Qantas breaks $50m tourism deal
Qantas CEO, Alan Joyce has severed a 40-year partnership with Tourism Australia after accusing its chairman, Geoff Dixon of leading a consortium to take over the airline.PT2M6S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-2add8 620 349 November 28, 2012
It is understood that Tourism Australia will hold a board meeting this afternoon to discuss the shock decision by the Qantas boss, Alan Joyce, to cancel a $40 million contract with the tourism group.
Joyce gave another spray today to the covert operation a group of businessmen are running to take control of the airline and oust him from the top job.
Happier days ... Alan Joyce, left, and Geoff Dixon. Photo: Getty Images
At a lunch speech, Joyce referred to the group of businessmen, including the former chief executive Geoff Dixon, the former senior executive Peter Gregg and Mark Carnegie, as APA Mark 2.
He was referring to the failed APA bid by Qantas in 2007 at $5.40 a share. He didn't mention that he was part of APA Mark 1.
While the group that makes up "APA Mark 2" has not announced its intentions, Joyce knows something is going on and is trying to stop it while it is still in its embryonic stages.
To this end he is using various tactics to flush out the club, with the latest being his decision to suspend a 40-year relationship worth more than $40 million over the next three years with Tourism Australia, on the basis of a conflict of interest.
The conflict, he believes, is that the chairman of Tourism Australia is Geoff Dixon.
This is designed to put pressure on Dixon or the government to force his resignation or make him come clean on his role in the consortium.
Joyce referred to this decision in his speech: "Today you've seen mention of correspondence relating to the Qantas relationship with Tourism Australia and a conflict of interest issue. Given that the Tourism Australia chairman is a member of the APA Mark 2 club, we deemed it prudent to suspend our partnership with Tourism Australia."
Joyce is clearly rattled by what is going on. Qantas's share price is trading at about $1.34, putting it on a market cap of $3 billion, which is a far cry from the $2 a share it was listed at 17 years ago. It is also a long way from a takeover offer five years ago of $5.40.
The consortium has been toying with the idea of doing something with Qantas for more than a year to address the airline's tumbling share price, disappointing earnings, stoushes with the unions and its latest decision to tie up with Emirates.
APA Mark 2 see value in the airline and want to unlock it for shareholders. This includes floating Jetstar and the frequent flyer business and beefing up its strategy in Asia. To put it into perspective, Jetstar's profit in the latest year was a little more than $200 million, as was its frequent flyer business. If these were floated they could each have a value of up to $2 billion.
The consortium is yet to take the plunge but there is enough information out there that the way they plan to do it is by building a stake at the same time as garnering support from shareholders to get them on the board and make changes from within.
Joyce tried to be dismissive of the speculation by saying there was no evidence they knew their aims and ambitions themselves.
Dixon et al know the airline like the back of their hands and have spent a lot of time thinking about Qantas and its strategy.
The move to suspend the deal with Tourism Australia was designed to send a powerful message to the consortium that Joyce and the Qantas board will not take the assault laying down.
"At Qantas we are not looking to recreate the past. We are not dwelling on earlier times. The world has moved on and we are busy taking care of today's business, looking after Qantas interests and advancing our strategy for all of our stakeholders and for all of our shareholders."
The clock is now ticking for the consortium to put their cards on the table and let shareholders decide on the best way forward for the company.