Qantas-MAS Merger Talk: Since When?

[Eugene Koh 4]

QANTAS may pursue Malaysia Airlines following the demise of the Australian carrier's $8 billion merger plans with British Airways.

 

Merger talks between Qantas and BA ended on Thursday night with failure to agree on a merger ratio.

 

The market appeared unperturbed by the news, pushing Qantas shares up 21c to $2.64.

 

Qantas had wanted majority ownership in the deal, reflecting its bigger market value, but BA was not prepared to become a junior partner.

 

The two had been proposing a dual listed company that would keep both airlines as separate brands, with headquarters in both London and Sydney.

 

But the deal -- which received a cool reception from analysts, the Australian Government and unions -- faced a number of significant hurdles.

 

These included governance and the structure of the BA pension fund and its liabilities, currently put at $4 billion.

 

The airline's management is also understood to have been split on the BA deal with those who supported it seeing the failed deal as a lost opportunity.

 

The end of merger talks leaves Qantas looking for a new partner in a climate where the opportunities could start to diminish as international aviation is liberalised.

 

Centre for Asia Pacific Aviation executive chairman Peter Harbison said Qantas would need to find a partner before it became marginalised in the push to consolidate. Mr Harbison said a deal with Malaysia Airlines, run by savvy ex-petroleum industry executive Idris Jala, appeared the most likely partnership option in Asia.

 

Qantas held unsuccessful exploratory talks with Malaysia earlier this year and executives say it does not have any active merger discussions on the cards at this stage. The Malaysians have since indicated they are still willing to talk.

 

"I think that could be quite an effective operation," Mr Harbison said. "Really, get Jetstar installed there and you are well into Asia.

 

"But then again, you have still got to do the deal and Idris is no pushover."

 

Mr Harbison said a merger with Singapore Airlines, often touted as a good match, was unlikely because of questions of control and potential competition issues.

 

He believed another possibility often raised, Cathay Pacific, was also unlikely, as were Thai Airways, Garuda, Philippine Airlines and the Chinese carriers.

 

However, he did not rule out a possible partnership with another European carrier or Japan Airlines in the longer term.

 

"They have certainly run the flag up the pole and because everybody at the moment is chasing around looking for dance partners before the music stops, it is an important activity to be involved in," he said.

 

"You have to do something now or your options will be abbreviated."

 

Sources close to Qantas also suggested Malaysia was the most likely match for the airline in this region.

 

 

[Keith T 2]

He believed another possibility often raised, Cathay Pacific, was also unlikely, as were Thai Airways, Garuda, Philippine Airlines and the Chinese carriers.

 

Find me an alliance that contains members who hate each other more than CX and QF!

[Eugene Koh 4]

AirAsia-Jetstar merger brewing

By B.K. SIDHU

 

 

Airlines’ bosses mulling over idea

 

PETALING JAYA: Something may be in the air between Qantas Airways Ltd and AirAsia Bhd. If things work out, a merger between AirAsia and the Australian carrier’s units Jetstar and JetstarAsia may be in the offing.

 

The talks are still in preliminary stages and it is learnt that AirAsia’s boss Datuk Seri Tony Fernandes and Qantas new chief executive officer Alan Joyce have been mulling over it. They last talked on the issue last week, a source said.

 

This comes at a time when Malaysia Airlines (MAS) is also in talks with Qantas for a possible alliance, but any alliance between Qantas and MAS will be between the network airlines.

 

 

Last week Qantas and British Airways announced the calling off of plans to merge into a mega carrier after failing to agree on key terms. The merger could have created an A$8bil plus carrier by market value with a fleet of about 500 planes.

 

The end of talks with BA opens new doors for other players such as MAS and AirAsia to search for synergies with Qantas. Now the brewing merger involves the low-cost carriers – AirAsia, Melbourne-based Jetstar and Singapore-based JetstarAsia.

 

Fernandes, when contacted yesterday, told StarBiz that “we are always talking and looking at ways to strengthen AirAsia into a global brand. If there are opportunities of equals which will enhance the brand, then it is something worth considering.’’ He declined to comment further.

 

Qantas’ Joyce was not immediately available for comment.

 

But a Qantas spokesman, in an e-mail response to a query from StarBiz, said: “We talk to airlines all the time about possible partnerships, relationships and cooperative agreements.’’

