Qantas considering going shopping!

A report in The Sydney Morning Herald says that Qantas is considering a series of acquisitions to bolster its main operating businesses as part of its plan to spin-off separately listed companies and release billions of dollars of capital for its shareholders.

A newly created aircraft fleet leasing arm will become the first Qantas-controlled operation to be offloaded in the restructuring of its divisions that will bolster yesterday’s announcement of higher dividend payments and the buyback of up to $1 billion of its shares.

Qantas investors could be rewarded with matching shareholdings in the new businesses or the payment of special dividends as the result of the expected windfall to be gained from the splitting up of the aviation group. However, the group intends to retain majority control of its corporate siblings.

The chief executive, Geoff Dixon, said Qantas would be transformed over the next two to three years as each new business took shape.

Unveiling record profits of $1.03 billion, the co-architect of the shake-up, the finance director, Peter Gregg, said the move was being driven by the belief that the “sums of its parts are worth more than the whole”.

Mr Gregg’s comments reflect a reorganisation that Qantas has been pursuing since 2003 and the subsequent launch a year later of the low-cost carrier Jetstar, which subsequently prompted a takeover bid by Airline Partners Australia eight months ago.

A similar shake-up was planned by Airline Partners to reward its members with the proceeds of asset sales and billions of dollars to be made in increased profits over the coming years.

Qantas confirmed as much, saying its $1 billion earnings were likely to grow by 30 per cent over the next 12 months.

The group’s holiday travel agency business yesterday joined the recently revealed list of operations, including its frequent flyer program and its troubled freight division, as candidates for the new ownership structure.

As well as bringing in new equity partners such as Aeroplan of Canada for the frequent flyer program that will soon include Jetstar’s loyalty scheme, Qantas said yesterday that it was considering “strategic acquisitions” for some of its other businesses.

This is thought to include the possible purchase of the freight transport company of the trucking magnate Lindsay Fox to bolster Qantas’s air freight division, which has found itself embroiled in an alleged price-fixing cartel with other international airlines.

Qantas is facing a fine of about $47 million by US regulators for its role in the scandal, which is likely to result in further penalties of tens of millions of dollars imposed by other countries investigating the airline cartel’s activities.

However, the investigation is unlikely to delay Qantas’s plans to farm out the freight division, given that the company indicated the alleged activities dated back to 1999 and the people involved had either been dismissed or had resigned.

The sale of various stakes in the new stand-alone businesses will help Qantas reduce its gearing levels, which are set to rise from 39 per cent to between 50 per cent and 60 per cent as result of the share buyback and the increased dividend payment totalling 30c a share for the year announced.

Report by The Mole