Qantas Suspends $50M Marketing Deal with Tourism Australia Over Consortium Meddling

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By Vittorio Hernandez | November 28, 2012 10:21 AM EST

Qantas suspended on Wednesday a $50 million marketing agreement with Tourism Australia over the alleged meddling of a consortium led by the head of the tourism body and former Qantas official.

"The Qantas Group has advised Tourism Australia that it is suspending future financial support due to a potential conflict of interest of the agency's chairman," a Qantas statement said.

"Qantas cannot continue to collaborate with an agency whose chairman is a member of a syndicate committed to unraveling Qantas structure and direction.

The flag carrier was referring to Tourism Australia Chairman Geoff Dixon, the former chief executive of Qantas. He also leads the consortium made up of former Qantas Chief Financial Officer Peter Gregg, venture capitalist Mark Carnegie, advertising expert John Singleton and retailer Gerry Norman.

The group reportedly is meeting the Australian and International Pilots Association on Wednesday for a second time to outline their plans. The first meeting was in early September.

To assuage Qantas senior officials about the agitation that could come from the consortium, Mr. Joyce sent them an email last week expressing confidence in Qantas's management's five-year plan designed to improve the air carrier's financial standing.

Other than the influential pilots' union, the consortium also allegedly have contracted the Transport Workers Union which count Qantas support staff, including baggage handlers who frequently walk off their jobs due to discontent with the way Qantas is treating them.

Mr. Harvey, who founded Harvey Norman, admitted on Tuesday that he is a Qantas shareholder. He acknowledged being a passive investor in the flag carrier which could fuel further aviation industry speculation that he belongs to the consortium that is pushing for a strategic change at the losing Australian air carrier.

He stressed that he has zero input into Qantas board and management decision-making process, which has irked many shareholders over policies that cause the company to lose money.

"I'm not praising (Qantas Chief Executive) Alan Joyce or condemning Alan Joyce," The Australian quoted the retail mogul.

"I'm just looking at Qantas and thinking . . . the asset backing is twice what the share price is, and mostly when you buy something at less than asset backing in a company that is going OK, mostly you will make money," he explained.

Besides Qantas shares, Mr. Harvey said he owns stocks in 50 other publicly listed companies. Reports said the consortium purchased Qantas shares in early June at $1.15 per share which eventually plummeted in value to 97 cents, an all-time low.

Although the Qantas share price is currently half its asset backing, Mr. Harvey said he considers the air carrier's stock a good buy because it could eventually double in price.

Qantas is in deep financial chaos due to overcapacity in the domestic market and stiff competition from lower-priced and government-supported Middle Eastern air carriers as well as frequent problems with its employees.

The Tourism Australia deal included a proposed partnership with Middle Eastern carrier Emirates. Qantas, however, reiterated its support for Australian tourism and will not cancel funding commitment to tourism marketing but will channel money through states, not through a federal agency.

In a letter to Tourism Minister Martin Ferguson on Tuesday, Mr. Joyce said he would not have any further deals with Tourism Australia while Mr. Dixon chairs the federal agency.

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