Qantas I'm Worried

I have been very worried by the events around the take over of Qantas. By taking the company off the share market, loading it with debt and predicating the future profits on expansion of the fleet. Larger aeroplanes at a time when we are all becoming worried by climate change and green house gases being a major contributor. The future needs to be carefully managed if we are to protect our planet. Rampant capitalism isn't the way, the era of conservative politics where the market decides what we consume must be brought under control. It is one of the most destructive forces on this planet.

Woof.

A journalist who writes for The Age newspaper here in Melbourne [Kenneth Davidson] has written an article looking at this take over. I have copied it below. Or you can visit the page here.

THE Qantas Bidder's Statement released last week is pure flannel designed to reassure the public that the airline will remain Australian owned and operated in the national interest.

Remember the reasons given for the privatisation of Qantas in 1995 was that market discipline would create a leaner, more efficient, more profitable (hence higher tax-paying) entity that would generate a win-win situation for the public, the shareholders and passengers.

Now we are expected to believe that this same market is myopic, investors are so obsessed with short-term profit and the share price that management is prevented from taking the "tough" decisions needed for long-term benefits.

This is a nice argument, but it is inconsistent with the facts. The only instability in the register until the takeover offer was when British Airways sold its 18 per cent stake in 2004. Shareholders have taken up rights issues to finance expansion with alacrity.

The value of the Airline Partners Australia (APA) bid is 25 per cent higher than the pre-bid price, which adds $2 billion to the Qantas market valuation.

This suggests that either the market undervalued the company by this amount or that the bidders have overvalued the company by this amount or some mixture of the two.

The letter to shareholders states: "APA is committed to supporting Qantas' current senior management team in achieving their existing strategy. Importantly, this includes supporting a $10 billion capital investment program over the next five years. More than 70 new planes will be introduced by 2014 to increase capacity by around 40 per cent."

And yet in the trade magazine Airline Business (July 6, 2006) David Bonderman, the founder of Texas Pacific Group, the largest foreign equity holder in the takeover vehicle and the investment vehicle that helped revive or launch carriers such as Continental Airlines, American West, Ryanair and Tiger Airways told the annual meeting of the International Air Transport Association it was time to sell airline stocks because "this is as good as it gets in the airline industry and it is only going to get worse".

Airline Business quoted Bonderman as believing "the industry is probably at its peak. It has been the same phenomena every six-eight years since the Wright Brothers. The massive aircraft orders that Airbus and Boeing booked last year is the almost perfect predictor to the top of the cycle. In two years' time you are going to see everyone cancelling those airplanes," Bonderman said.

He is entitled to change his mind or lie to convince the market that he is in the market to sell airline assets when he is in the business of buying. It is the duty of Qantas board members to be informed of these matters as custodians of the company with responsibilities to inform shareholders fully.

As shareholders and the public are given to believe that Macquarie Bank put this deal together, the real (or imagined) difference in the market and the APA valuation of the company Qantas is mainly based on APA's ability to "extract" value from the enterprise that is not now available to shareholders.

Macquarie Bank is Australia's financial engineers par excellence. Anthony Munk, managing director of Canadian company Onex, which is committed to take 12.5 per cent of the equity in APA, was quoted in Toronto's The Globe and Mail on December 13 after the offer was announced, justifying the investment thus:

"This is a very good company, it is well run, its market is well protected, we think that it really has a quality service to offer on its international routes and we just feel that there is an opportunity to extract value."

Munk has to be reasonably honest because he is talking to his investors. Bob Mansfield is different. His job is to reassure politicians and the public that the takeover is temporary and in the public interest.

The question is how will value be extracted. In the absence of candour from the bidders we can only guess: apart from cutting labour costs (easy with WorkChoices) the techniques are likely to involve asset stripping, combined with splitting the airline into profit centres based on high-value, high-cost local (City Flyer and regional) and international (North America, Johannesburg, Tokyo and Jet Star taking over the less profitable) routes.

The claim in the Bidder's Statement that foreigners will be stumping up 49 per cent of the equity but will accept only 39 per cent of the voting interest is irrelevant window dressing designed to reassure the natives. The equity partners will be looking after their own interests, which may or may not coincide with the national and public interest.

The $10 billion borrowings are to to be funded by a consortium of six foreign banks led by Morgan Stanley. According to Euromoney: "Credit Suisse was one of the banks originally touted as a lead, but the bank dropped out due to the leveraged loan's lack of usual covenants." In crude terms, the bid will be financed by high-risk, high-interest, junk bonds. Security for the loans will be the company's assets.

The hinge on which the whole deal rests is Qantas directors' willingness to ditch their policy of limiting debt to 50-60 per cent of assets in favour of a policy accepting an increase in debt to about 80 per cent of assets with provision to go even higher if economic conditions are unfavourable.

Qantas profit will be wiped out by the additional debt, but so will the tax liability, which will be redirected to financing the debt. APA wants tax-free capital gains, not taxable income. With luck, taxpayers will be paying for the cost of the $10 billion addition to our international debt necessary to finance the takeover.

