How come Virgin Blue doesn’t need a private buyout group to be able to finance a $2.2 billion expansion of its international fleet like Qantas claims it needs for its fleet expansion?
Virgin has announced it plans to purchase six Boeing 777-300 extended range aircraft to operate across the Pacific, taking on Qantas.
The announcement yesterday from VBA has been a while coming but it will add further to unease among some investors about the pricing of the $5.45 a share offer from Airline Partners Australia, the involvement of management in the deal and the strident campaigning in favour of the transaction by CEO Geoff Dixon and chairman Margaret Jackson.
The duo seem joined at the hip and Ms Jackson was having a bash of critics in the media yesterday in interviews from a hospital room in Melbourne: she must have been desperate to get her point across.
Her comments came as the APA’s acceptances topped the 24 per cent mark yesterday (and will go higher today) and some volatility in the price which fell, and then recovered to $5.14 a share.
VBA is 62 per cent owned by transport giant, Toll Holdings which inherited the stake through the takeover of Patrick Corporation.
The fleet expansion and move into long distance international routes like the trans-Pacific, was being planned before the Toll offer happened. So a big shareholder would not have made much difference to the plans or the financing.
VBA plans to start the service next year with 10 flights a week and some analysts see this as a threat to the $11.1 billion offer for Qantas by the APA group: hence it might actually help the bid get over the line.
But Qantas is going so well at the moment (domestically through the mainline and Jetstar and internationally through the old ‘high cost’ airline with Jetstar starting to grow traffic).
Figures for February for Air New Zealand, released earlier this week, show that it too is doing very well at the moment, especially on its key Trans-Tasman routes which were supposed to have been loss makers because of increased competition (that’s if you listened to Qantas and Air NZ when they were pushing their cross alliance).
Qantas and United Airlines have a duopoly on non-stop services across the Pacific between Australia and the US.
VBA shares traded steady at $2.64 yesterday, 21c below their all time high of $2.85 reached a few weeks ago. The shares are up around 40 per cent in the past year, mainly due to the fall in oil prices and increased passenger numbers.
On that basis, if there was no bid, QAN shares would be trading around $4.15 at the moment, perhaps $4.20, compared to the low last May-June of around $2.91.
Meanwhile the vigour of Ms Jackson’s commentary on the bid in interviews in The Australian and Australian Financial Review newspapers yesterday raised some eyebrows.
She is a non executive independent chairman responsible to all shareholders. It is a difficult time for her with the bidders on one hand and some other shareholders holding out for more information and a better price on the other.
She declared it would be “devastating” if the bid failed.
Yes it might well be, but some big shareholders argue that while APA has done due diligence on Qantas and knows a lot of information, ordinary shareholders, the owners, know a lot less, such as the break up between international and domestic business projected for the rest of 2007 and in those 2008 earnings estimated released last Friday.
Just why that information can’t be released has yet to be explained.
Meanwhile that silly attempt to try and neuter the bid by Family First Senator, Steve Fielding of Victoria has failed with a Senate committee yesterday rejecting the proposed bill.
The proposed legislation sought to make Qantas’s budget carrier Jetstar and other units subject to the same provisions as the parent company. That was a try on prompted by some of the unions opposed to the takeover bid.
