.

 

A successful deal could be the first step in the formation of the world's first transcontinental mega-carrier. British Airways is also discussing an alliance with American Airlines. "It is an exciting step towards a truly global airline," said the airline's chief executive, Willie Walsh.

 

The main sticking points for Qantas in any deal will be the price each airline is worth in the combined entity and clarity about British Airways' pension scheme. The latter has been a stumbling block in talks between BA and the Spanish airline Iberia. Under the pension scheme, BA's liability remains constant even if its asset base declines, creating a deficit which it is responsible for paying.

 

Qantas is likely to insist that British Airways does not run its talks with Iberia in tandem with its own negotiations. However, it is expected to be willing to consider Iberia joining a merged entity at a later stage.

 

The combined entity would have about $23 billion in sales and 500 aircraft. The two airlines would retain their own brands. The few obvious benefits include lower costs from a single entity purchasing aircraft and other goods.

 

The British Airways talks came after Qantas held merger discussions with Malaysia Airlines earlier this year. Qantas is believed to be keeping its options open on that alliance in case the BA deal falters.

Qantas is also said to have long harboured a desire to merge with Cathay Pacific. The Hong Kong carrier has a large international hub and extensive freight operations, and also has strong links into the fast-growing Chinese aviation market through its subsidiary Dragonair, which is focused on the mainland.

 

Cathay out-manoeuvred Singapore Airlines in 2006 to obtain a 20 per cent stake in Air China. But while Qantas in the past has been willing, it is believed Cathay has failed to reciprocate.

 

The managing director of Integrity Investment Management, Paul Fiani, said a deal with BA would succeed only if it reflected the fact Qantas had a superior business to BA. "A simple merger of equals will not add value to the company. The merger ratio has to reflect that Qantas has a strong domestic business and a very valuable frequent flyer business," said Mr Fiani, whose firm has a stake in Qantas.

 

Qantas suspended the Malaysia Airlines talks earlier this year because the two could not reach agreement over the merger ratio and governance issues.

 

WOULDN'T IT BE NICE IF ALL GOES WELL, IT'S A GREAT PARTNETSHIP!

[Mohd Suhaimi Fariz 2]

Qantas a keen suitor

December 4, 2008

 

QANTAS has committed itself to forging a tie-up with a foreign carrier even if its planned $9 billion merger with British Airways falters.

 

Qantas has pitched its biggest proposal since the botched Macquarie Group-led buyout last year, confirming it is in merger talks with its former cornerstone shareholder, British Airways. Qantas said the merger could involve the formation of a dual-listed holding company.

 

But given the numerous obstacles the deal faces, Qantas admitted "there is no guarantee that any transaction will be forthcoming". Some of its institutional shareholders are already ruling out accepting a merger of equals, emphasising that Qantas is a better franchise than British Airways.

 

British Airways is expected to lose money this year and next. Qantas is forecasting a $500 million pre-tax profit. Shares in Qantas surged as much as 9 per cent yesterday before closing up 10c, or 4 per cent, at $2.35 as investors took a sceptical view of the benefits of a planned tie-up.

 

A successful deal could be the first step in the formation of the world's first transcontinental mega-carrier. British Airways is also discussing an alliance with American Airlines. "It is an exciting step towards a truly global airline," said the airline's chief executive, Willie Walsh.

 

The main sticking points for Qantas in any deal will be the price each airline is worth in the combined entity and clarity about British Airways' pension scheme. The latter has been a stumbling block in talks between BA and the Spanish airline Iberia. Under the pension scheme, BA's liability remains constant even if its asset base declines, creating a deficit which it is responsible for paying.

 

Qantas is likely to insist that British Airways does not run its talks with Iberia in tandem with its own negotiations. However, it is expected to be willing to consider Iberia joining a merged entity at a later stage.

 

The combined entity would have about $23 billion in sales and 500 aircraft. The two airlines would retain their own brands. The few obvious benefits include lower costs from a single entity purchasing aircraft and other goods.

