Qantas halted amid cash-call buzz

12 April 2012

TRADING in shares of Qantas, Australia's largest airline, has been halted amid speculation that the carrier will unveil plans to raise more than A$1bn (£354m) when it reports its full-year results on Wednesday. Dealing will not resume until Friday.

The cash call, part of an aggressive expansion plan, will open the way for British Airways to reduce its 21% stake in the company. BA has denied it wants to cut its stake but has already effectively done so by not participating in the last Qantas equity placing last October, which cut its holding from 25%.

Qantas, one of the world's most profitable airlines, has fared better than most in the wake of 11 September, largely because of domestic factors. Its major competitor Ansett was forced into liquidation, leaving Qantas with about 85% of the domestic market.

The company is trying to capitalise on that by raising A$10bn (£3.5bn) to fund a fleet and facility upgrade over the next four years. An Australian analyst said the programme could be achieved using cash and debt. 'However, it would probably be more comfortable if it raised some equity,' he added.

Qantas has been lobbying the government to lift its cap on foreign ownership, believing the interest this would attract could boost the share price by up to 15%. But last week the government refused to raise the limit.

When the airline was privatised in 1995, foreign ownership was capped at 49%, with no single airline allowed to own more than 25%. While most analysts agree lifting the cap is not essential at present, it may become so as Qantas looks at acquisitions and further fleet upgrades. It is believed, for example, that the company is interested in taking a 25% stake in Air New Zealand that could cost A$400m (£142m).

The Australian government, currently trying to persuade a reluctant electorate to accept the full sale of the partly privatised telecoms company Telstra, is unlikely to want to address the issue now. But neither is Qantas likely to drop it after two years of intense lobbying. In Sydney, the shares closed up nine cents at A$4.69.

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