 

Jetstar’s Australian operation is wholly owned by Qantas but is managed separately and operates independently. Jetstar’s intra-Asian operation – JetstarAsia – is a Singapore-based partnership between Qantas (49%), local businessmen Tony Chew (22%) and FF Wong (10%), and Temasek Holdings (19%). JetstarAsia officials declined to comment when contacted yesterday.

 

In an economic downturn when passenger traffic is on a decline, airlines look to cooperate by forming code shares, alliances, strategic partnerships and even mergers to sustain operations. If a merger shapes up, it could possibly involve a share swap, a source said.

 

“A possible merger of Jetstar, JetstarAsia and AirAsia would mean that the operations of the airlines will be merged to create a stronger airline which could potentially be known as AirAsia/Jetstar with a larger network, a bigger aircraft fleet and wider access to many more markets.

 

“There are synergies by combining AirAsia and Jetstar. With a merger, passengers from Asia will have wider choices to fly to Asia, Australia, New Zealand, India, China and even Honolulu (via Jetstar),’’ he said.

 

The Kangaroo route (from any Australian point to KL and on to Europe) is a possible route that these airlines will capitalise on. Jetstar stopped flying the Sydney-KL route in September due to the economic slowdown.

 

Qantas and MAS talks were still progressing, another source added. He said the alliance would be modelled alongside the KLM/Air France structure. That model allows MAS to retain its identity.

 

MAS first began talking to Qantas a year ago.

 

Yesterday Qantas also announced that it has reduced its international and domestic fuel surcharges for the third time in recent months because of falling oil prices.

 

The new surcharges apply to tickets bought on, or after, Dec 23. Qantas executive general manager John Borghetti said the group’s fuel bill this financial year would still be A$400 million higher than in 2007/08. The surcharge has been cut by A$20 to A$35 for shorter-haul Asian destinations such as Bali.

 

The fuel surcharge for a one-way ticket from Australia to the United Kingdom and Europe has been cut by A$30 to A$160.

 

Qantas joins the league of airlines that are reducing fuel surcharges since crude oil prices have fallen over 70% from its July height of US$147 a barrel.

 

 

[KK Lee 5]

Merger between AK and JQ don’t add value or cost saving to the merged company, it make more sense to form an alliance.

 

Local media is known to report ‘leaked’ news on merger to churn up beaten down stock price e.g. ‘potong and vw’, ‘MAHB and Schipol’; can only take these news with a pinch of salt.

 

[Radzi 2]

Interesting poll in Utusan Online today.

 

o Bancian

18 Disember 2008

Daripada MAS bergabung dengan Qantas, lebih baik ia bergabung dengan AirAsia.

Setuju

66.6%

(5135)

Tidak setuju

24.9%

(1923)

Tidak kisah

8.4%

(650)

Jumlah Undi: 7708

[Kenneth T 0]

Any merger may implies a possible lost of shareholding by either side, i dont think that's going to happen in Malaysia.

[Eugene Koh 4]

Slightly off topic and not worth setting up a new thread!

 

Since MH is doing lots of MRO for Qantas, does anyone in KL manage to capture shots of QF

planes in KUL? Haven't seen one in Airliner or Jetphotos or Msian Wing so far.

 

Other wish would be to see 2 or 3 (even better) of SQ A380s in Spore.

[Walter Sim 1]

seen Wunala taken by Capt Radzi a while back ago !

[kandiah k 0]

Asia the perfect fit for QantasFont Size January 10, 2009

Article from: The Australian

 

AFTER the termination of an $8 billion merger proposal with British Airways last month, speculation has resurfaced that Qantas has turned its attention to Asia and is looking into a tie-up with Asia's biggest budget airline, Malaysian-based AirAsia, or Malaysia Airlines.

 

Speculation emerged last month in Malaysia that Qantas and AirAsia were in preliminary talks about a merger deal, but they were quickly hosed down by both companies.

 

Yesterday, Qantas again denied the talks, saying it wasn't in merger talks with anyone at present.

 

But with consolidation going on globally, driven more by the need to boost profits than being the biggest carrier, it is only a matter of time before Qantas's new boss, Alan Joyce, puts his stamp on the company and does a deal.

 

Qantas is an end-of-the-line carrier that operates in an uneven regulatory, competitive and financial playing field.

