If not Emirates, then who? That’s has been one of the questions surrounding Qantas Airways after the airline floated a proposed new corporate structure for its international operations in a bid to open itself up to further investment.
The answer, it seems, is no one. Not yet anyway.
The move to split its domestic and international operations came after federal parliament moved to relax parts of the Qantas Sale Act – no longer is a single foreign carrier restricted to a maximum 25 per cent stake, while the 35 per cent limit on total foreign airline ownership was also lifted. But the 49 per cent total foreign ownership cap remains.
While Qantas has offered few specifics about the new international company – questions such as would it have its own Air Operator’s Certificate, would it be publicly listed and how much would the airline group want to hold of both its domestic and international arms would for now remain unanswered – chief executive Alan Joyce said he expected interest from offshore.
“Those options could be mixed and varied and we’re not going to speculate on how they could occur, but this is aimed at allowing us to seek further investment – future investment around the international business,” Joyce said after announcing a full year loss for 2013/14 on Thursday.
In the days after the proposed split was announced, attention turned to Emirates, given the Dubai-carrier’s deep alliance with the Flying Kangaroo that was forged in 2013.
However, Emirates has long maintained that it is not interested in an equity stake and that stance was reaffirmed overnight when Emirates chief commercial officer Thierry Antinori told the Reuters news agency: “We buy planes and invest in products; we do not buy shares.”
So who else could be in the frame?
Neil Hansford, the chairman of aviation consultancy Strategic Aviation Solutions, doubted there would be an airline willing to invest in Qantas International given its current predicament.
“I can’t see any other airline having any interest of buying into Qantas,” Hansford said on Tuesday.
“The international operations have nowhere to go. They have been forced off the Kangaroo route and they used to make a third of their profit on the Pacific route and that has gone away now as well.”
However, the domestic business still had plenty of positives despite the struggles in recent times due to a flood of extra seats in the local market, the mining boom coming off the boil and weak consumer confidence.
Mint Asset investment analyst Greg Fraser said a new equity investor in Qantas International, whether a foreign carrier or overseas fund manager, did not solve all the airline’s issues.
“It’s not a straightforward thing to say that simply raising more equity having split the airline into two is the answer to all their problems,” Fraser said on Tuesday.
“I think there is a multitude of factors that they continue to have to address, such as the cost of operations, the cost of the fuel that they buy and all the standard things of operating an airline.
“I don’t think it is the panacea that some people in the market think it might be.”
One aviation analyst, who declined to be named, suggested any foreign airline who chose to invest as an equity partner in Qantas may find the Flying Kangaroo’s deep (non-equity) alliance with Emirates a hinderance to working as closely as they would like.
“The relationship with Emirates is pretty much the poison pill for anybody else to buy into Qantas International I would have thought,” the analyst said.
CAPA – Centre for Aviation said in a research note after the changes to the Qantas Sale Act were announced there “would certainly be interested airline investors” if the 49 per cent cap on foreign ownership was lifted, with Emirates on the top of the list.
“Given the close and deepening tie with Emirates, it is becoming highly unlikely that the Gulf carrier would not join Qantas’s share register should there be a substantial shift in the government’s position,” CAPA said on July 22.
CAPA also noted the rise of Chinese airlines such as China Southern – which had considered taking a 10 to 15 per cent stake in Qantas in 2013 but went no further than merely looking – and the impact they would have on the industry in the years to come.
“There are the fast growing Chinese airlines; they will undoubtedly become major forces in international aviation by the end of this decade and will be investing in foreign airlines as part of their global spread,” CAPA said.
