MPs angry over APA debt plan for Qantas

In a report last week by Scott Rochfort and Jacqueline Maley in the Sydney Morning Herald, it appears that APA’s plans to take billion of dollars from Qantas’ balance sheet have angered some Federal MPs, who feel they have been misled by the private equity consortium bidding for the national carrier and it has prompted calls for a fresh review of the bid.

Four months since launching the bid, the consortium left it until Thursday to disclose its plans to load an extra $1.7 billion of debt into Qantas and take $4 billion from its balance sheet in its first year of ownership, with Senator Barnaby Joyce saying, “They are not playing with their money, they are playing with everybody else’s money and they are playing with our economy”, adding, “This deal had hairs on it from the start and it’s getting hairier by the moment.”

Senator Joyce questioned why APA had left it until this week to reveal its plans to take $4 billion out of the airline within one year of gaining control, saying, “This could be implied by some to be misleading,” adding that it was not disclosed when Treasurer Peter Costello and the Foreign Investment Review Board reviewed the deal and approved the bid.

Federal Liberal MP Bruce Baird said APA’s plan was “a real concern”, adding, “Perhaps in the light of these new aspects of the bid further review should be carried out on it”.

Due to the high levels of debt involved, Mr Baird said he was worried APA could find it harder to abide by the undertakings provided to the Government, such as not to cut the Qantas Frequent Flyer program or regional services.

Mr Costello is not expected to change his position, as when he approved the deal in March, he said it was not his job to determine how much debt companies should carry on their books.

Australian Shareholders Association Executive Director Stuart Wilson said it would be the taxpayer who paid the bill if the Government was forced to bail out Qantas, saying, “Whilst the private equity players get their money back and more”.

The prospect of a riskier investment is swaying Adelaide investment house Argo Investments to consider accepting the APA offer for its Qantas shares, with Rob Patterson, Managing Director of Argo, which owns 2.9 million Qantas shares saying,  “We’re still tending to think we’ll accept,” adding, “The main reason will be the risk from dramatically increased leverage in the business.”

Qantas offered a fresh round of voluntary redundancies on Thursday to 50 line maintenance staff and an undisclosed number of “surplus” short-haul cabin crew, this coming on top of the 150 long-haul cabin crew offered redundancies on Wednesday, with the cuts to flight crews come despite the airline recently announcing a boost to its domestic services.

The cuts also come amid speculation that Qantas may soon issue its fourth profit upgrade since late last year, thanks to the airline reporting its best passenger loads in more than a decade, with its latest figures showing it filled a record 86.6% of its international seats in January, the high loads are making it increasingly hard for passengers to get seats on flights, particularly to the US.

“Australia-US (route) is a stand-out because there are not many planes flying it,” said Flight Centre spokesman Haydn Long. “The UK is also a bit of an issue at the moment.”

Report by The Mole from The Sydney Morning Herald