Doubled Profits And Suppressed Share Price Prompt 'Speculation'

Officials at Qantas Airlines admit that their record-low share price, despite news that full-year profits have just doubled to $250 million (AUS), has made the airline a desirable takeover target. But they insist that despite rumors to that effect, there have been no such offers so far.

CEO Alan Joyce tells Aerospace & Defense News, "There's no formal or informal bid on the table and nobody has approached us. It is pure speculation."

The prospect of a takeover has been discussed at the higest levels of government. The Australian newspaper reported rumors this week about a possible $3.5 billion bid, and resulting discussions at senior government levels. Treasurer Wayne Swan and Transport Minister Anthony Albanese were said to be opposed to a private equity bid, and considering options for intervention if it happened. Foreign ownership of the airline is currently capped at 49% by the government. "It's in Australia's interests that Qantas remains a majority Australian-owned and effective airline," Albanese told reporters in Canberra.

It wouldn't be the first time. Airline Partners Australia, a private equity group led by the Allco Finance Group, made a run at the airline in 2006.

Not everyone thinks Qantas would make sense for a takeover. At the time of the 2006 bid, the airline's total debt was about $4.6 billion. It's now $6.9 billion, up 50% in five years.

FMI: www.qantas.com.au