 

The British Airways talks came after Qantas held merger discussions with Malaysia Airlines earlier this year. Qantas is believed to be keeping its options open on that alliance in case the BA deal falters.

Qantas is also said to have long harboured a desire to merge with Cathay Pacific. The Hong Kong carrier has a large international hub and extensive freight operations, and also has strong links into the fast-growing Chinese aviation market through its subsidiary Dragonair, which is focused on the mainland.

 

Cathay out-manoeuvred Singapore Airlines in 2006 to obtain a 20 per cent stake in Air China. But while Qantas in the past has been willing, it is believed Cathay has failed to reciprocate.

 

The managing director of Integrity Investment Management, Paul Fiani, said a deal with BA would succeed only if it reflected the fact Qantas had a superior business to BA. "A simple merger of equals will not add value to the company. The merger ratio has to reflect that Qantas has a strong domestic business and a very valuable frequent flyer business," said Mr Fiani, whose firm has a stake in Qantas.

 

Qantas suspended the Malaysia Airlines talks earlier this year because the two could not reach agreement over the merger ratio and governance issues.

 

 

WOULDN'T IT BE NICE IF ALL GOES WELL, IT'S A GREAT PARTNETSHIP!

 

What? Qantas and Malaysia Airlines? After Qantas badmouthed MAS after one of their incidents?

[Karlm 0]

Yes, I reckon this is still possibility scince Engineering tie up.

[Keith T 2]

What? Qantas and Malaysia Airlines? After Qantas badmouthed MAS after one of their incidents?

 

Qantas has in the past (2001) held talks with MAS with the view of a JV and bringing MAS into oneworld. So such talks are not entirely unsurprising.

 

Note that Qantas did not "badmouth" MAS - it was the Qantas unions who weren't happy with the airline's decision to send maintenance offshore. All a power play really.

 

Media reports have also suggested that similar talks have been held with SQ and Cathay.

Edited December 4, 2008 by Keith T

[KK Lee 5]

Given different corporate culture between MH, QF and BA, nationalism and strong tie between politicians and suppliers, full merger with MH is unlikely. However, it is more likely this negotiation will pave way for MH to join OW.

 

[Izanee 0]

wow...what a revelation. MAS needs to join a bloody alliance at some point....sooner rather than later

[BC Tam 2]

MAS needed to have joined one of the alliances like yesterday already (even as a founder member of one I understand), not sooner nor later !

Edited December 4, 2008 by BC Tam

[Syed A Ridhwan 0]

MAS merger looks unlikely

 

KUALA LUMPUR: Malaysia Airlines is seeking partners to grow further but stopped short of saying it is seeking a merger with British Airways and Australia's Qantas.

 

"We are in talks with a number of airlines on collaborating and creating synergies for growth. This ranges from joint ventures and code shares to interlining partnerships.

 

"For example, we have signed a memorandum of understanding with Qantas on a joint venture on maintenance, repair and overhaul," MAS managing director and chief executive officer Datuk Seri Idris Jala said in a statement yesterday.

 

Foreign and local newspapers have reported a possible merger of three airlines recently with a local Chinese daily yesterday saying the three carriers have entered into the final stages of talks.

 

An Australian daily, however, said while there had been talks between Qantas and MAS, the latter is said to have rejected the offer.

Analysts said a merger is unlikely due to political sensitivities, as MAS is considered a national asset.

 

"The carrier has a strong cash flow and is quite healthy.

 

"We don't see that the Malaysian government will see any urgency for the airline to merge with another or two other airlines," OSK Research Sdn Bhd analyst Ng Sem Guan said.

 

However, he does not rule out a code-share agreement between the three airlines.

 

"Code-share agreements have many variations. So, they could come up with an agreement that would see the three airlines offering each other seats and sharing profits," Ng said.

 

Source

Edited December 5, 2008 by Syed A Ridhwan

[Keith T 2]

The last line sounds interesting... like the QF/BA JSA. Perhaps a 3 way JSA on the roo route? It'd be a v potent combination against competition from the likes of SQ/TG/CX and the Middle Eastern carriers. I bet you'd see Virgin (both Atlantic and Blue) lobby their lungs out against this.

