Dixon puts his legacy on the line
A report in The Age says that speculation has emerged that Qantas chief executive Geoff Dixon may use his final year at the helm of the Kangaroo carrier to forge a merger or “regional alliance” with Singapore Airlines.
The merger idea first surfaced in 2004 before Qantas reportedly went cold on the idea, fearing it could eat into its lucrative Pacific route, which Singapore Airlines has been trying to break in on for years. Gossip out of the Qantas board meeting in New York last week indicates the subject has been raised again.
A merger could be attractive as high oil prices continue to attack airline earnings. However, it would undoubtedly be of interest to the Australian Competition and Consumer Commission too.
Singapore and Qantas have long been bitter rivals and the acrimonious relationship between the two has been passed down to the pair’s low-cost carriers, Jetstar and Tiger Airways, in the Australian domestic market.
A happy marriage between Singapore and Virgin would seem more likely, subject once again to competition and regulatory approval. There is no doubt that Toll Holdings’ Paul Little would be more than happy to sell his company’s 63% stake in Virgin for the right price. The airline continues to drag down the logistics company, which abandoned plans to offload its stake in April because of the sharemarket downturn.
A partnership between the two could help Singapore get a start on the Pacific route as Virgin Blue’s VAustralia begins international operations later this year. At a minimum, it could provide VAustralia with more capacity to break Qantas’ stranglehold on the route. It would also allow Virgin Blue to take on Qantas at the top end of the domestic market and leave Tiger Airways to compete with Jetstar in the budget and leisure travel markets.
If Dixon presided over a failed merger between Singapore and Qantas, having also had to endure the embarrassment of the spectacular crash landing of the $11.1 billion private equity bid for the airline, his legacy would be seriously tarnished.
A Report by The Mole from The Age
John Alwyn-Jones
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