07 May 2007

Qantas Deal Collapses - What's next?

If it sounds too good to be true then it must be....

Suffice to say - APA (basically McQuarie and TPG) - received a bloody nose from the regulator and the stockholders and said - you cant ride roughshod over the national icon. The problem is that the perception of value and the actual value in the marketplace are not aligned. The shareholders all believe that there was some monkey business with a bleak future prospects put out when the bid was announced. Yet the performance of QF and the various subs has been much better than the regime of Mr Dixon would have us all believe. Plus the chaps at TPG were really struggling to make the deal work. It was marginal at best.

The Flying Kangeroo is somewhat therefore in limbo. The senior management find themselves in a quandry because unless APA or either partner makes a bid very soon - then at least the Chairwoman's head must roll.

The market for airline stocks is going to be good for the summer and in Oz perhaps even longer given the tight lock that QF currently has on the market. But perhaps not for long. The Canberra government cannot fend off SQ's desire for a seat at the US-OZ highly lucrative market. Not to mention the start soon of Virgin/Pacific/Blue Something's 777 service coming in 2008.

With AMR looking to suffer a summer of labor discontent (Pilots want 30%+ raises) those PE (Private Equity) Funds need to find somewhere to put some of that cash. Remember the old adage - how to make a million? Start with a billion and buy and airline.

Good Luck QF - Flying Solo is probably your best option at this point. But do make sure that you focus on the back door... there are many barbarians at the gate and you cannot rest on your laurels. (I love a mixed metaphor or 3)!



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