Friday, November 24, 2006

Qantas: bring on the spivs!

A takeover of Qantas led by money-hungry over-indebted American spivs could be the best thing that ever happened to the Australian traveling public. Not because the new owners would make Qantas more efficient and immediately pass on the savings to travelers. Quite the reverse.

The modus operandi of the new breed of American “private equity” funds such as the Qantas suitor Texas Pacific to load up their prey with debt and ramp up charges and the like to pay it off.

And anyone who has driven on a Macquarie Bank toll road or tried to catch a taxi or park a car at the Macquarie Bank-controlled Sydney Airport will know that Macquarie, Texas Pacific’s partner in the bid for Qantas, isn’t shy about jacking up prices either.

Not that they are likely to get the chance. The $11 billion takeover, still in the “preliminary discussion” stage according to Macquarie, is most unlikely to fly.

The Australian Competition and Consumer Commission gets to run its eye over takeover bids. Its Chairman, Graeme Samuel knows all about the Macquarie Bank. He was its Executive Director in the early 1980’s.

He knows too that the proposed takeover would see Macquarie controlling Australia’s busiest airport and owning 15 per cent of the airport’s biggest customer – the sort of arrangement that the ACCC was set up to stop, should it be likely to be anti-competitive.

The Treasurer gets a say as well. As the Minister responsible for the Foreign Investment Review Board he is able to block any foreign bid for the airline, even one that obeyed the letter of the law relating to Qantas and kept foreign ownership below 49 per cent.

He certainly won’t be easing that restriction in order to make it easy for the predator...
He said yesterday that Qantas “flies the Flying Kangaroo and the Flying Kangaroo says Australia - and as far as I'm concerned that means majority Australian ownership”.

The Foreign Investment Review Board guidelines are so broadly drawn that if the Treasurer so wanted he could block the bid for Qantas with as little as a phone call and a press release, as he did for the Shell bid for Woodside Petroleum in 2001.
With an election due next year and with the genuinely untested legal issues that would accompany a foreign bid for Australia’s national flag carrier there is every likelihood that he would.

The share market recognised this yesterday the Qantas buying stopped.
But what if the bid did succeed? What if Qantas became effectively American controlled?

It would lose the special place it has held in the hearts of Australia’s politicians. In the 13 years since Qantas at first became part-private under the Keating Government (and became one-third British owned) our politicians have continued to act as if what is in Qantas’s interest is in the nation’s interest.

They have blocked bids for competition on the Qantas’ rivers of gold – the air highways that stretch from Sydney to Los Angeles and from Tokyo to Sydney. All in the national interest, they have assured us.

The real national interest is in opening the skies to complete competition, so that we (and the foreign tourists who are considering coming to Australia) can enjoy world’s-best low prices when we travel.

An American takeover of Qantas, with the associated bad publicity about Qantas no longer being special and about jobs going offshore might just persuade our Government to flick the switch to full competition.