Qantas will receive $408 million for handing over its half stake in road freight business Star Track Express to Australia Post in return for the rest of an air cargo company it does not already own.
The sale of its 50 per cent stake in Star Track Express to Australia Post is the largest disposal of a non-core asset by Qantas in recent times. It follows on the heels of Australia's largest airline selling or closing other non-core assets such as catering and engineering units over the past six months.
While Qantas will sell its stake in Star Track Express, it will take full control from Australia Post of Australian Air Express, which has a fleet of eight freighter aircraft including Boeing 737-800s.
The airline has made no secret in recent months of its intention to sell Star Track Express, but retain the air cargo business which is considered a better fit with Qantas Freight.
As part of the deal announced today, Qantas will book a net profit of about $30 million in the first half from the transaction, and receive net proceeds of $408 million and $5 million once the disposal is completed. The airline will use the proceeds from the sale primarily to pay down debt.
Shares in Qantas rose 2 per cent to $1.2175 this morning.
The deal for the government-owned Australia Post to take 100 per cent ownership of Star Track Express requires approval from the competition regulator.
Qantas's chief executive, Alan Joyce, said the acquisition of the 50 per cent stake in Australian Air Express would "significantly strengthen" the airline's air cargo network.
"Through this acquisition we will be able to offer an integrated air freight product across domestic and international networks," he said.
Star Track Express failed to live up to its high-growth promises made when Qantas forked out $375 million for its half-share in 2003. The purchase represented the airline's most concerted push into the high-growth express freight sector.
The most recent accounts lodged with the corporate regulator show Star Track Express made net profits of $20 million for the year to June 2011, $12.5 million in 2009-10 and $18.6 million in 2008-09.
Australian Air Express made net profits of $17.4 million in the year to June 2011, $13 million in 2009-10 and $119,000 in 2008-09.