Troubled BA might sell stake in Qantas
By Mark Todd
Qantas and its major shareholder British Airways may be preparing to sever ties, as speculation last night mounted that the UK carrier was looking to sell its $1 billion stake in Qantas to ease the pressure on its strained finances.
Qantas shares fell 13c to $3.24 yesterday on the speculation, which variously had Credit Suisse First Boston and Macquarie Equities selling BA's stake at prices between $2.60 and $3 a share.
Almost 21.5 million Qantas shares were traded.
Qantas public affairs manager Mr Michael Sharp would only offer the standard line that "we don't comment on market rumours".
The speculation, which has cropped up consistently during BA's eight-year relationship with Qantas, coincided with the Australian carrier's board meeting ahead of the company's annual meeting in Melbourne today.
Analysts suggested BA would resist selling the 25 per cent holding in Qantas unless it desperately needed the funds to ensure its future. BA, along with many other airlines, has had to sack thousands of workers to remain viable after a severe slump in demand for air travel following terrorist attacks in the US. Some carriers, Swissair among them, have collapsed.
In the week following the September 11 attacks, volumes on BA's US routes fell 60 per cent and it lost $140 million of revenue and $120 million of profit. Analysts have forecast the airline's losses for 2001/02 could spiral to as much as
"Strategically it would be a ridiculous move for them to sell," said one analyst who declined to be named. "But it may get to the stage where they don't have a choice."
It is estimated that BA could first sell property and unencumbered planes worth almost $3 billion.
At today's prices, BA is facing a 13 per cent loss on the Qantas investment, which many consider to be the best exposure to the troubled aviation industry. Some merchant banks have a 12-month price target for Qantas of more than $5 a share.
Qantas's market capitalisation of $4.3 billion is now rapidly approaching that of BA at $4.85 billion.
It is believed, however, that BA is more interested in concentrating on European and US routes, and would have the support of Qantas senior executives if it decided to quit its stake.
A substantial concern for BA, though, is the prospect of the stake falling into the hands of a rival, which might create a major power that could force BA from Southern Hemisphere markets.
BA beat Singapore Airlines to the cornerstone interest ahead of Qantas's sharemarket float in 1995. It is thought the Flying Kangaroo harbours a desire to somehow forge a dominant regional operator through an alliance with the Asian carrier