BREAKFAST DEALS: Qantas lift

Qantas gets its historic $9 billion aircraft deal off the ground and there is even a glimmer of hope on the IR front. Meanwhile, Metcash boss Andrew Reitzer says the ACCC got its argument wrong on both counts and lifts the lid on the discount wars. In other news, former Treasury boss Ken Henry rejects talk of any conflict of interest as he gets set to join NAB's board. Elsewhere, New Hope Corporation's bid to find a worthy suitor may not deliver a result, Fitness First joins the trade sale treadmill and efforts to save European bank Dexia gather pace.

Qantas, Virgin Australia, Airbus  

The storm of industrial action hasn't prevented Qantas from signing off on the biggest aircraft order in Australian aviation history, with the carrier set to pay $9 billion to Airbus for 110 A320s. The aircraft will be the backbone of Qantas' planned push into Asia through the expansion of Jetstar and the new premium airline, details of which are still under wraps. Interestingly, the deal comes as the International Air Transport Association recently delivered another gloomy picture for the global aviation industry, with chief executive Tony Tyler warning that profit forecasts of $US28 billion in the three years through 2012 may be unsustainable as over-capacity and regulatory costs eat into margins. Tyler, who is a former CEO of Cathay Pacific, said in an interview that margins may come under further pressure if the global economic situation gets worse. The airline game is tough at the best of times and for Qantas, its ongoing scuffle with the unions is likely to make a further dent on the numbers. The Asian push is a key part of Qantas chief executive Alan Joyce's vision of nursing the international business back into health but softer economic conditions and the costs incurred from the industrial action could delay that plan. Luckily for Joyce there was some good news on the IR front – which this week has been dominated by the news of death threats and so forth – with the Transport Workers Union, which represents baggage handlers and other ground crew, calling off their two-hour stoppage which was planned for today. The move, which the TWU said was a "gesture of good faith” came as Qantas reached an in-principle enterprise bargaining agreement with the Flight Attendants Association of Australia, covering 2100 domestic flight attendants. The agreement includes a three per cent annual pay rise over the next three years and a yearly $500 lump-sum payment. The agreement with the flight attendants and the TWU decision to call off the strike are a positive sign for Qantas but tougher negotiations lie ahead and the unions certainly don't seem to be in a mood to relent. Meanwhile, Qantas and its rival Virgin Australia also took the time yesterday to indulge in a bit of bragging, with both securing work from Rio Tinto to fly the mining giant's staff both at home and internationally. Qantas has extended its existing deal with the miner for another three years, while Virgin Australia has for the first time won a piece of Rio's global contract.

Metcash, ACCC and lifting the lid on the discount wars

Metcash boss Andrew Reitzer has waited close to 15 months to get his hands on Franklins and with the Federal Court to rule on the Australian Competition and Consumer Commission appeal to unwind the $215 million transaction there is still a chance, albeit a very slim one, that the whole deal could unravel. However, Reitzer doesn't seem too worried by that prospect as he laid into the regulator in the latest KGB interview. Reitzer told Business Spectator that the ACCC is wrong on two counts: firstly, that the regulator's claim of one big retail grocery market and a separate wholesale market was erroneous, and secondly, that there is no way Franklins would have survived on its own and it probably should have been sold a lot sooner. With sales down about seven per cent, manufacturers taking away promotional monies and discounts and a despondent staff, Reitzer said that in another three or four months there would have been nothing left. However, the most revealing point of the interview was not about Franklins or the regulator but rather Reitzer lifting the lid on just what's driving the current discount wars. Reitzer said that the likes of Woolworths and Coles weren't bearing the cost of cheap milk and bread, with manufacturers and farmers funding the promotions. The comments certainly seem on the money given that the Senate Economics Reference Committee investigating the price war has reportedly been told by the Queensland Dairyfarmers Organisation that the discounting has taken $77 million out of the supply chain.

