Friday, December 05, 2008

Proposed Qantas BA merger

The predictable outraged sense of nationalism of Labor toward the proposed merger between Qantas and British Airways is only exceeded in stupidity by its commercial stupidity.

Keating was the first of Labor’s economic ‘geniuses’ to stamp his mark on Qantas’ adventurism by thwarting a tie up between Qantas and Singapore Airlines. He ‘saved’ Qantas by instead fostering Grandma BA’s acquisition of a 25% stake in Qantas (which they subsequently flogged off at a big profit to cover their own financial difficulties) and prevented Qantas from aligning itself with a star performer in the Asian region - the obvious choice was Singapore Airlines - that could perhaps have engineered real synergies and efficiencies. Now Qantas who were originally opposed to the BA move, and favoured an Asian connection, are clamouring to get into bed with unprofitable, debt-ridden Grandma once again.

Are there further realisable synergies on routes between ends of the world in Europe and Australia? Qantas and BA already coordinate fares and schedules on the Australia-London route. What synergies can Australia foster on flights between London and Stockholm? Between the UK and the US? You are joking. But, yes ’ll bet Grandma BA is hot to trot with the coltish flying kangaroo on this one. Wouldn’t you? BA would at least then gain the stupid protectionist advantages now assigned to Qantas on Australia-Japan and trans-Pacific routes.

BA and Qantas have comparable operational costs although BA’s are higher – a ludicrous op ed by Jemina Whyte in yesterday’s AFR suggested a basis for synergies lay in the fact that both carriers had unionised work-forces – but an carrier like Singapore Airlines has significantly lower costs. An Asian carrier would realise economies with Qantas in terms of being a regional hub and in terms of pressuring the featherbedding of the Qantas workforce. If a deal is not currently on then that is no reason to hop into bed with aging Grandma.

But whatever the stupidity of outraged Labor nationalism any moves to prevent the unseemly liaison between Qantas and BA can only be welcome.

Presumably there is a price at which the merger makes sense but it is a price that BA will not accept. Currently the proposed deal is said to involve ‘no premium’ and that in itself is revealing. The British are being generous enough to admit that low debt Qantas which will probably halve its profits to $250 million this year does not need to pay a premium to acquire heavily indebted BA which will be lucky to break even this year in intensely competitive international markets. BA are also ‘prepared’ to entertain the notion of a rotating CEO! The combined entity will thus be mis-managed at least 50% of the time.

I have often felt that many university bureaucrats should be offered memberships of local golf clubs or paid holidays for 48 weeks per year rather than ‘manage’ universities by trying to regulate how working academics teach or do research and in devising strategy documents that literally nobody reads. Given the political impossibility of sacking these cretins damages and costs would be smaller if these hapless bureaucrats could simply be kept off the street. Cannot new Qantas CEO Alan Joyce be offered something similar? Just run an airline Alan, pay Qantas’ bills in these difficult recessionary times and forget about trying to be a Master of the Universe -with an aging, crotchety and broke Grandma BA.

Since I wrote the above remarks the stock market has voted with a resounding thumbs-down to this foolish proposed deal.


conrad said...

You could ask those bureaucrats to podcast their stuff instead -- that way it doesn't kill trees and they can track the number of times people listen to (probably zero).

Here's one for a laugh: I was so lucky that I got something called "confidential market intelligence" emailed to me and every other staff member every so often (generally monthly), which had important news in it, like South Korea to trys to increase market share with Mongolian students (someone was paid to collate this rubbish). Now as it turns out, it appeared something was wrong with the password setting, so I couldn't actually open it (and many other people couldn't either --- I knew of no-one that could). But it kept on coming, for over a year, until it mysteriously disappeared. Thus it appears some guy was paid for a year to collate information which approximately zero people ever read, and no one said anything nor cared.

Francis Xavier Holden said...

BA & Qantas combined could plumb amzing depths in disregard for customers combining Brit arrogance, condescention and non existant customers skills with Oz chip on the shoulder casual indifference.

Wheres yobbo on this?

Anonymous said...

Do you think its worthwhile to drop by Singapore after visiting Malaysia? I heard a lot of nice things about singapore. And there seemed to be so many things to do at singapore as listed out at