BREAKFAST DEALS: Qantas soars

Qantas splashes out the cash to beef up its domestic fleet and while it's sunny skies for the airline on the domestic front, the international business still continues to be a headache for Qantas boss Alan Joyce. NBN Co's latest deal with Pay TV operator Austar to take the NBN to the country cops criticism, while there is talk that Foxtel may be serious about snapping up Austar. Meanwhile, Australia's richest person and mining magnate Gina Rinehart looks set to add to her fortune with her Kevin Corner mine receiving a $2.25 billion bid. And traditional retailers are on the run as the company behind Angus & Robertson and Borders goes into voluntary administration.

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Qantas , Virgin Blue

Qantas Airways shares soared yesterday after the airline posted a four-fold rise in net profit for the first half. The carrier's first-half net profit rose from $58 million to $239 million and it's confident that second half numbers will be better than last year's despite the engine troubles with its A380s and the torrid weather in Queensland. Qantas boss Alan Joyce also took the opportunity to beef up the airline's domestic fleet through new orders and leases. The fleet upgrade includes the lease of five additional Boeing 737-800s along with the extension of leases on two Boeing 737-800s for Qantas. Qantas is also leasing 10 additional A320s, and extending existing leases on 11 A320s for its Jetstar business. Qantas will also buy 10 Fokker 100s for its latest acquisition, air charter services provider Network Aviation, and lease two extra Boeing 717s for its QantasLink regional service. The fleet renewal comes as Qantas looks to cement its position as the domestic heavyweight and the best way to do that is to have as many planes in the sky as possible. Joyce has pointed out that the move is designed to tap into new market opportunities and he might have a point. Corporate travel is getting back to good levels, as evidenced by Qantas' move to increase capacity in the lucrative east coast to Perth route, and Jetstar is increasingly spreading its wings in Asia. The acquisition of Network Aviation in December has given Qantas' a presence in the Western Australian fly-in-fly-out (FIFO) resources air charter market and the three extra aircrafts will be a welcome addition to Network Aviation's existing fleets. The one sore point for Joyce is the state of its international business, which continues to chew up a lot of capital but deliver little. The A380 engine fiasco certainly didn't help on that front and a group headed by executive Lesley Grant has been installed to examine all options and report before the end of the year. The group has its work cut out to get the international arm back on track and while a bigger fleet helps, the real prize lies in securing a viable partnership with a partner in Asia. After a turbulent year or so the skies are looking a lot clearer for Qantas and investors have certainly picked up on that positivity. Qantas shares posted their biggest one-day gain in almost two years, rising 5.4 per cent as the absence of dividend failed to dampen the spirits of investors. The international business is still a drag but the 'Flying Kangaroo' is looking a lot healthier. . 

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NBN, Austar, Foxtel

The NBN Co has found a handy ally in its bid to get the rollout of the National Broadband Network (NBN) to rural areas, with a $120 million deal to buy wireless spectrum from Pay TV operator Austar. The NBN Co is buying Austar's 2.4 GHZ and 3.4 GHZ wireless spectrum holdings to help it bring broadband to the country – a key promise made by the Gillard government to independents Tony Windsor and Rob Oakeshott. Unsurprisingly, the NBN Co and the government have come under immediate fire with detractors taking pot shots at the price tag. The spectrum was bought by a consortium led by Optus for $65 million in 2007 under the Howard government's OPEL project. The consortium subsequently handed it back to Austar when Rudd came to power in 2008. While the NBN Co has maintained that its agreement with Austar is very different to the OPEL/Optus deal, that hasn't stopped shadow regional communications minister Luke Hartsuyker and shadow communications minister Malcolm Turnbull from sticking the boot in. Meanwhile, The Australian reports that Austar is back in the sights of its Pay TV peer Foxtel. Talks of a Foxtel- Austar tie up have been around for a while with News Ltd and Consolidated Media Holdings both making overtures in the last six years but the paper suggests that things might be really serious this time around. There's talk that ConsMedia deputy chairman James Packer, along with Foxtel chief executive Kim Williams, is reportedly pushing for a deal and Telstra executives have also discussed the merits of a merger in the days leading up to its latest results.

