Thursday, December 14, 2006

Goodbye Qantas? Good Buy Qantas?

Australia’s national airlines, Qantas, is being taken over by a consortium of equity funds who will de-list the airline, taking it private. They say they won’t be breaking up the airline or making any other drastic cuts.

The Melbourne Age quoted the consortium’s leader,
Bob Mansfield, as saying:

“We have a longer term perspective than the day-to-day equity market.”

If that’s true, and they really do offer “patient capital” as they claim, it would have to be something of a world-first among such firms. The whole point of equity firms is to maximise returns for shareholders. They won’t care about unions or even preserving the national identity of Qantas, they’ll only pay attention to their returns.

Qantas and Air New
Zealand twice tried to stitch up deals together, but both times they were rebuffed by regulators in both countries. It’s probably inevitable that both airlines will disappear one day, probably after being acquired by bigger companies.

So, Australians are probably kidding themselves if they think their airline can go on forever owned by equity firms. If it does continue long term, it would probably come as the result of another buy-out by local investors. Personally, I doubt that’ll happen.

More fun facts to know and tell for my American friends: The name Qantas is an acronym from the company’s original name,
Queensland and Northern Territory Air Service, which is the market it initially served.

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