SYDNEY: Qantas Airways Ltd. has sold the lease on its Sydney domestic terminal back to the airport operator for 535 million Australian dollars (US$394 million) as Australia’s biggest airline works to free up capital.
“They are working very hard at retiring debt to get their credit ratings up while proceeding to buy new aircraft to reduce the age of their fleet,” said Neil Hansford, chairman of consulting firm Strategic Aviation Solutions. “So if they can turn some assets like the terminal into cash it then puts them in a much better position,” he added.
Qantas is expected to report Thursday that it swung to a profit in the last financial year from a A$2.8 billion loss in fiscal 2014. The carrier’s improving financial position follows a brutal cost-reduction regime that included thousands of job cuts, the cancellation of some aircraft orders and the shutting of poorly performing routes.
The sale of the Sydney terminal lease comes as Qantas holds talks with Melbourne and Perth airports about similar deals. Qantas Chief Executive Officer Alan Joyce said Tuesday that those talks were in early stages. Qantas sold its lease over its Brisbane terminal back to the operator there for A$112 million in February last year.
Qantas said it would record a A$210 million gain in fiscal 2016 from the deal with Sydney Airport, which was the result of years of talks, carried out at times against the backdrop of a deteriorating bottom line.
“This has strengthened the cash position and the capital position of the group,” said Mr. Joyce. He said the deal also secures Qantas’s long-term position at its largest hub by ensuring the airline has priority use of the terminal through to mid-2025. Some analysts, however, questioned why the airline was selling a key asset just as its fortunes are improving.
“They don’t need the cash,” said Tony Webber, managing director of Webber Quantitative Consulting and a former Qantas chief economist. “In my mind it’s madness to sell an asset to a monopoly operator. It just gives them more power, and the ability to increase fees in the future.”
Sydney Airport owns the land on which Terminal 3 stands. Qantas bought a 30-year lease on the terminal in 1989, and control of the facility was due to revert to Sydney Airport in mid-2019.
The airport will now take back control nearly four years earlier, on Sept. 1. From that point, Qantas will incur a per-passenger charge for flights arriving at the terminal. Qantas and Sydney Airport said they have agreed on a rate for the passenger charge through 2025, but didn’t disclose the details.