Don't expect to hear much about this from the ALP. Its new business adviser, Sir Rod Eddington, is a director of Allco Equity Partners, a partner in the APA bid.

The ALP voted with the Government in December to abolish capital gains tax on assets held by foreigners. This has added $200-$300 million to the value of the Qantas takeover offer to the 47 per cent of foreign shareholders who will sell their shares. And it will add hundreds of millions to the after-tax gains of the foreign equity partners when they sell out of the tax avoidance scheme in a few years, providing all goes well.

Any additional comments can be sent to mark_brickel@hotmail.com

Elections and Climate Change

It seems like only a year or so ago that we were being congratulated on good GDP with low inflation and a growing economy. Business as usual for the majority of the population. The greed of the 1980s-90s had been replaced with the Avarice of the new millennium. We were all acquiring new things, from houses to cars, ipods, computers, overseas trips, etc etc.

Now all of a sudden, at least over here in Australia, where we have two more elections [state and federal] We are starting to debate in earnest the difficult subjects of: Climate Change, Water, Renewable energy.

It is difficult for us cause we all use these things and really most of us haven't stopped to think, what it is doing to our environment and just how sustainable it all is.

This is the crux of the matter, we have rarely, if ever had to rein in our excesses even in war time, we sacrificed our personal use but continued to use our resources at increased rates.

No we have got where we have not by being careful users of our resources. We have expanded and reproduced like rabbits on the back of insatiable and unsustainable demands.

The really hard thing for the current crop of politicians is to understand that the reasons they gave for electing them last time, are in many ways, the opposite to what we want them to do this time.
The left wing Greens are to have their day. If politics is what I think it is, then a compromise will have to be met, and I don't think the world has time for compromise we have wasted too many years living on the hock.

Woof.

Any additional comments can be sent to mark_brickel@hotmail.com

Oil and Water Wars

We are at the start of what will be remembered in a hundred years from now as the century that brought to a head the Oil and Water resources wars. At the moment we are dressing up the first one [Oil] in all sorts of other disguises. The Americans as usual are waging an outright lie of a war. Calling it some sort of holy war or vendetta but in reality a thinly disguised insurgence to gain control of at least some of the middle east oil. As usual it is a mess and wont be solved in the short term.

The Russians do it a different way and trump up charges against their new found entrepreneurs and lock them up, and I assume then take back control by government decree the oil assets they previously owned.
Here in Australia we argue with the poorest newest nation [East Timor] about there relatively small oil reserve shared with us off their coast line. And so on around the world.

Water wise we have a takeover bid by the federal government to take control of the rivers of South East Australia. We have abundant water in the north and not enough in the South where most of us live. Who gets the water, will be fought over [politically] during this century.

Elsewhere in the world the fight is on for control, distribution and quality of water. Elections will be won and lost over these issues. But more importantly so will wars.

I haven't even mentioned Asia or South America they want to enjoy the living standards we have taken for granted for a century now we are asking them to bypass the good times and taken on the pain as we expect to do, without even a sniff at the good time excesses we have enjoyed in the West. Don't expect an easy ride on that quest either.

For the first time in a very long time our children will have a materially lower standard of living than we have. This is going to hurt. No wonder the investment bankers around the world are looking at acquiring publicly listed assets, such as Utilities and Transport. They can take the financial guts out of them before they become hollow edifices.



Any additional comments can be sent to mark_brickel@hotmail.com

Re Cycled Water?

That is the problem with this debate in Australia we are calling it re-cycled water. All water is re-used, re-cycled. But the connotations is that water that has been in recent contact with sewage is going to remain dirty, unhealthy, dangerous.

I was once told that we were drinking Caesar's piss, meaning all the water on this planet has been here for a long time and it just keeps going around. The way most of our sewage has been treated in the past, is that it ends up in the sea.

Most of us live in coastal cities and up until recently everything from raw sewage to treated effluent is sent out to sea. When the sea has treated it the water evaporates becomes clouds that move around and in the end drop as rain. So if I am not mistaken the same water molecules are falling down as rain again collected in our tanks and dams and back into our stomachs etc etc.
Now if we want to speed up that process, we can take the sewage before it gets to the sea and start treating it and finally returning it to our water systems. If the truth were told we have known what to do for centuries. It is very important we have a clean and constant supply of water it is the corner stone of our health system. Doctors play a roll in health care but clean water and sewage disposal is infinitely more important to good health.

So yes we need to get our methods of re-use of water right and that is achievable. There are many ways to skin a cat, lets look at our water resources in that light and use what we can to provide clean safe water supplies.

A foot note to the new Environment minister. Governments that are awash with surpluses shouldn't talk about expensive user pays programmes with basic needs such as water, when other arms of government are wasting billions on all sorts from wars to public servant pension funds.
It's our money [Malcolm]

Woof.

Any additional comments can be sent to mark_brickel@hotmail.com

Religion in Politics

Religion in politics Aussie style.

Tony Abbot a prominent coalition minister in the Howard government, has had a go at the new leader of the opposition over his use of religious beliefs.

Along the lines of,
"If you believe in Jesus you would probably want to vote labor [left] cause that is what Jesus would be into, looking after the poor and homeless."