 

It's fun to speculate...

Edited December 5, 2008 by Keith T

[Izanee 0]

MAS was silly to turn down BA and QF in the past. They had a chance to be a FOUNDER member of an alliance...and now they're begging people for scraps.

 

I think it will be good for KLIA if MAS joined an alliance. I prefer KLM but the Air France idiots are making things difficult. If we're not wanted there....we should rejoin BA and QF...if they're willing. As Keith said above, it would indeed be a potent competition to SQ/TG/CX.

 

KLIA is crying out for airlines to serve its underutilised terminals (apart from LCCT) ...come on MAS, what say you???

Edited December 5, 2008 by Izanee

[Ken M. 0]

I also would prefer MH to join Skyteam however I'm not sure this will ever happen given AF's dominate role in Skyteam.

Can't see a BA/QF/MH merger working either.

[Pieter C. 5]

I also would prefer MH to join Skyteam however I'm not sure this will ever happen given AF's dominate role in Skyteam.

 

Leo van Wijk, will step down (together with Spinetta) from the AF-KL board on 01jan09 to become 'CEO' of Skyteam, so all is not lost for MH, given the (still) excellent cooperation between MH-KL...

 

For more info on the QF-MH talks: see OneWorld thread...

 

[jysim 0]

Sources from mySinChew.com said the MH-BA-QF merger would follow the KL-AF model.

 

Meanwhile, the integration of Air France and KLM in 2003 has been touted as a classic among aviation mergers in the world. It is understood that the proposed MH-BA-QF merger will also be based upon such a model.

 

Under their mutual agreement, a holding company was set up by Air France and KLM. However, both carriers were allowed to continue operating independently, keeping their own logos, trademarks and brands, as well as their own management jurisdiction, resource distribution and staffing.

 

Industrial insiders are of the opinion that it was wise for the carriers to keep their own logos, trademarks and brands, because for a corporate entity, to relinquish the brand and image it has built up with so much effort over the decades is comparable to the act of suicide.

 

Meanwhile, The Malaysian Insider reported:

 

While details of the talks remain sketchy, it is understood that what is on the cards is a business arrangement which is “deeper than a code share, but maybe just short of a merger.”

 

This would mean the respective airlines remain in local control with their own identities intact, with the possibility of that a new super-holding company could be formed.

 

But any deal will still be subject to government approval.

 

Interesting happenings indeed. What surprised me is the reason BA and QF are interested in MH given that:

1. both do not fly into KUL
2. MH is not part of OW, given BA and QF are
3. the prescence of a mightier and more financially-stable SQ a little down south

Edited December 6, 2008 by jysim

[jani 0]

This topic is being widely discussed on a.net, kinda surprised not more are interested in the subject on these boards.

 

Currently the buzz is that only QF and MH will merge, as BA will probably go with IB.

[Y C LEONG 1]

Leo van Wijk, will step down (together with Spinetta) from the AF-KL board on 01jan09 to become 'CEO' of Skyteam, so all is not lost for MH, given the (still) excellent cooperation between MH-KL...

 

mr van wijk was suppose to be in LHR today touring klm operation in t4.. unfortunately can't even see a shadow of him..

 

 

[Mohd. Helmi 0]

If only..

 

 

I think there's good opportunities to be had if this were to happen. The very least QF flying to KUL to provide connections. The very best they shift their SIN hub to KUL for their Kangaroo hops. QF only fly to FRA and LHR in Europe, so they could tag on MH to other EU destinations, providing the much needed frequency, yield and load, not to mention giving QF access to more routes to the Middle East, India, China, South East Asia.

 

QF, being such a large carrier, actually don't offer many international routes (once upon a time they did, during the not so profitable, glory romantic years of flying multi sectors), but anyways the current lack in international routes is a reflection on how removed geographically Australia is in the world, Asia provides Aust the connections.

