Qantas Airways Ltd. (QAN)“I’ve got a bunch of mates I invest money with. We’ve looked, among other assets, at Qantas,” Gregg said in a phone interview today, citing friendships with Geoff Dixon, former chief executive officer at the carrier, and venture capitalist Mark Carnegie. “We think it’s cheap and undervalued.” The head of Qantas’s international pilots’ union confirmed talks with a member of the group, without saying whom.
The Australian Financial Review reported that Gregg, now CFO for Leighton Holdings Ltd. (LEI), and Carnegie spoke to investors about a plan that includes the sale of Qantas’s frequent flier program. The group would prefer a tie-up with an Asian airline such as Cathay Pacific Airways Ltd. (293) to serve the regional market, the newspaper said, citing people it didn’t identify.
Gregg, who served as Qantas’s finance chief for eight years, announced his departure from Qantas in August 2008 less than three weeks after Dixon said current Chief Executive Officer Alan Joyce would replace him in the carrier’s top job.
Australia’s largest airline has been dogged by takeover speculation this year as the stock sank to a record low in June, when Joyce said the Sydney-based company would post its first loss since listing in 1995.
Balance Sheet
Qantas is seeking approval for a partnership with Emirates and this month announced its first share buyback in more than four years after receiving A$750 million ($778 million) from cutting a Boeing Co. (BA) order for airplanes and selling its stake in a road freight venture. Those developments diminished the appeal of rival strategies to shareholders, said Sondal Bensan, an analyst for BT Investment Management Ltd. (BTT) in Sydney.
“These three announcements are probably the most significant three changes the company’s seen in a decade, relative to the current value of the company,” he said. “The balance sheet’s in a much better condition than it was six months ago.”
BT is Qantas’s sixth-largest shareholder with a 5 percent stake, according to data compiled by Bloomberg. Bensan said he wasn’t aware of any approach to BT by the investor group.
Richard Woodward, vice president of the Australian and International Pilots Association, said that he’d had a meeting with one of the investors about the plan. He didn’t confirm the person’s identity or the detail of the discussions, saying the talks were private.
Different View
Qantas rose 1.6 percent to A$1.275 at the close of trade in Sydney, compared with a 0.6 percent rise in the S&P/ASX 200 index. The stock has fallen 13 percent this year while the index has risen 7.5 percent.
Gregg said he wasn’t trying to destabilize the company.
“I spent 25 years of my career trying to build Qantas up and when I left Qantas it was a very successful company,” said Gregg. “I have a different view of strategic direction.”
Asked if he had held meetings with the airline’s unions about its strategy he said: “I get calls all the time asking my opinion about a variety of things, if you call that a meeting.” A telephone message left at Carnegie’s venture capital firm MH Carnegie & Co. wasn’t immediately returned.
“Management remains focused on building a stronger Qantas, which it is doing through the proposed Emirates partnership” and expanding its budget arm Jetstar in Asia, the airline said in an e-mailed statement today responding to the report in the Australian Financial Review.
Steve Purvinas, federal secretary of the Australian Licenced Aircraft Engineers Association, Qantas’s union for specialist mechanics, said he hadn’t been approached either and would welcome the change.
“That management team says they’re going to be interested in growing the business, rather than tearing it down piece by piece,” he said by phone.
Carnegie and Gregg may have the support of shareholders holding about 20 percent of Qantas shares, the Australian Financial Review said. While they want the airline to list its budget carrier, Jetstar, and return funds to shareholders, they haven’t formed a firm proposal, according to the report.
Source: Bloomberg