Mind you Tony Abbot was once given the job of deciding whether there should be stem cell research and legalised abortions and he is a devout catholic with responsibilities in health care.

We all go through life thinking our belief systems are the right ones, but when you put those into sensitive public policy development it gets tricky.

I always thought that is was the Americans who wore their religion on their collective sleeves. Now it is spreading to the U.K. and here too.
I am an Atheist so I find it all quite laughable that people go round believing in some 'Magic book' with all sorts of hocus pocus in.

My request to all politicians regardless of your political bent or religious belief is leave the religion out of politics, please.

And a short message to the people of South East Queensland, ' Get used to the recycled water we will all be following soon, it's OK you ain't the first and wont be the last.

Woof.

Any additional comments can be sent to mark_brickel@hotmail.com

Whitewash

I've been trying to find out about the word 'Whitewash', in relation to winning a sporting series when the opposition haven't won any games.
Harder than I thought when it comes to the web. Plenty on whitewashing walls but only one line entries re sporting events.
I want to know if it has something to do with the score card/board, i.e. no score white score board. Or is it like the saying 'White lie'. Which may have something to do with 'race'. In as far as white is good and black is bad.
So if anyone out there knows the answer to question of 'Whitewash' or any other interpretations then please let me know.
Woof.

Any additional comments can be sent to mark_brickel@hotmail.com

New Year 2007

I haven't wished you a happy new year cause it isn't much of a happy new year for many people around the world. Wars in the middle east and Africa. Bus bombs in Asia and floods and a drought affecting others. All I can say is stay calm and keep your head down, we could be in for a bumpy second half to this first decade of the new millennium.

On a personal note I am discussed in the hanging of Saddam Hussein, not because I have any sympathy for the man, not at all. I think if that is the only way to deal with tyrants like him we haven't learnt much about humankind in the last 2000 years. 15 people died on a bus within a few hours of Saddam's death. Retaliation? and there is much more of that to come. If the Americans continue to think that force will make the Iraqis stop killing each other, then again, they haven't been listening to other leaders in the region.

I hope it rains soon.

Woof.

Any additional comments can be sent to mark_brickel@hotmail.com

Shane Warne?

Crazy as it may sound I think the surprise announcement by Shane Warne that he is going to retire after the Sydney test is a set up by Channel Nine.
The test series against England is over, 3 Nil down and 2 matches to go. Apart from the barmy and army and some die hard fans who would bother to go to MCG on Boxing day.

A dead rubber is a dead rubber.

Not now, Shane has changed all that with this announcement and all the management at channel nine must be sighing a collective sigh. It has guaranteed an audience for the last two tests despite the no contest situation. Who wouldn't want to watch the worlds best bowler of the last century firstly get his 700 th wicket, and play in his penultimate and then his last test match.

The reason I link this to channel nine is that it is definite that he will work for nine on his retirement and so to kick off his career with nine he announces his retirement in time to maximise the interest in these last two tests. There you go simple.

Best of luck Shane enough said.

Woof.
Any additional comments can be sent to mark_brickel@hotmail.com

Planes and Water

As the summer heats up and here in Melbourne we watch as our parks turn yellow and brown from lack of rain. We have been informed that as of the 1st of January we will be on stage 3 water restrictions. This means, I think that we can no longer use the watering hose as and when we like, and other water restrictions will be imposed. The government that is imposing these restrictions needs to reassure the public that they are on the case with regard to reusing the water we are already using. Not only that, but also how we are to find new water supplies from as many places and treatments as possible.
There are too many people living in cities like Melbourne to be left wondering about their future water provision and the quality of that water. So here's a water tip to the Brack's government announce some some water strategies so we can have a worry free Christmas.

Qantas is to be sold and now the pilots have come out saying they want to start a fighting fund to stop the takeover. If you read a previous blog you will see that I am against the sale too. So good on you pilots I'm right behind you.
Woof.

Any additional comments can be sent to mark_brickel@hotmail.com

Qantas

What the hell, The management at Qantas have agreed to be bought by a group called 'Airline Partners Australia' a bunch of faceless men who will now control our national airline. And all the minister responsible for this area could say was subject to compliance with regulatory blah blah blah and the share holders deserve a return on their investment. Again it is Macquarie bank behind this, the chief exec of Qantas is getting 60 million dollars for this deal so I wonder why the board caved in and sold. The chief exec is going to donate his 60 million to charity and in some way that will be alright.
So it is OK to fleece a major company of millions of dollars if you can be seen to be giving some of it to charity. Cause the CEO is not going to stop at the first 60 million he has many more where those were stashed.
The Macquarie pay their chiefs squillions and when asked just say that's what you need to pay them to keep good staff. Well try telling that to the hundreds of workers who will now get the sack so as to maximise profits to these new faceless owners. Not even a share holders meeting to air any grievances.
This government must take some of the blame for this they set up piss weak regulatory frameworks and then sit back and watch these companies get sold and their only comments are about market places and share holders.
If you want to run an airline and you have squillions to spend go make one for yourselves and try and make it profitable.
Woof.



Any additional comments can be sent to mark_brickel@hotmail.com