Perhaps it would make good sense for a big Pacific-based carrier to merge with an Atlantic-based one. But perhaps not.

British Airways is considering a merger with Qantas. According to the FT, "This is an exciting step towards the creation of the first truly global airline," said Willie Walsh, BA chief executive.

The plan comes about a year too late. The major reason for airline mergers has been to cut costs in the face of rising fuel prices. Now fuel prices are moving down -- and sharply.

The risks of merging large airlines make a long list. Putting together worker pools and cutting benefits often causes strikes. Marrying duplicate reservation IT systems can cause customer booking trouble for months. Consumers get upset and often go to another carrier.

Looking at the history of the industry, it is hard to find an airline merger which was a fabulous success. A number of carriers combined in the 1980s and 1990s only to go bankrupt at the beginning of this decade.

A BA merger with Qantas is too risky to try.

Douglas A. McIntyre is an editor at 247wallst.com.

A Qantas merger with British Air makes little sense originally appeared on BloggingStocks on Wed, 03 Dec 2008 14:00:00 EST. Please see our terms for use of feeds.

• Replace one 100-watt light bulb with a 18-watt fluorescent for 2 1/2 years
• Replace your refrigerator with a high-efficiency model
• Plant a Douglas fir tree for every four flights

Qantas gives airline passengers one more option: carbon offset originally appeared on BloggingStocks on Mon, 24 Sep 2007 14:40:00 EST. Please see our terms for use of feeds.

Taking over an airline is always difficult. Besides dealing with a tough business, there is also the politics.

In the case of the $9 billion buyout for Qantas Airways Ltd. (ASX:QAN), the buyers, including Texas Pacific Group, were able to get buy-in from the necessary governmental authorities.

That looked like it would be the biggest hurdle, right?

Maybe not. According to a story in The Age, there are still some more issues.

A big shareholder -- Balanced Equity Management -- basically wants a higher price. And why not? Equity in Australia has been red hot.

It's a gutsy strategy, though. If the deal falls through, Qantas shares are probably going to be lower than current levels. Keep in mind that there are a lot of hedge funds in the stock and they may dump their shares if the deal implodes. In fact, on the recent news, the stock price of Qantas fell 3%.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Qantas buyout hits turbulence originally appeared on BloggingStocks on Fri, 23 Mar 2007 14:57:00 EST. Please see our terms for use of feeds.

Airline acquisitions are always difficult, especially when some of the buyers are foreigners. That was the situation in the proposed $8.7 billion buyout of Qantas. One of the buyers includes the Texas Pacific Group.

In fact, Qantas is a crown jewel of Australia (a company that has posted profits for the past 13 years -- which is certainly a big feat for an airline). So, it would make sense that the regulatory approval would be quite difficult, right?

Well, according to the Wall Street Journal [a paid service], the Australian government granted approval to the deal. True, there are some conditions, such as keeping domestic routes and not off-shoring certain types of jobs.

But, for the most part, this looks like a done deal.

Basically, as private equity firms get bigger and bigger, they need to strike deals in foreign markets. However, many countries impose stiff barriers. For example, this is the case in Europe.

But, as for Australia, it looks like things are wide open for deal-making.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Qantas deal cleared for takeoff originally appeared on BloggingStocks on Wed, 07 Mar 2007 08:00:00 EST. Please see our terms for use of feeds.

Airline industry crackdown: on stewardesses having sex? originally appeared on BloggingStocks on Fri, 23 Feb 2007 17:20:00 EST. Please see our terms for use of feeds.

Late in December, I wrote a piece for Bloggingstocks about the voracious private equity firm, Texas Pacific Group (TPG). For 2006, it struck deals worth about $101 billion, with notables like Qantas and Harrah's.

So, TPG is poised to raise a mega fund? Not really. According to a piece in Reuters, the new fund is a measly $1 billion.

Huh? Isn't that chump change?

It certainly is. Given TPG's activity last year, such a fund would not last very long.

In other words, the fund will probably focus on the middle market.

The problem: TPG will compete with a myriad of other private equity firms, which could lead to higher valuations (because of the auctions).

Then again, TPG has a great brand - and this could mean getting better pricing on deals. After all, a prospective target might think there is much more upside in partnering with TPG.

But, TPG's move is certainly interesting. Then again, over the years, the firm has been quite successful by going against the conventional wisdom.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Is Texas Pacific Group downsizing? originally appeared on BloggingStocks on Fri, 05 Jan 2007 14:15:00 EST. Please see our terms for use of feeds.

Yet again this week, there are a variety of multi-billion dollar private equity deals. Is it too much? Will there be a blow-up?

A recent piece in Breakingviews takes a look at this, focusing on the prolific Texas Pacific Group. Over the past week, the company has been involved in the following deals: Qantas, Sabre Holdings, Biomet and Harrah's (assuming the company takes the offer).

But, hey, isn't everything bigger in Texas?

The fact is that money is piling into private equity funds. And the mission of such a fund is simple: buy companies. But with this deal frenzy, might these firms be getting sloppy? Should they be more patient?

Perhaps. But keep in mind that mega funds have the resources to hire top-notch analysts. These analysts then scour thousands of companies, writing up profiles. By the time a company is "in play," the private equity firm is ready to pull the trigger.

But history shows that booms tend to be followed by busts. And by any indication, private equity is certainly in the boom phase -- at least for now. It's the bust phase that I'm worried about.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates DealProfiles.com.

