By Matt O'Sullivan
QANTAS is expected to merge the freight ventures it has with Australia Post in an effort to slash costs and turn around their disappointing performances over the past two years.
The two joint ventures - Star Track Express and Australian Air Express (AAE) - again delivered weak earnings in the 12 months to June despite Qantas's own freighter aircraft having a profitable year due to a rebound in demand on key routes to China and the US. Despite suggestions of unease within management, Qantas has vowed to remain 50-50 equity partners with Australia Post in both Star Track Express and AAE because of their strategic importance.
The outcome of a review of the two companies - which employ almost 5000 people between them - will be revealed in early October, which Macquarie and Citi analysts expect will result in them being merged in order to slash back office costs.
Star Track Express has been Qantas's most celebrated acquisition over the past decade. Qantas and Australia Post bought the road freight group for $750 million in 2003, in a deal that remains the airline's most concerted push into the express freight sector.
But it has failed to live up to its high-growth promise as it battled strong competition from both Toll Holdings' IPEC and TNT, and suffered from a large fall in freight demand due to the global financial crisis.
Qantas's group executive for commercial and freight, Rob Gurney, would not comment on whether Star Track Express and AAE would be merged but conceded they were ''not performing to their potential''.
''We believe there is a lot of headroom for improvements in the financial performance of the businesses,'' he said.
''One of the reasons we did the review is that we are not happy with the performance.''
Qantas would not divulge the two joint ventures' bottom-line results for the year but Mr Gurney said that their earnings ''haven't moved substantially''.
While demand in the international air freight market was improving, Mr Gurney said: ''Closer to home it has been a tougher market, so those businesses have suffered from that over the year.''
His comments suggests that AAE only just broke even in the year to June, while Star Track Express's net profit would be of the order of about $20 million.