MUTANT a recipe for alphabet soup of acronyms

I HAVE been knee-deep in acronyms throughout my business-reporting career.

It's part of the daily weave. What used to be the Australian Mutual Provident Society and is now AMP is, for example, lined up beside what was National Australia Bank and is now NAB waiting for a decision by the ACCC, or Australian Competition and Consumer Commission, to see who gets to buy out AXA, France's former l'Assurance Mutuelle contre l'Incendie, to take control of AXA's Australian business, AXA Asia-Pacific, or AXA AP.

Any share offer for AXA AP will be benchmarked against the VWAP, or value-weighted average price for the bidder's shares, and the value of the target will be assessed by the experts using DCF, or discounted cash flows.

And so it goes. The market's climb out of the depths of the financial crisis is measured by valuations of esoteric acronymised counters including CDOs (collateralised debt obligations), CDS (credit default swaps), and interest rate spreads over LIBOR, the London Interbank Offered Rate and as company profits recover they are being announced in terms of NPAT, or profit after tax, EBIT, or earnings before interest and tax, and EBITDA, which is EBIT with depreciation and amortisation also not deducted.

I try where I can to explain the alphabet soup, but it is sometimes a TISNA (there is no alternative) problem. Acronyms are everywhere in the business and finance community for the same reason that internet surfers LOL and ROFL: the abbreviations get past complex concepts that are generally understood within the world in which they are used, enabling those who are familiar with them to get to the real point of a conversation. If acronyms were all expanded in financial reportage, there would be little space left for the reporting itself.

But over the years I have developed some ideas about acronyms that might be presented as Maiden's Unified Theory on Acronyms, Names and Titles . . . or MUTANT.

MUTANT rule No.1, sometimes honoured in business and finance circles to the point of absurdity, is that acronyms must form a word, preferably a word with an upbeat association.

CBA has raised money over the years by issuing hybrid debt-equity securities that go by the name of perpetual, resaleable listed securities, or PERLS. The bank issued a fifth tranche of them in October, raising $2 billion, and, like most hybrids, they are tradeable on the ASX, using CHESS the exchange's clearing house electronic subregister system.

There are exceptions to rule No.1. Acronyms sometimes hide a harsher reality as, for example, did FTMUT (Flexible Tariff Management Unit Trust) and PSUT, the Portland Smelter Unit Trust, the obscurely named vehicles that took the Cain government's power price subsidiary for the Portland aluminium smelter off the state's balance sheet.

But the best acronyms are pronounceable and memorable. And rule No.2 they are also stable. It's no accident, for example, that our top securities regulator, ASIC (the Australian Securities and Investments Commission), has been through a series of acronymic incarnations as successive governments have recast its role.

Its lineage extends back to 1974 and the formation of ICAC, the Interstate Corporate Affairs Commission, which existed between 1974 and 1979. ICAC's replacement was the NCSC (National Companies and Securities Commission), another federal-state hybrid, and when Canberra finally took control of company and securities law at the end of the 1980s, a new acronym, ASC, or Australian Securities Commission, was born.

Then, in 1997, the Wallis inquiry into Australia's financial system proposed two new super regulators a securities, companies and consumer protection regulator it suggested be called the Corporations and Financial Services Commission, or CFSC, and a new banking insurance and financial services regulator, the Prudential Regulation Commission, or PRC.

The super-regulators were created, but their names and acronyms were not. The new agencies wanted to be branded "Australian" to flag their status in the international regulatory community, and today's ASIC and APRA, the Australian Prudential Regulation Authority, were born.

The philosophy behind my MUTANT rules is that the best acronym says something about the thing it represents by being constant and memorable, and on Interbrand's Australian brand league table, the big four banks rate highest (Westpac is not an acronym, but it's close enough).

In my opinion, however, the title of Australian acronym champion goes to the collection of letters that has existed since 1920, when Queensland and Northern Territory Aerial Services was formed in 1920.

Unlike CBA's PERLS, the Qantas acronym doesn't speak to anything but its own history, but it's world-famous, and the choice to fold the Australian Airlines domestic brand into Qantas in 1993 was obvious.

The next branding decision is tougher, however.

Qantas maintains a two-brand strategy, running Qantas and Jetstar in parallel as full-fare and discount airlines respectively. In the December half-year, Qantas was still the biggest profit contributor, earning $199 million before tax compared with Jetstar's $72 million.

Traffic and passenger number statistics for February that Qantas released yesterday showed, however, that Jetstar boosted passenger numbers by almost 14 per cent in a year to 50 per cent of the number who flew under the Qantas acronym, up from 46 per cent a year earlier.

That trend will continue as Qantas scales back premium seats and shifts more routes on to Jetstar. The discount airliner is going to become Qantas's dominant operation, and when it does, Qantas has to decide whether to dump the Jetstar brand and fly solo again with its famous acronym.