Quotes: MENA   Enter Symbol: NewsLetter: Search: advanced

Qantas opens door to foreign investors  Join our daily free Newsletter

MENAFN - Arab News - 28/08/2014
No. of Ratings : 0
Add to Mixx!

(MENAFN - Arab News) SYDNEY: Qantas Airways Ltd. is looking past its record annual loss and predicting blue skies ahead as a landmark change in Australian laws opens the door to foreign investment in the airline's international arm its biggest headache.

A funding injection into its international division would allow Qantas to better compete on price and service offerings with rivals whom it says are bolstered by unlimited funding from wealthy state backers.

It would also support Qantas' plans to re-configure its aging fleet invest resources in popular routes and further enlarge its global network partly through its partnership with Emirates Airline.

Qantas said it expected to return to profit sometime in the current financial year.

The surprisingly positive outlook gave the airline's shares their largest one-day percentage gain in a year.

The so-called 'Flying Kangaroo' has been bruised by high fuel costs a strong Australian dollar increasing international competition and a domestic price war with arch-rival Virgin Australia Holdings.

Qantas International has been the biggest drag on the airline's earnings with its loss for the year ended June 30 the largest among the carrier's divisions and doubling from a year earlier.

Aviation experts also point the finger at Chief Executive Alan Joyce and his management team criticizing ill-fated moves such as the rollout of its low-cost Jetstar subsidiary in an already crowded Asian market.

Joyce acknowledged that a record A2.8 billion (2.6 billion) annual net loss and an underlying loss before tax of A646 million were 'unacceptable' but vowed that 'the worst is over.'

The headline loss was almost entirely due to a A2.6 billion non-cash writedown in the value of Qantas' fleet as it restructured to take advantage of new domestic laws allowing greater foreign investment.

In the biggest restructure since Qantas was privatised two decades ago the airline is hiving off its international arm from its domestic unit. The move will allow a foreign airline to take as much as a 49 percent stake a major change from the previous 35 percent limit.

'The changes to the Qantas Sale Act have removed a significant impediment for Qantas to be involved in long-term consolidation' Chief Financial Officer Gareth Evans said in Sydney.

'By providing a separate subsidiary you give an option for a foreign investor to take equity directly in the international business' he said.

Still analysts cautioned the airline against expecting a rush of foreign investors on its doorstep any time soon with current alliance partner Emirates seen as the only likely candidate.

'I think the most logical partner would be Emirates because they've already got relations with them but there is a lot of speculation that continues to occur and the business should just focus on improving its underlying operations' said David Liu head of research at Above The Index Asset Management Pty Ltd.

Joyce said that foreign investment was a long-term strategy and the focus remained on a A2 billion turnaround program that includes stripping costs freezing capacity and slashing 5000 jobs.

'We are focused now in the short to medium term on the transformation program' he said. 'We are not actively out there looking for an airline investor.'

Qantas shares were up 7.3 percent in midafternoon trade at A1.39 a three-month high and the biggest intraday gain in a year. The stock reached an all-time high of A6.05 in 2007 before the global financial crisis hit.


The headline A2.8 billion loss overshadowed a smaller-than-expected underlying loss before tax of A646 million compared with a restated A186 million profit a year earlier. Analysts had on average anticipated an underlying loss around A750-770 million.

Joyce said there was a 'clear and significant' easing of both international and domestic capacity growth and the airline expected 'rapid improvement' in its financial performance with a return to underlying profit before tax in the first half of the current year.

Bell Potter analyst John O'Shea said there was evidence that domestic airfares have stabilized which was a positive sign for the sector generally but added that Qantas needed to commit to backing away from its price and capacity war with Virgin.

Analysts expect Virgin to post a A250-270 million pre-tax loss when it reports earnings on Friday with both airlines caught out by excess capacity in global markets and moves by international carriers to increase capacity into Australia.

'Looking at how bad the result is maybe it will be a catalyst for them (Qantas) to actually behave more rationally in relation to pricing' O'Shea said.

Joyce said that Qantas would extend a freeze on increasing domestic capacity into the first half of the current year.

In stark contrast to the Australian carriers Air New Zealand Ltd which owns around 26 percent of Virgin Australia on Wednesday reported a 44 percent jump in annual net profit to NZ262 million.

The New Zealand flag carrier also said it planned to significantly grow capacity this year.

Despite an investor push for major asset sales Joyce said a review of its profitable Frequent Flyer loyalty scheme which analysts value at up to A2.5 billion had concluded there was 'insufficient justification' for a partial sale.

However he said the airline had identified other potential asset sales including airport terminals property and land holdings.

Any proceeds from such sales would be used to repay debt.


Arab News

  MENA News Headlines
 Oct 10 2015 - Al Masah plans USD299m healthcare expansion across GulfMENAFN
(MENAFN) Al Masah Capital Limited has revealed plans to invest around USD299 million to support the growth and regional expansion of its newly-rebranded healthcare private equity initiative.The ...

 Oct 10 2015 - UAE Eagle Hills starts work on USD3b Belgrade Waterfront projectMENAFN
(MENAFN) Eagle Hills, a UAE-based private investment and real estate development company has announced the start of construction of its flagship development in Belgrade.Belgrade Waterfront, the ...

 Oct 10 2015 - Dubai's hotel revenues down 10.1 percent in AugustMENAFN
(MENAFN) Four- and five-star hotels in Dubai reported weakening performance levels in August, with revenue per available room (RevPAR) declining 10.1 percent to USD147.45.Figures from hospitality ...

 Oct 10 2015 - UAE-Work place etiquette to abide byKhaleej Times
(MENAFN - Khaleej Times) Last week I was invited to facilitate an Emotional Intelligence training programme for 22 participants at an interior decorating firm. Their ...

 Oct 10 2015 - Asiri hails UAE s role in Arab coalition says no safe havens to rebellious militiasEmirates News Agency (WAM)
(MENAFN - Emirates News Agency (WAM)) DUBAI 10th October 2015 (WAM) - Spokesman of the Saudi-led Arab coalition forces Ahmed Asiri has praised the played by the UAE in the coalition and the ...

 Oct 10 2015 - Hamdan bin Mohammed Launches 'Taqdeer Award' to Recognize Excellence in Labour Welfare PracticesEmirates News Agency (WAM)
(MENAFN - Emirates News Agency (WAM)) - Crown Prince of Dubai: "The Award reflects the importance that Dubai places on ensuring progressive labour practices in line with global standards" - ...

 Oct 10 2015 - Saudi-Celebrity clockmaker thanks KSA on arrivalArab News
(MENAFN - Arab News)JEDDAH: Talented American student of Sudanese origin Ahmed Mohammed Al-Hassan arrived in Jeddah on Friday morning to perform Umrah and visit his relatives. The Kingdom last week ...

 Oct 10 2015 - Israelis worried but defiant amid wave of stabbingsGulf Times
(MENAFN - Gulf Times) Israelis are deeply unnerved in the midst of a spate of stabbings that have brought back memories of previous Palestinian uprisings, but say they are ready to "confront" any ...

 Oct 10 2015 - Kingdom job seekers' paradiseArab News
(MENAFN - Arab News)JEDDAH: The Eastern Province Riyadh and Jeddah are among the most sought after locations for job seekers in the Middle East North Africa (MENA) region a new study has found. The ...

 Oct 10 2015 - Saudi summons Czech envoy over 'Satanic Verses'Gulf Times
(MENAFN - Gulf Times) Saudi Arabia has summoned the Czech ambassador over a translation of British writer Salman Rushdie's controversial book "Satanic Verses", official media said on Friday. The ...




Click to Apply


Middle East North Africa - Financial Network

MENAFN News Market Data Countries Tools Section  

Middle East North Africa - Financial Network

Main News
News By Industry
News By Country

Islamic Finance News
Private Equity News

How-To Guides
Technology Section

Travel Section

Search News

Market Indices
Quotes & Charts

Global Indices
Arab Indices


Oil & Energy

Currencies Cross Rates
Currencies Updates
Currency Converter

USA Stocks
Arab Stocks

Saudi Arabia 

Economic Calendar
Financial Glossary

Financial Calculators

RSS Feeds [XML]

Corporate Monitor


Real Estate
Submit Your Property

Arab Research
Buy a Research

Press Releases
Submit your PR

Join Newsletters

© 2014 menafn.com All Rights Reserved.  Terms of Service | Privacy Policy | Contact Us | Advertise | About MENAFN | Career Opportunities | Feedback | Help