MERGER NOT A FAIT ACCOMPLI: QANTAS CEO
9 December 2008
MATHEW MURPHY, AVIATION REPORTER, SYDNEY
QANTAS chief executive Alan Joyce says the proposed merger with British Airways may come to nothing, with three "big issues" still to be navigated even before regulators and the Government take a look at it.
In his first speech as Qantas chief executive, and his first speech since the BA merger talks were leaked to the media last week, Mr Joyce played down any notion that the merger was a fait accompli. He said it was still "early days" and that Qantas needed to work through the merger ratio that would deliver the most value for Qantas shareholders, issues related to BA's pension fund, which has liabilities of about $4 billion, and market conditions.
"We have said today that there are a number of significant hurdles that we have to overcome and the pension fund is one of those significant hurdles," he said. "We are still at the early stages of this. There is a lot of discussion, a lot of reviews that need to be done before we get comfortable with the pension fund, the current economic environment relating to this transaction and the whole merger ratio and the value for Qantas shareholders.
"There is a reasonable chance that this may not go ahead. We ... have significant hurdles to overcome, so there is absolutely no guarantee the transaction will be forthcoming. We won't proceed with the transaction unless ... it creates value for Qantas shareholders and takes us to the next level."
In response to BA's rival merger talks with Iberia, Mr Joyce said he had made it clear to his BA counterpart, Willie Walsh, that BA would have to decide between the Spanish carrier and Qantas.
"When you explore dialogue with any carrier, the likelihood is that the carrier will have multiple dialogue going on," he said. "BA is conscious, as Iberia are and we are, that only one of these transactions can take place."
Mr Joyce said Qantas was not in talks with any other airline but admitted it was interested in exploring a possible tie-up with an Asian carrier.
"Potentially any merger of BA, if that is the way we decide to go, does not preclude us doing something in Asia eventually, and we believe there are going to be potential opportunities in Asia and around the world, and we will look at all opportunities," he said.
"We are of the belief that consolidation is the way the industry will go forward and there are revenue and cost synergies in tying up with partners across the world."
Mr Joyce refused to give details of the scale of those synergies in the BA proposal but analysts predict no more than about 2per cent of the $36billion in revenue the mega-carrier would rake in every year.
Mr Joyce told an Australia-Israel Chamber of Commerce lunch in Sydney that airlines in the future would be grouped as hub carriers, mega-carriers or niche carriers, with Qantas keen to participate in the globalisation of the industry.
He said that could be done while retaining majority Australian ownership, an Australian headquarters and a vast majority of Australian employees.
Qantas shares closed 16 higher at $2.38.
KEY POINTS
Pension fund a significant barrier.
Merger won't proceed unless it creates value for Qantas shareholders.
Qantas interested in exploring link with an Asian carrier.
©008 Copyright John Fairfax Holdings Limited. www.theage.com.au
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