Qantas is considering placing its aircraft fleet in a separate management company as it ponders another multi-billion-dollar order for at least 70 new aircraft.
The airline is seeking partners in the venture as part of a wide-ranging capital-management plan it is working on in the wake of the failed private-equity takeover bid by Airline Partners Australia.
Other spin-offs under consideration include the airline’s frequent flyer scheme and freight operations. Industry sources say the carrier has a request for a proposal on the fleet management venture in the market, and expectations are that management will make a submission to the board in the next few months.
It is not clear whether Qantas would retain a majority shareholding in the proposed company, or whether any of the private equity companies that were part of failed takeover bid would be involved.
The new company would supply aircraft to Qantas, Qantaslink and Jetstar as well as partly owned investments such as Singapore-based Jetstar Asia and recently-acquired Vietnamese carrier Pacific Airlines.
The radical move comes as the airline is looking at acquiring at least 70 new aircraft – 20 additional 787s and 50 new narrow-body planes – to cater for planned expansion and its rapidly growing Jetstar subsidiary.
The new planes would be in addition to the 45 Boeing 787s and 20 double-decker Airbus A380 superjumbos already on order and due to start arriving next year.
Jetstar has become a major growth vehicle for Qantas, both domestically and in Southeast Asia, where it links up with intra-Asian flights operated by Jetstar Asia and Pacific.
Qantas is pursuing a two-brand strategy that will see Jetstar take over more leisure-oriented routes and Qantas concentrate on premium traffic.
It has also been on the hunt for some time for further acquisitions in the region to expand its network.
The additional aircraft order could go to the Qantas board by August.
Qantas shares soared last month after the airline hinted at possible spin-offs of the frequent flyer program and freight operations as early as next year, as a way of boosting shareholder returns after the failed Macquarie Bank-led private equity bid.
The Qantas freight business is valued by analysts at well over $1billion while its frequent flyer program, which has almost 5 million members, is estimated to be worth $2-3 billion.
Plans outlined by Qantas chief executive Geoff Dixon last month would also see Qantas left with partial holdings in those businesses.
The airline was moving to separate its freight assets from the Qantas business that it wanted to develop as an integrated Asia-Pacific freight and logistics company.
Analysts are expecting the plan to result in a capital return of between $1 billion and $2 billion, compared to the $4 billion proposed by Airline Partners Australia, but Qantas has given no indication of the size of the payout.
The airline wanted to retain its investment-grade rating, which puts pressure on the company to raise funds by better use of capital in its non-core assets.
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June 29, 2007 at 5:38 am