Qantas Predicts Another Airline will Buy In Now Restrictions Are Looser

Qantas Predicts Another Airline will Buy In Now Restrictions Are Looser

Qantas Airways expects another Airline will buy a stake in the Australian carrier over the longer term now that some Foreign Investment Restrictions have been lifted, says chief Financial officer Gareth Evans.

In terms of the way we view the landscape for us we have always been fans of consolidation whether it be through commercial arrangements or stronger ties, more equity ties we have certainly been fans of that, he said at the CAPA Australia Pacific Aviation Summit on Thursday. Consolidation is the way of the future for the aviation industry. But at the same time it never happens quickly.
Changes to the Qantas Sale Act mean a foreign airline could own up to 49 per cent of the Australian carrier, although that would restrict its ability to have any Foreign Institutional shareholders, which currently comprise about 40 per cent of the share register.

It is not complete removal but it is certainly a step in the right direction, Mr Evans said. Consolidation is a long term proposition.

British Airways once owned 25 per cent of Qantas and Mr Evans said that relationship had worked well at the time.
He said it would be logical for Qantas to have an equity partner in Asia in the future but did not rule out interest from other regions, particularly given Dubai based Emirates is a major commercial partner of the Airline.

The relationship with Emirates, which is a form of consolidation  albeit a commercial one brings significant benefits in terms of learnings between the two partners, collaboration on key routes and pricing, he said. It can in the fullness of time lead to initiatives around costs as well. That isn't something we have addressed with Emirates yet, but you can see that happening over time.

Mr Evans said the partnership with Emirates was performing to Qantas financial expectations in light of a Tough International market with an oversupply of capacity. He said International capacity growth to Australia was expected to moderate to a level of about 3 to 4 per cent this year following a 46 per cent rise over the previous four years.
In the domestic market, Qantas has said it will freeze capacity in the current quarter. Mr Evans said the Airline had yet to decide on its December quarter capacity plans and he said it would be difficult to predict the outlook for 2015.

We had some unemployment figures out today a little worse than people anticipated, he said. We'll see what that means with interest rates. We still have the residual consumer confidence figures. We'll have to see how that plays out. But the Domestic Aviation Market is pretty robust. The weakness we are seeing today can turn around pretty quickly."
Qantas is expected to report a full-year underlying pre tax loss of more than $700 million on August 28. The Airline has embarked on a big restructuring plan, with $2 billion of costs to be cut over three years, nearly $1 billion of which will come from its international business.
Mr Evans said employee morale at Qantas had taken a hit as a result of the airline's decision to slash 5000 jobs as part of the cost-cutting plan.
He said morale was expected to improve once the transformation program was completed.
The employees at Qantas have a tremendous passion for the organisation, he said. This truly is an iconic business that tugs at the heartstrings of a lot of people, and especially the employees that work there.

CAPA Australia Pacific Aviation, 
Qantas Airways expects another Airline will buy a stake,
Domestic Aviation Market is pretty robust,
British Airways once owned 25 per cent of Qanta,

Mohini Porwal [ B Sc]
Trainee News Editor


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