Qantas warned last week that it may report its first annual net loss since it was privatised in 1995, causing a selloff in its shares that wiped out A$1.1 billion, or a third, of its market value. That fuelled speculation that the airline may offload its stakes in Australian Air Express and a travel agency to shore up investor sentiment, according to analysts.
"Qantas is under a fair bit of pressure. I wouldn't be surprised if they sell off some non-core assets," said Will Seddon, a portfolio manager at White Funds Management, which owns 777,499 Qantas shares.
Qantas shares hit an all-time low of A$0.96 last week, sparking off talks of a private equity bid.
A Qantas spokesman said that the carrier has hired investment bank Macquarie and set up an internal team to defend against possible takeover bids..
Qantas declined to say whether it had received any approaches, and a source with knowledge of the matter said no "formal bid" has been lined up yet.
The airline recently split its international and domestic businesses so that a new management team could focus on turning around the unprofitable international division.
Analysts said they did not think the split was designed to clear the way for a takeover of the division.
Macquarie led the bid with private equity firms in 2006. The bid was ultimately scrapped as two key fund managers refused to back the A$5.45 a share offer despite Qantas management pushing for the takeover.
The Airline Partners Australia group included private equity giant Texas Pacific Group and Canadian investment firm Onex Corp.
Investor Impatience
The global aviation sector is struggling with high fuel costs and weak travel demand.
Qantas suspended dividends in 2010, the company's international division is set to double its operational loss this year, and its profitable domestic business is under pressure from rival Virgin Australia.
Last year, Qantas grounded its entire fleet for nearly two days amid a bruising battle with unions.
Qantas is trading at 0.4 times book value compared to 0.8 times for its rivals, according to Nomura. That means shareholders can expect to get less from Qantas than its competitors should all of its assets were sold off in case of a bankruptcy.
A recent Deutsche Bank research note suggested Emirates could invest in Qantas' domestic arm. Chief Executive Alan Joyce has told the media that reports of Emirates taking an equity stake are wrong.
Qantas may sell its 50 percent stake in cargo carrier Australian Air Express and its 29 percent share in JetSet Travel World, with the holdings possibly worth as much as A$475 million ($471.70 million) in total, according to Macquarie analyst Russel Shaw.
"The management think they can turn it around and continue to have all their business under one roof. Some investors feel the value in some businesses needs to be realised sooner," said White Fund's Seddon. (Reuters)