 

MH-QF partnership in my view would be much better than a Skyteam membership, simply because the new entity could be much more competitive on the Australia to Europe sector. especially with all these Middle eastern carriers making in roads on the Kangaroo route, also there's greater synergies to be had from such a merger, more so than BA in my view. A combined BA-QF-MH entity would be even better, perfect!! The shift of QF/BA to KUL would be a major coup for KUL, akin to Mearsk and Evergreen shipping lines moving their shipping transshipment hub from PSA to PTP.

 

.... Ohh well.

[Pieter C. 5]

Malaysia Open To State Airline Tie-Up

 

December 16, 2008

Malaysia's government is open to a tie-up between its national airline Malaysia Airlines and a foreign-owned airline, the country's deputy premier told the Malaysian Reserve newspaper.

 

The Malaysian press has reported MAS and Australia's Qantas Airways may be in merger talks, although MAS has denied the reports and said that it and Qantas were in talks on a joint maintenance venture, not a merger.

 

"The present conditions in the world dictate to us to be creative and innovative provided we can agree on the participation of foreigners on a win-win basis," Najib Razak, who is also the finance minister told the paper when asked about a potential tie-up with Qantas.

 

The Malaysian state owns over 90 percent of MAS, which said earlier this month it was in talks with several airlines on code shares and joint ventures.

 

Qantas is in merger talks with British Airways, but has said it could be tough to reach a deal.

 

(Reuters)

 

[Wilson Kook 0]

Malaysia Airlines in Qantas partnership talks: Chief

Published: 2008/12/16

MALAYSIA Airlines said yesterday it has begun talks with various carriers, including Australia’s Qantas, to form tie-ups including joint ventures as carriers face a tough economic environment.

 

The airline’s managing director and CEO Idris Jala had previously denied reports that Malaysian and Australian carriers were in merger talks.

 

Jala made the latest comments after Deputy Prime Minister Najib Razak reportedly said the government was open to a tie-up involving Malaysia Airlines. The government owns more that 90 per cent of the national carrier.

 

 

“The present conditions in the world dictate to us to be creative and innovative provided we can agree on the participation of foreigners on a win-win basis,” Najib was quoted as saying in a local newspaper.

 

Jala said that while Malaysia Airlines would pursue strategic partnerships, the government would have the final say in the decision to go ahead with a tie-up.

 

“Any partnership that we pursue will require engagement with, and approval by, key stakeholders,” he said.

 

“Malaysia Airlines is very pleased with the continued strong support from the government. We will do everything possible to fulfill the interests of the airline in line with the aspirations of the nation.”

 

Jala said that “more details will be announced as and when we have finalised the terms of any of these partnerships. At this stage, we have no further comment.”

 

Malaysia Airlines has undergone a sweeping turnaround programme, including staff layoffs and route closures, which ended a series of disastrous losses and produced a record profit in 2007.

 

Last month however, the carrier said net profit for the third quarter shrank 90 per cent to RM38 million (US$10.7 million), from RM364 million in the same period last year due to higher fuel costs.

 

The International Air Transport Association last week said the aviation industry is expected to post a loss of US$2.5 billion in 2009 due to the economic crisis.

 

“The outlook is bleak,” said Giovanni Bisignani, the association’s director general and chief executive. - AFP

[Robert 0]

If only..

 

 

I think there's good opportunities to be had if this were to happen. The very least QF flying to KUL to provide connections. The very best they shift their SIN hub to KUL for their Kangaroo hops. QF only fly to FRA and LHR in Europe, so they could tag on MH to other EU destinations, providing the much needed frequency, yield and load, not to mention giving QF access to more routes to the Middle East, India, China, South East Asia.

 

Are you suggesting that QF would pull out of LHR-SIN?

 

Surely the amount of premium traffic on this sector would prevent this.

 

KUL has always struggled to attract the necessary amount of premium traffic.

[Pieter C. 5]

Malaysia Airlines In Talks With Qantas, Others

 

December 16, 2008

Malaysia Airlines said on Tuesday it is in talks with several airlines including Australia's Qantas Airways for possible tie-ups.

