Qantas Airways missed the A$200 million ($110 million) target for its retail offering by A$80 million, and it would have been worse except for underwriters who were committed and did come up with A$100 million.
Unlike its earlier institutional offering, which was oversubscribed, the retail offering fell victim to a plunge in share prices below the offer price. The fall was triggered by investor fears over the effect of a US-led attack on Iraq on fuel prices and air travel. By the time its offer closed, Qantas shares were trading A¢50 below the offer price.
Geoff Dixon, Qantas chief executive, does not blame government policies for this lacklustre response, but he is quick to claim that the cap on foreign ownership of Qantas will make it even harder for the airline to fund its initiatives. Specifically, Dixon points to a planned A$2 billion revamp for its QantasLink regional fleet. For instance, QantasLink hopes to replace its ageing British Aerospace BAe 146s.
In August Canberra rejected a Qantas call to relax its foreign ownership cap. "We are around the tenth largest airline in the world based on revenue passenger kilometres, but we still represent less than 3% of the global market," Dixon complains. "Although we will always remain a principally Australian airline, we are going to need to undertake investments overseas, and most likely forge new equity partnerships."
Dixon continues to argue that Qantas needs to forge alliances with such nearby rivals as Air New Zealand to gain the economies of scale both need to compete in global markets.
But he seems unlikely to gain very much sympathy from the Australian Competition and Consumer Commission (ACCC). In a recent speech, Professor Allan Fels, ACCC chairman, countered that studies show the most competitive international companies come from countries with robust local competition.
Source: Airline Business
