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Investors Seek To Scupper Qantas/Emirates Alliance

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Australia's Qantas Airways went on the offensive on Wednesday against a group of investors that includes the airline's former chief executive, accusing them of trying to sabotage a recent alliance with Dubai's Emirates.

The spat between Qantas CEO Alan Joyce and his former mentor and friend Geoff Dixon, who led the carrier from 2001 to 2008, formally came out in the public arena with Qantas suspending over AUD$40 million (USD$41.8 million) in funding to the country's main tourism agency, which is headed by Dixon.

Qantas has been battling high fuel costs, tough competition and a strong Australian dollar that has dented tourism spending, and in September announced a strategic tie up with Emirates to shore up its loss-making international business.

Local media say the group of investors has accumulated a 1.5 percent stake in the airline and is seeking a shareholder-led change in strategy. At least one of the investors, wealthy advertising executive John Singleton, has called for Joyce's ouster.

In a statement emailed to reporters, Qantas said it was cutting funding to Tourism Australia, adding that Dixon "was a member of a syndicate committed to unravelling Qantas' structure and direction."

The group of investors has not put out a statement about its intentions.

"They'll seek to gain influence the cheapest way possible and I think that makes a hostile takeover for complete control unlikely at this stage. But I wouldn't completely rule it out," said Peter Esho, analyst at City Index.

Esho said the group's main intent was to replace Joyce.

"This is a grassroots campaign to really align the shareholder base either way: current management which has presided over a large fall in the share price or a bunch of people that previously ran this business, know it intimately, and want to do things differently," he said.

Joyce recently wrote to staff saying he had no intention of supporting any private equity bid.

Qantas shares have slid about 44 percent since Joyce took the helm in November 2008.

The group of investors also include former Qantas chief financial officer Peter Gregg and investor Mark Carnegie. Many were part of a consortium called Airline Partners Australia that made an unsuccessful USD$9 billion takeover offer at AUD$5.45 a share in 2007.

Joyce, who dramatically grounded all flights for two days last year to force a resolution with unions, told journalists in Sydney on Wednesday that the majority of shareholders as well as customers and employees supported the Emirates alliance.

He said that while it was clear that the investor group did not support the Emirates alliance, it was not clear what their strategy was, and added that he had not spoken to Dixon for eight months.

"Personal relationships and anything else around it is secondary to... protecting Qantas," he said.

(Reuters)