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REDgroup Retail, Angus & Robertson, Borders

Australia's largest book seller and the company behind Angus and Robertson and Borders book chains, REDgroup Retail, has gone into voluntary administration, with Ferrier Hodgson brought into clean up the situation. What's truly striking here is that REDgroup, owned by private equity outfit Pacific Equity Partners, was once touted as a potential IPO candidate. But after a prolonged bout of sagging earnings it has finally come down to this. REDgroup reportedly owes $46 million to its creditors and the fate of the 180 Angus & Roberston and 20 Borders stores will become clearer in March when the creditors sit down. Till then its business as usual but in reality time may be running out for traditional book sellers. The villain of the piece is online retailing, which continues to lure customers away with its promise of cheaper books and DVDs. Retail giants like Harvey Norman and Myer have already voiced their concerns about pressure from online retailers but they have the capacity to do something about it, while tradition bricks and mortar booksellers are not quite that lucky. There are a few issues to keep in mind here – the federal government allows the importation of GST-free books from overseas. Meanwhile, local retailers can't buy books on the international market while consumers can pick them up online before they hit the domestic shelves. The demise of Angus & Roberston and Borders may force the government to rethink those policies but the bottom line is that customers needs and habits have changed and traditional booksellers just might not be nimble enough to keep up.

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Gina Rinehart, Hancock Prospecting, GVK Power and Infrastructure, Gloucester Coal, Donaldson Coal

Gina Rinehart's Kevin Corner mine could be worth well north of $2 billion as talks between the mining magnate's Hancock Prospecting and India's GVK Power and Infrastructure heat up. Sources have told Reuters that the Indian company has offered about $2.25 billion for the mine and has hired Ernst & Young as transaction advisor. GVK was in the race for another mining magnate Ric Stowe's Griffin Coal last year but was edged out by fellow Indian company Lanco Infratech. Kevin Corner is estimated to have coal reserves of around 4.3 billion tonnes and has a capacity to produce 30 million tonnes a year and is likely to be productive for the next 30 years. In other mining news, there is speculation that Gloucester Coal may be preparing to buy Donaldson Coal. Gloucester's majority shareholder Noble Group owns Donaldson and The Australian Financial Review reports that Gloucester may push through with a capital raising to fund the deal. The paper adds that there is chatter about a possible deal with Macarthur Coal over their jointly owned Middlemount project in Queensland.  Talk of corporate moves by Gloucester were sparked this week after the miner cancelled a series of post-results investor meetings. So far Gloucester has been very quiet but some sort of clarification may be forthcoming next week.

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Wrapping up

After letting suitor Singapore Exchange Limited (SGX) do all the talking in the last couple of day it was ASX Ltd boss Robert Elstone's turn to do take the stage yesterday as the local bourse operator posted a better than expected first half result. Elstone was in a confident movement saying that a merged ASX-SGX will not rest on its laurels for too long and would instead look for merger with its rivals in the northern hemisphere. He also reiterated that a rejection from Canberra would jeopardise the long-term future of the ASX. However, it looks like the political dance still has some way to go with Greens leader Bob Brown maintaining his virulent opposition to the deal and particularly the presence of the Singapore's government on SGX's register. Meanwhile, AXA Asia Pacific's chairman Rick Allert has been asked to join AMP's board. AMP has also extended the hand of friendship to AXA APH director Patty Akopiantz. The appointments will take effect once the $14 billion deal between the two parties get the necessary regulatory approvals. In banking news, National Australia Bank (NAB) has confirmed that ratings agency Moody's Investor's Service has also placed the bank's UK subsidiary Clydesdale Bank on review for a possible downgrade. Moody's has already placed the long-term senior unsecured debt ratings of NAB and the Bank of New Zealand on review for a possible downgrade as part of its Australian Banking review. Clydesdale's A1 long-term bank deposit and senior unsecured debt rating, its A3 dated subordinated debt rating and its (P)A3 junior subordinated rating are now all under review. NAB said that the move will have no impact on CB's Prime-1 short term ratings, on its C- bank financial strength rating (BFSR) or on its Backed-Aaa ratings of debt securities issued in 2008 under the UK government's Credit Guarantee Scheme. Bunnings Warehouse Property Trust (BWP) has agreed to acquire a suite of assets from Wesfarmers-owned Bunnings Group for $241.7 million, including 10 operational Bunnings Warehouses and three properties for prospective warehouses sites. BWP is funding the deal through a fully underwritten 1 for 4.84 accelerated non-renounceable entitlement offer to raise about $150 million which will be managed by UBS. Wesfarmers owns about 23.5 per cent of BWP and wholly-owns Bunnings Property Management, the responsible entity of the trust. Meanwhile, software developer Bravura Solutions Limited has confirmed that it has received several indicative bids from interested suitors but said that all were preliminary and highly conditional.