Qantas surge puts more heat on bid
Scott Rochfort in today’s Sydney Morning Herald says that Qantas has produced another set of bumper traffic figures, fuelling expectations the carrier is on track to post its fourth profit upgrade since being approached by takeover suitor Airline Partners Australia late last year.
Flying in the face of warnings from Qantas Chairman Margaret Jackson and APA about the threats facing the national carrier, another upgrade could hamper the consortium’s bid to gain control of the airline only days after lowering its acceptance condition to 70%.
Qantas reported the percentage of seats filled in the fiscal year to February continued to hover around 80%, with BBY analyst Fabian Babich, saying, “Within the context of the bid it’s certainly going to cause people who are arguing the bid is too low to beat their drum a lot louder”.
Qantas shares remained steady at $5.38, after the airline also reported that yields (average fares) across its international division rose 8.7% in the fiscal year to February, while domestic fares rose a healthy 4.4%.
Based on these figures, Goldman Sachs JBWere estimated international fares alone could have risen 10.3% over the previous 12 months, with domestic fares up 7.6%.
Andrew Sisson of Balanced Equity Management, which has already called for APA to lift its bid said, “It’s just one month of figures but it does show they are doing well.”
JP Morgan analyst Matt Crowe said, “It raises the possibility there could be another upgrade,” adding, “While the price of oil has been rising, that has been offset by the rising value of the currency.
“The near-term outlook for Qantas is extremely good,” said Mr Crowe who already has a $5.68 price target on Qantas, well above APA’s $5.45 offer.
In a statement to the market, Qantas attributed the strong results to robust demand “combined with temporarily stable industry capacity”, adding, “The yield improvement was primarily the result of increased fuel surcharges imposed to partially offset higher fuel costs, which are expected to rise by around $625 million in 2006-07 compared with the prior year, based on current market prices and hedging levels”.
Qantas did not highlight the rise in the Australian dollar though, with the currency appreciating 6% against its US counterpart since its last profit upgrade on March 15 and aside from offsetting fuel and aircraft costs, which are based in US dollars, the rising dollar is also set to help boost the number of Australians wanting to book overseas trips.
The bumper figures could further complicate APA’s attempts to lure remaining Qantas shareholders to accept its $11.1 billion bid, especially on signs some fund managers are already holding out for the consortium to come back with a higher offer later this year.
Report by The Mole from The Sydney Morning Herald
John Alwyn-Jones
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