Qantas bidders buckle on review

The Australian AVIATION, February 5, 2007

Joseph Kerr and Steve Creedy


THE consortium of Australian and foreign companies behind the $11 billion Qantas takeover will submit its plans today for government approval after buckling in the face of growing political concern about the bid.
After insisting for weeks that the sale did not amount to a foreign takeover, Airline Partners Australia agreed last night to voluntarily submit its bid to the Foreign Investment Review Board, raising the prospects of the Government imposing conditions on the sale.
The move might help quell growing backbench nervousness among government MPs, but will put Peter Costello -- who as Treasurer could have the power to approve or block the bid -- under huge pressure, with polling to be released today showing immense public opposition to the Qantas sale, particularly among Coalition voters.

The polling, carried out for the ACTU in marginal Coalition seats and showing that 80 per cent of people are opposed to the unconditional sale of Qantas, echoes widespread concerns among government MPs about the political fallout the debt-laden buyout could attract in an election year.

Unions will this week conduct a series of meetings on Qantas with Coalition politicians in Canberra, with Transport Workers Union officials lining up 45 government MPs for talks between tomorrow and Thursday.

Last night, APA -- which is locally backed by Macquarie Bank and plans foreign ownership levels of almost 40per cent -- insisted it was an Australian company, but agreed to submit its bid to the Foreign Investment Review Board anyway.

If Mr Costello believes a takeover bid submitted to the board would see foreigners control an Australian company and pose a threat to the national interest, he can impose conditions on the deal.
"Although we are not foreign and (the Foreign Acquisitions and Takeovers Act) does not apply because we are majority Australian-owned and controlled, we have chosen to lodge a voluntary notification under FATA in order to most effectively give accountable undertakings to the Government regarding our plans," said APA director Bob Mansfield.

"We want to provide assurances that our experienced group of aviation investors and patient approach to investment in the aviation sector will provide a sound foundation for Qantas to grow and prosper under the continued management of Geoff Dixon and his team."

Coalition MPs are concerned about the level of debt Qantas will be asked to carry under the deal, and also the massive profit the consortium plans to make within only a few years -- a profit that to some suggests a breakup of assets might be on the cards.

Brisbane airport and Virgin Blue have raised concerns about the possibility of collusion between Qantas and Sydney airport -- the nation's biggest airport -- which is owned by Macquarie Bank.

The suggestion was sharply rejected, with Sydney airport chief executive Russell Balding saying it was offensive. Analysts have also questioned the lack of detail in the bidder's statement about how APA plans to lift the airline's profitability to justify the $2.5 billion to $3 billion premium applying to its $5.60-a-share bid.

Mr Costello yesterday broke his silence over the issue, welcoming the fact the bidders had decided to apply for foreign investment approval.

"The Government's view has always been that such notification should be made, a view I put to all the proposed equity partners on Wednesday last," Mr Costello said. "Once notification has been made, the application will be dealt with in accordance with the act. This will allow the FIRB to carefully scrutinise the application."

The political pressure will now fall to Mr Costello and the FIRB, with the ACTU's polling -- conducted by social research specialists Auspoll -- showing 80per cent of respondents opposing a sale without government conditions and 94 per cent saying Qantas should be forced to maintain regional services.

A total of 86 per cent said that under the new ownership structure, Qantas should not be allowed to send more jobs offshore, while 84 per cent said maintenance work should not be carried out overseas.

ACTU secretary Greg Combet yesterday welcomed the decision to open the deal to an FIRB inquiry but said the move did not resolve the concerns people had about it or guarantee that conditions would be placed on the sale.

"We think that a political process is going to be necessary as well and one of the first steps of that is to have a parliamentary inquiry into these issues and test the national interest considerations," Mr Combet said.