 

"We are in talks with a number of airlines, including Qantas. This ranges from joint ventures and code shares to interlining partnerships," Malaysia Airlines Managing Director Idris Jala said in an emailed statement.

 

He did not elaborate on the tie-ups.

 

"More details will be announced as and when we have finalized the terms of any of these partnerships. At this stage, we have no further comment."

 

Malaysia Airlines earlier this month said it was pursuing "strategic partnerships" with some airlines, which included a maintenance, repair and overhaul joint venture with Qantas.

 

On Tuesday, newspaper Malaysian Reserve reported that the country's government is open to a foreign tie-up for the state-owned airline, according to Malaysia's Deputy Prime Minister Najib Razak.

 

"The present conditions in the world dictate to us to be creative and innovative provided we can agree on the participation of foreigners on a win-win basis," Najib, who is also the finance minister, told the paper when asked about a potential tie-up with Qantas.

 

(Reuters)

 

"joint ventures and code shares to interline partnerships"....hmmmmm, they have already with KLM and Alitalia; now they should include Air France, Korean, and Delta/(Northwest) and it will really become Global i.e. Skyteam

 

[Mohd. Helmi 0]

Are you suggesting that QF would pull out of LHR-SIN?

 

Surely the amount of premium traffic on this sector would prevent this.

 

KUL has always struggled to attract the necessary amount of premium traffic.

 

I'm not suggesting they pull out of SIN. Even if such a merger to ever happen, there will surely be a QF presence in SIN. I'm actually quite skeptical about the whole thing, the best we can expect for if there were to be an MH-QF tie up, is that there would be QF codes on MH flights. The whole scenario of QF shifting their LHR stopover to KUL can only happen when it can be justified economically, QF has a no nonsense sense attitude about doing things, just short of ruthlessness, shifting QF maintenance offshore, as well as outsourcing IT and inflight services during the Geoff Dixon era.

 

But that said, eventually over time, if such a merger goes through, I suspect it would actually make more sense not to have network overlaps, like any merger/tie-up there needs to be gains in economies of scope, scale and synergies, savings would definitely be had from cutting out network overlapping. Premium traffic could be built and passed on to KUL from the QF network and as a result of the QF presence.

 

Anyways, this is just an opinion to a hypothetical scenario, a highly exciting and interesting one, whatever it maybe, I have huge doubts about it.

Edited December 17, 2008 by Mohd. Helmi

[Eugene Koh 4]

MAS starts talks with Qantas

 

 

KUALA LUMPUR: Malaysia Airlines (MAS) said yesterday it has begun talks with various carriers, including Australia’s Qantas, to form tie-ups, including joint ventures, as carriers face a tough economic environment.

 

Managing director and CEO Datuk Seri Idris Jala had previously denied reports that Malaysian and Australian carriers were in merger talks.

 

Jala made the latest comments after Deputy Prime Minister Datuk Seri Najib Tun Razak reportedly said the Government was open to a tie-up involving MAS. The Government owns more that 90% of the national carrier.

 

Jala said that while MAS would pursue strategic partnerships, the Government would have the final say in the decision to go ahead with a tie-up. - AFP

 

 

[Azman MN 1]

read today that BA and QF have called off merger talks.

[Ashmil Abd Ghani 0]

read today that BA and QF have called off merger talks.

 

Heard that QF request/demand more from BA..Still cant read the detail but at least that may be the main reason why it stop there..So I dont how it goes with MH after this..

 

So BA-MH-QF tie-up team look impossible at this time..

[Keith T 2]

Heard that QF request/demand more from BA..Still cant read the detail but at least that may be the main reason why it stop there..So I dont how it goes with MH after this..

 

So BA-MH-QF tie-up team look impossible at this time..

 

QF is a bigger airline than BA in terms of market capitalisation, so they've asked for more than 50% of the combined entity.

 

Similarly I hear that the QF/MH talks were quite advanced but stalled when MH wanted 50/50 of the merged airline.