BA wins Qantas as US bid fades

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The Independent Online
British Airways yesterday secured a 25 per cent stake in Quantas, the Australian flag-carrier, beating off the only other bidder, Singapore Airlines, with a Adollars 665m ( pounds 292m) bid.

But its wider strategic goal of clinching a dollars 750m tie-up with USAir remained in the balance as John Major prepared to make a last-minute plea for the deal to be allowed when he meets President George Bush this weekend.

The Qantas deal will give BA an important foothold in the burgeoning Australasia-Pacific market. Qantas acquired Australian Airlines in September and together they fly to more than 60 destinations with a fleet of 86 aircraft and last year carried 12.5 million scheduled passengers.

Lord King, BA's chairman, said he was delighted that its offer had succeeded despite a concerted 'anti-Pommie' campaign in some quarters.

But he refused to be drawn on reports that the Bush administration is poised to veto the USAir deal as he arrived at Heathrow to see off the Prime Minister on his flight to the US.

According to the reports, Andrew Card, the US Transportation Secretary, will block the deal next week unless Britain agrees first to an 'open skies' agreement across the Atlantic giving the big three US airlines greater access to Heathrow. BA sources later tried to play down the reports, saying: 'If you are in a poker game, that is exactly the hand you would play.'

Mr Card has promised to rule on BA's proposed acquisition of a 21 per cent voting stake and 44 per cent equity stake in USAir by Christmas Eve - the deadline for calling off the deal.

Britain is adamant that it will go forward with an open skies agreement with the US only after the deal has been approved. Although the USAir bid is likely to be high on Mr Major's agenda, industry sources insisted last night that he would not table any new offer when he meets Mr Bush.

Under the Qantas deal, which will be financed through cash and borrowings, the Australian government is recapitalising the airline with an injection of Adollars 1.35bn, valuing it at about Adollars 2bn.

The remaining 75 per cent will be floated by June in the largest public float undertaken in Australia. The government has set a limit of 35 per cent on foreign investment in Qantas which, after the BA trade sale, leaves 10 per cent open to foreign institutional investors. There were suggestions in Australia last night that BA could seek to increase its holding in Qantas by joining a consortium of investors bidding for this share.

Ralph Willis, the Australian Minister for Finance, said BA had been selected instead of Singapore Airlines on grounds of price and conditions and because it offered Qantas strategic benefits.

Sir Colin Marshall, BA's chief executive and deputy chairman, said that, through the alliance with BA, Qantas would achieve significantly increased market reach in North America and Europe. BA, in turn, would gain 'valuable market presence' in the Pacific.

While the deal will give BA significant influence over Qantas by allowing it three directors on a new Qantas board of 12, Sir Colin and Mr Willis sought to counter fears that it will lead to ultimate British control. Sir Colin said: 'Qantas will be an independent Australian corporation, substantially owned and controlled by Australians.'