Qantas considers selling long-term terminal leases

Qantas stands to reap as much as $1 billion from relinquishing the long-term leases on passenger terminals at four airports, including Melbourne and Sydney, years before they expire.

Qantas stands to reap as much as $1 billion from relinquishing the long-term leases on passenger terminals at four airports, including Melbourne and Sydney, years before they expire.

The airline has told analysts in briefings that it expects to make a decision on selling the long-term leases on terminals at Melbourne, Sydney, Perth and Brisbane airports within a year. It expects to raise up to $1 billion from the leases, which expire in 2018 or 2019.

Should it opt to terminate them early, Qantas will need to funnel a portion of the funds raised into the construction of a new engineering hangar at Sydney Airport to replace its existing jet base.

Sydney Airport is due to release more details in the middle of this year about plans to expand passenger terminals on land now occupied by Qantas' jet base. It will also detail the site for new hangars for both Qantas and Virgin Australia. Under its existing plans, it has earmarked land in the airport's south-east near the third runway and General Holmes Drive for the hangars.

Macquarie Equities analyst Ian Myles said Qantas had indicated it would sell the leases on the terminals within the next 12 months.

"From Qantas' point of view, selling the terminals makes perfect sense," he said.

"The issue is at what price. Whatever the price they sell it for, they will pay in rent. You could sell it for nothing and your access fees would be very, very low."

Qantas declined to comment on the nature of any talks with the airports, saying it was in regular contact with them about "a range of issues".

"We also regularly review our assets to ensure they are delivering value for the group," a spokesman said.

But Sydney Airport confirmed the talks were continuing about the "early reversion of leases".

Qantas is obliged to return the jet base - the lease for which expires in 2020 - to Sydney Airport as a "clean site". The airline will have to decide on a new maintenance hangar well before it vacates the site.

Macquarie Equities said Qantas had talked about a delay in making a decision about the jet base, and the size of the new hangar, which some said could become the largest in the southern hemisphere.

Qantas has pursued a strategy of divesting non-core assets in recent years, which has resulted in offloading a half stake in Star Track Express and some catering and maintenance operations.

Sydney Airport needs the land occupied by the jet base to expand its operations to cater for growing passenger volumes. An expansion onto the jet-base site would provide an extra nine terminal gates.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles