10 March 2007

Conditions on the Qantas sale

On 6 March 2007 Australian Treasurer, Peter Costello, and Minister of Transport, Mark Vaile, announced the details of conditions on the proposed purchase and delisting of Qantas (transcript of joint press conference). The conditions have been imposed in the form of a Deed of Undertaking. A story the following day in the Australian reported on reactions.

In a related posting on 9 January 2007 I noted the conditions imposed on Air New Zealand to allow it to complete the purchase of Ansett Australia. There is some evidence that the Australian Government has learnt from that experience.

A question, however, that remains for me in this proposed deal is what will be the impact of a more highly geared Qantas balance sheet in the face of external shocks and the inevitable cyclical industry downturns. The Age touched on this issue on 16 February 2007 in a report by Malcolm Maiden and opinion piece by Kenneth Davidson which suggested that this should have been grounds to veto the bid. Whether this is an appropriate grounds for government intervention is another question.

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