 

To try to protect its bottom line, it has been reducing capacity on international routes to keep a lid on its costs.

 

But this is a risky strategy and the price it will pay is a permanent loss of high-value traffic to competitors, many of whom are increasing inbound capacity into Australia over the next few months. Even more alarmingly, some have long-term agendas in this region.

 

The upshot is that industry consolidation is the most logical longer-term fix to this fundamental issue for Qantas.

 

The natural place for consolidation is Asia, particularly Malaysia, which is emerging as an airline hub, particularly since the Government's recent decision to open up inter-capital city routes.

 

For this reason, doing a deal with AirAsia can't be ruled out.

 

It is a publicly listed company with a market cap of about $US603 million ($852 million) and its colourful chief executive, Tony Fernandes, who launched the airline just two months after the attacks of September 11, 20001, when few wanted to fly, was recently forced to cancel a plan to privatise the airline after failing to get finance. Since then, the share price has continued to fall, making a tie-up a cheap option for Qantas.

 

AirAsia would certainly increase Qantas's footprint in Asia, but it would be a clear admission that its own Jetstar Asia strategy had failed.

 

The Qantas board obviously has a lot of faith in the budget airline model given its decision to appoint Joyce, the former head of Jetstar, as the new head of Qantas during the toughest industry conditions since 2001.

 

In such tough times, airlines with the lowest cost base are the ones most likely to survive. His international airline experience was also another big factor in the appointment.

 

But doing a deal with AirAsia has its pitfalls, not least of which is: which airline would dominate in the merger?

 

Qantas is a powerful brand but it would be short-sighted to do a deal with a budget airline when it could do a more strategically complimentary deal with Malaysian Airlines.

 

Qantas held unsuccessful exploratory talks with Malaysia last year and it is understood that the Malaysians have since indicated they are still willing totalk.

 

The reality is the market is waiting to see Joyce put his stamp on Qantas -- before somebody else does. If Joyce is smart, he will talk to Graeme Samuel, chairman of competition regulator the ACCC, to sound out his attitude to an Air New Zealand/Qantas tie-up, which would offer numerous synergies.

 

The two airlines tried to do a deal a few years ago, but abandoned talks in late 2004 when the competition regulators on both sides of the Tasman knocked it back.

 

In changed conditions, with new governments, their views might well be different.

 

But putting aside the highfalutin ambitions of global expansion and any speculation on what might happen to Qantas if the OneWorld alliance falls apart, Joyce really needs to get the airline's house in order domestically.

 

He needs to re-engineer the airline's domestic service process, address customer satisfaction and improve conditions with the unions.

 

Whatever surveys the company brings up, mounting anecdotal evidence shows that Qantas has lost the mindshare of customers. The perception is Qantas doesn't care about safety, customer service or its employees.

 

If he really wants to win some market share back from Virgin Blue, he needs to look at more than just price.

 

Too many flight cancellations with little warning, flights running late, flight attendants with low morale, sour faces at check-in desks and poor IT systems have left a bad taste in many people's mouths about Qantas.

 

It is no surprise then that Qantas has been having a tough time holding on to market share as customers switch to Virgin Blue. In a bid to win back customers, as well as a reflection of continued weak demand, Qantas abolished the domestic fuel levy.

 

All of these tough conditions have prompted analysts to revisit their numbers.

 

Earlier this week, Citi analysts estimated net profit would fall from $970 million last financial year to $348 million.

 

The International Air Transport Association estimates that world airlines will lose a collective $5.2 billion this year.

 

Nevertheless, it is still operating in a duopoly with Virgin Blue domestically and for that reason Qantas will stay profitable in 2009.

 

This is in sharp contrast to some of its Asian brethren, some of which are expected to make a loss.

 

In the past year, Qantas's share price has more than halved to $2.55, and pressure is expected to continue as global economies fall into a recession, leaving airlines exposed to dwindling demand, falling prices and tough debt markets.

 

Running an airline is never easy, but Joyce has taken the helm at one of the tougher periods in recent history.

 

If he plays his cards right and starts to improve customer service, staff morale and management's relationship with the unions, he will set the airline up for better times ahead. That will mean less bad press, less safety issues, and less flight delays.

Edited January 13, 2009 by kandiah k