Private equity: Out of control? originally appeared on BloggingStocks on Mon, 18 Dec 2006 13:06:00 EST. Please see our terms for use of feeds.

The Texas Pacific Group (TPG), a major private equity firm, certainly understands the airline industry. While others have been crushed (even the venerable Warren Buffett), this firm seems to understand the particular nuances inherent in the industry.

Although, historically TPG has focused on distressed airlines, the latest deal for Qantas Airways is quite the opposite. Quantas is one of the world's best run airlines, turning a profit for the past 14 years.

TPG paid a premium for this kind of performance: $8.7 billion (or about 17 times earnings for 2007). Then again, this might be a sign that TPG sees good times ahead for the airline industry, in which case, why not pay for a chunk of a great airline?

The deal's not done yet. It will need to pass muster with governmental authorities. But TPG understands these types of complexities. For example, there will not be any off-shoring of jobs and regional flights will remain in place - all of which should help with the political issues.

Want more details on how this deal went down? Check out The Australian.

Tom Taulli is the author of various books, including the Complete M&A Handbook. He also operates DealProfiles.com.

Qantas's high-flying valuation hits $8.7 billion originally appeared on BloggingStocks on Thu, 14 Dec 2006 15:00:00 EST. Please see our terms for use of feeds.

An investor group, which includes the private equity firm Texas Pacific Group and Macquarie (an investment bank in Sydney), has been chasing Qantas (ASX:QAN)for the past month and is willing to pay $8.6 billion for the airline.

Alas, Qantas handily rejected the offer.

Qantas has done very well as a standalone carrier. In fact, it has been profitable for the past decade -- as many other airlines have gone bust. And with lower oil prices and a pick-up in air travel, the airline industry looks poised for growth.

However, a private equity deal would mean a ton of debt, which could make it difficult for Qantas to grow -- especially if there is slowdown in economic growth or even a terrorist disaster.

According to a Bloomberg.com piece, it looks like the deal has some tough terms, such as a back-out clause if oil prices surge. No doubt, the Australian government will need to opine on the deal, as well as Qantas' unions. Yes, this is likely to be a grueling process.

Tom Taulli is the author of various books, including The Complete M&A Handbook, and operates DealProfiles.com.

Qantas deal status: Delayed originally appeared on BloggingStocks on Wed, 13 Dec 2006 14:18:00 EST. Please see our terms for use of feeds.

The cost of flying will continue to rise. Airline mergers are coming fast and furious as the year draws to a close. I think it's too late to avoid the deal risks of a merger-resistant Democratic Congress before January. Nevertheless there's a major airline merger trend underway: Continental Airlines, Inc. (NYSE: CAL) wants to combine with UAL Corp.'s (NASDAQ:UAUA) United Airlines, US Airways Group, Inc. (NYSE: LCC) is trying to buy Delta Airlines Inc. (OTC: DALRQ), Airtran Holdings (NYSE: AAI) is going after Midwest Express Group (AMEX: MEH), and private equity firms are trying to acquire Qantas Airways Ltd.

This merger wave will be bad for consumers. The fewer the number of airlines left standing, the less the competition. And the less competition, the higher the price the airlines can charge you and I. Antitrust laws are designed to encourage competition and to prevent such consumer-damaging consolidation. But it's likely that the incoming Congress will scrutinize this matter more closely than the current one.

Why the flurry of mergers? There are two major operating costs in the airline business -- jet fuel and labor. While airlines can use hedging to limit increases in jet fuel prices, there's not a huge amount that can be done to reduce them. By contrast, some companies, such as US Air, have been extremely effective at lowering labor costs by filing for bankruptcy and ripping up contracts with pilots, attendants and other workers, and resetting pay at much lower levels.

The proposed mergers will lower labor and other costs further and with fewer choices available for consumers, the airlines will earn nice profits on the spread between the lower costs and the higher prices they can charge. While airline shareholders may benefit, consumers will suffer.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm, and a Professor of Management at Babson College. He has no financial interest in Airtran, Continental, Delta, Midwest Express Qantas, or US Air.

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Airline consolidation means higher ticket prices originally appeared on BloggingStocks on Wed, 13 Dec 2006 09:15:00 EST. Please see our terms for use of feeds.

As we approach the holidays, some private equity firms are still working. Now we hear that Texas Pacific Group and Macquarie Bank Ltd. approached Qantas Airways to do a leveraged buyout, worth about $8.5 billion.

The Australian airline has provided few details, but it doesn't seem to matter. The company's stock price has soared 20% on the speculation.

Keep in mind that Qantas was formerly owned by the government. As a result, there are likely to be many regulatory complications for a deal. For example, no investor can have a stake in excess of 25% and foreign ownership must not exceed 49%. And there will need to be negotiations with the unions.

But aren't airlines a terrible investment? Their collective history is certainly frightening. Nevertheless, Qantas appears to be under-leveraged, has a dominant share in Australia, has access to the lucrative Asian markets and has been profitable for more than a decade.

Further, the Texas Pacific Group has tremendous experience in the airline sector. Their first investment was in 1993 with Continental Airlines, which turned out to be a home run. Other investments include US Airways and Ryanair Holdings Plc.

Yes, Texas Pacific Group likes to venture into areas that the rest the crowd avoids - and so far, it's worked out very well.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.

Qantas: A leveraged buyout, mate originally appeared on BloggingStocks on Wed, 22 Nov 2006 10:51:00 EST. Please see our terms for use of feeds.