Qantas bidders agree to submit to Foreign Investment Review Board scrutiny

Amongst a flurry of media reports and speculation, Airline Partners Australia, the consortium of Australian and foreign companies behind the $11billion Qantas takeover, after insisting for weeks that the sale was not a foreign takeover of Qantas, in the face of growing political concern about the bid, will today voluntarily submit its plans to the Foreign Investment Review Board, raising the prospects of the Government imposing conditions on the sale.

The move might also help reduce growing backbench nervousness among government MPs, but at the same time, it will put Peter Costello, who can approve or block the bid, under massive pressure, with polls due to be released today showing immense public opposition to the Qantas sale, particularly among Coalition voters.

The polling, while carried out for the ACTU in marginal Coalition seats, shows that 80% of those polled are opposed to the unconditional sale of Qantas, echoing widespread concerns among government MPs about the political fallout the debt laden buyout could attract in an election year.

The Unions have also cranked up their campaign in Canberra with a series of meetings on Qantas taking place with Coalition politicians with 45 government MPs lined up for talks.

APA, which is locally backed by Macquarie Bank and plans foreign ownership levels of almost 40% mainly through Texas Pacific, remains insistent it is an Australian company and while confident that it is not required to do so, has agreed to submit its bid to the Foreign Investment Review Board.

The submission for review though does open up the possibility that if the Board believes that the material submitted to the Board will see foreigners controlling an Australian company and also posing a threat to the national interest, Mr Costello can impose conditions on the deal.

APA director Bob Mansfield said, “Although we are not foreign and the Foreign Acquisitions and Takeovers Act does not apply because we are majority Australian-owned and controlled, we have chosen to lodge a voluntary notification under FATA in order to most effectively give accountable undertakings to the Government regarding our plans.”

He added, “We want to provide assurances that our experienced group of aviation investors and patient approach to investment in the aviation sector will provide a sound foundation for Qantas to grow and prosper under the continued management of Geoff Dixon and his team.”

Coalition MPs are concerned about the level of debt Qantas will be asked to carry under the deal, and also the massive profit the consortium plans to make within only a few years, a profit that to some suggests a breakup of Qantas’ assets might be on the cards.

At the same time, Brisbane and Melbourne Airports and Virgin Blue have raised their concerns about the possibility of collusion between Qantas and Sydney Airport, which also happens to be owned by Macquarie Bank, but the suggestion has been sharply rejected, with Sydney airport chief executive Russell Balding saying it was offensive.

Analysts have also questioned the lack of detail in the bidder’s statement about how APA plans to lift the airline’s profitability to justify the $2.5 billion to $3 billion premium applying to its $5.60-a-share bid, with Mr Costello yesterday breaking his silence over the issue, welcoming the fact the bidders had decided to apply for foreign investment approval, adding, “The Government’s view has always been that such notification should be made, a view I put to all the proposed equity partners on Wednesday last.”  “Once notification has been made, the application will be dealt with in accordance with the Act and this will allow the FIRB to carefully scrutinise the application.”

ACTU secretary Greg Combet yesterday welcomed the decision to open the deal to an FIRB inquiry but said it did not resolve the concerns people had about the bid or guarantee that conditions would be placed on the sale, adding, “We think that a political process is going to be necessary as well and one of the first steps of that is to have a parliamentary inquiry into these issues and test the national interest considerations”.

Report by The Mole