Pilots get in the fight for Qantas

A report in The Australian today says that Qantas pilots are considering a plan to personally invest $50,000 each as part of a “blocking stake” to stop the airline’s $11 billion sale to a private equity consortium backed by Macquarie Bank.

The stake by 2500 pilots would form part of a union campaign to encourage shareholders to reject the $5.60 a share offer from the consortium, Airline Partners Australia, to buy Qantas and turn it into a private equity company.

Unions are deeply worried that the bidding consortium plans to slash jobs, sell assets, cut regional routes and send maintenance work offshore to pay off debt, if the sale to a private investment fund is successful.

Australian and International Pilots Association president Ian Woods said yesterday Qantas’s 2500 pilots may be prepared to invest in 1% of the stock — worth about $110 million, if enough shareholders were willing to hang on to their investments to block the bid.

The consortium bidding for Qantas has said the deal will not go through unless it acquires the 90% of shares necessary to force a compulsory acquisition of the other 10%.

Mr Woods said, “It’s an option that the pilots would consider, and it may well be in their long-term interests, but not until the 8 or 9% of people not willing to sell is forthcoming”.

Mr Woods said thwarting the Qantas sale deal could also depend on the support of union-friendly superannuation interests, with unions launching a campaign urging shareholders to ignore the windfall from the $11 billion bid for Qantas, with the ACTU trying to persuade shareholders the deal is bad for the public and the airline.  

ACTU airlines spokesman Richard Watts said unions did not regard the sale as a good transaction in the interest of shareholders, the public or the airline and that the ACTU would encourage people not to sell, saying, “Essentially, what we’re saying is Qantas is a good long-term investment”. “They might make a few bucks if they sell now, depending on when they bought, but they will forgo a good long-term investment.”

Mr Watts said the campaign would also focus on the potential impact of the heavy level of debt the takeover would involve on the economy as a whole.

The Qantas board on Thursday approved a $5.60-per-share bid for the airline, saying it provided shareholders with a 33% premium on the November 6 closing price and better reflected the carrier’s true value.

Australian Competition and Consumer Commission chairman Graeme Samuel said yesterday he would investigate concerns raised about the bidding consortium holding an interest in Sydney Airports Corporation at the same time as it potentially owned Qantas.

Mr Samuel told The Australian the ACCC was conducting a “normal process” to be concluded by February 22, but market concerns about competition demanded a rigorous review.  “This is a very high-profile takeover,” he said. “Our focus is on competition, despite concerns others have raised about foreign ownership.”

The bidding consortium claims it will be “business as usual” at Qantas following the sale and that it has no plans to break up the airline, cut regional routes or send maintenance jobs offshore, but analysts are already speculating on potential asset spin-offs.

JP Morgan’s Matt Crowe estimated that more than $2.5 billion worth of assets could be sold with a low degree of difficulty and these include the airline’s terminals, frequent flyer program, catering unit and holidays business.

Deputy Prime Minister and Transport Minister Mark Vaile yesterday gave no indication about whether the Qantas sale would get government approval, saying that the Government was keen to examine the competition aspects of the takeover, including any conflict of interest for Macquarie Bank, given its airport interests, adding, “Obviously, we will watch that very closely”.

Mr Vaile also ridiculed suggestions Qantas would wind back its popular frequent flyer program. “Commercially, if the new owners wanted to start dismantling that, it would be commercial madness and it’s not my decision, but you invest $11 billion into something, the strength of which is the brand — Qantas and One World.”  

Australian Workers Union national secretary Bill Shorten called on the consortium to reveal its plans for the airline and said Treasurer Peter Costello should ask serious questions about the sale, with Mr Shorten fearing maintenance work would go offshore and cheaper pilots could be sought outside Australia in a bid to cut costs and pay off debt.

Mr Woods admitted that his “blocking stake” proposal was a risky strategy, saying it would be difficult for Qantas investors to knock back the existing deal, but he said Qantas had provided reliable revenue streams and there could be people prepared to take a longer-term view.

The pilots’ union is also attempting to talk to the proposed private equity owners about its concerns and ways its members could take a role in the new structure.

The pilots’ enterprise agreements are currently open, meaning they are able to take protected industrial action and they already have concerns about plans by management to concentrate on low-cost carrier Jetstar, a move they believe will come at their expense by reducing wages and conditions.

Report by The Mole from information in The Australian