CRASH LANDING?(2)

Winning himself a role as a stealth bomber pilot in the movie Broken Arrow was reportedly a dream come true; being drafted in as narrator of a 50th anniversary documentary about the Blue Angels aerial demonstration team was just as fulfilling; naming his first child Jett seemed an entirely natural thing to do. Yes: Hollywood star John Travolta is evidently a fan of flying.

He's also a fan of Australian airline Qantas, having joined the company's payroll in August 2002 when he became its so-called “ambassador-at-large”. Among the various activities he has undertaken since, Travolta completed a “Spirit of Friendship” tour, in which he flew 35,000 miles in a Qantas Boeing 707 in order to extol the virtues of Australia's national airline in 13 cities around the world.

And there is another thing that Travolta is apparently a fan of: namely, the A$11 billion ($8.7 billion; €6.6 billion) offer that Qantas has accepted from Airline Partners Australia, a private equity consortium including domestic firms Allco Equity Partners, Allco Finance and Macquarie Bank, as well as Canada's Onex Corp and Texas Pacific Group of the US. Australian daily newspaper The Advertiser claimed on January 16th that Travolta – while admiring the airline's Australian roots – was “not concerned” by the takeover bid.

As such, he would be in a minority were he of Australian rather than New Jersey Italian/Irish descent. A recent survey by market research firm Roy Morgan International found that 51 percent of Australians opposed the takeover, while 49 percent supported it. Among the anonymous responses to the poll quoted by a Roy Morgan press release were such views as “there are too many Australian businesses being sold off overseas” and “a takeover will inevitably lead to a break-up of the company or some other negative impact”.

The first of these two comments betrays a lack of awareness of how the deal was delicately structured in order to avoid any perception that it was intrinsically “foreign”. If the deal completes, it will in fact leave a majority of Qantas in domestic hands. Australian private equity firm Allco Equity Partners will hold 35 percent and its asset finance subsidiary Allco Finance 11 percent. While it's not clear how much Macquarie will take, it is known that it will be enough to push the domestic holding over 50 percent. The foreign members of the consortium, meanwhile, will acquire interests of less than 15 percent each.

It's not only the size of the proposed equity holdings that shows how the consortium members have sought to tread over eggshells as softly as they can. In response to criticism of the deal from airline union officials, the consortium issued a statement emphasising its long-term commitment to Qantas, including a pledge to invest more than A$10 billion over the next five years and to “maintain Qantas' world leading maintenance and safety record”.

Given the consortium's apparent determination to play by the rules, some observers believed – and perhaps still do – that the deal would underline Australia's reputation as an open, Anglo Saxon-type market where global LBO funds could conclude deals smoothly, without experiencing the kind of headaches regularly given them by regulators in neighbouring Asian territories.

Shortly after the deal was agreed, a leading Sydney-based gatekeeper told PEI: “If the consortium meets the requirements of all parties – sellers, regulators, politicians etc – there's no reason why it shouldn't succeed. If they meet the legal requirements and then there's [government] intervention, it would surprise people. It's not the sort of market where you would expect that to happen.”

Since then, though, the Australian media has found critics of the buyout in ready supply – politicians among them. While insisting that it will not stand in the way of the market, the Australian government has stressed the need for the deal to comply with various regulations within the Qantas Sale Act and the country's Airports Act. In an interview, Deputy Prime Minister Mark Vaile described the “employment aspect” of the deal as “very very important”. Some opposition politicians have been openly hostile to the deal.

In January it was reported that consortium member Texas Pacific Group was mulling a bid for Italian airline Alitalia amid indications that confidence in the Qantas deal going ahead was weakening.

It may have the tacit approval of a Hollywood legend, but Qantas may yet be the deal that grounds the emerging Australian LBO market.