Ken Henry, NAB

It was only a matter of time before former Treasury Secretary Ken Henry's appointment to the board of National Australia Bank was going to ruffle some feathers and, true to form, Henry has had to come out and hose down talks of any conflict of interest, given that he is also leading Prime Minister Julia Gillard's review of Australia's engagement with Asia. With Australian banks, including NAB, looking to expand their operations through the region, Fairfax papers report that some have raised the issue of conflict between his duties as a non-executive director for NAB and his preparation of the white paper which will examine Australia's long-term position in Asia. Henry has understandably rejected the suggestions as ''absurd'' and if anything he might actually be in the mood to seek seats on other boards.  

New Hope Corporation, Macarthur Coal

Shares shot up like a rocket on Wednesday in the latest target in the local coal space, New Hope Corporation, after the miner kicked off an auction to find a suitable suitor. However, after jumping 15 per cent in a day it was altogether a quiet affair yesterday as investors paused to consider whether the process is actually going to deliver a result or not. As mentioned in yesterday's column, there is no doubt that New Hope is a good catch but with a potential price tag of $6 billion not everyone is sanguine that a deal will be forthcoming. One only has to look at the recent auctions attempted by Bandanna Energy and Whitehaven Coal, both of which failed to land a buyer and have seen their shares suffer as a result. Another thing to keep in mind is that New Hope has a couple of other interests – in energy conversion technologies, oil and gas companies – attached to it. Not all suitors will be keen on those and that could be a bone of contention if New Hope chairman Robert Millner sticks to his guns with regards to only selling the whole company or nothing at all. Meanwhile, Peabody Energy and Macarthur Coal have extended their $4.83 billion takeover bid for Macarthur Coal for a second time. The companies said on September 30 that they had gained shares equivalent to 21 per cent of Macarthur and have extended the period in which shareholders have to accept the offer to 2000 AEDT on October 28. It had originally set a deadline of September 27, before extending that to October 14. Finally, Newcrest Mining's new boss, Greg Robinson, has played down speculation that the gold miner is ready to splash out $5 billion to pick up the remaining 50 per cent of the of the Wafi-Golpu gold-copper project in Papua New Guinea from its joint venture partner Harmony Gold Mining.

Fitness First, BC Partners

It looks like the Fitness First chain of gyms has joined the trade sale treadmill, with The Australian Financial Review reporting that the chain's British owners, BC Partners, are looking for a buyer. Fitness First's operations in Australia and Asia are reportedly believed to have generated an annual revenue of about $500 million in the year to October 2010 and the paper reckons the business could be worth as much as one billion dollars. Apparently the trade sale option has come about after BC Partners' initial plans to float the business in Singapore were canned earlier this week.  

Wrapping up

Taking a look at international news, it looks like the rescue of troubled European bank Dexia is gathering momentum, with reports that official talks are underway to sell the bank's Luxembourg subsidiary. There is also talk that the bank's two biggest shareholders, the Belgian and French governments, are in favour of nationalising its operations there. Belgium and France became Dexia's largest shareholders after the 2008 credit crisis, when they bailed it out with a $US7.8 billion package, while Luxembourg also took a small stake. Back to local news, the Macquarie consortium reportedly has some competition on its hands for Charter Hall Office REIT, with the target's chief executive, Adrian Taylor, telling the AFR that another party has expressed interest in entering the fray. Meanwhile, The Australian reports the independent expert's report that endorsed the restructure of Centro has found lawyers and financial advisers working on the proposal will get at least $100 million if the deal goes through – a whole sight more than what Centro's note holders, bondholders and shareholders are set to see. The paper also reports that Burrup Fertiliser boss Pankaj Oswal has been accused of one of the biggest fraud cases in Australian history after receivers PPB Advisory allegedly uncovered another $113 million that was siphoned out of the company. In resources, Xstrata has given the Leighton Contractors-backed Queensland electricity project CopperString a significant blow by signing on to underwrite a rival power station from APA Group and AGL Energy. And speaking of Leighton, the construction giant's major company shareholder, Hochtief, now has four members on Leighton's eleven-member board, with Manfred Wennemer coming on board.