Nov. 23 (Bloomberg) -- Qantas Airways Ltd., target of a takeover approach by Macquarie Bank Ltd. and Texas Pacific Group, offers the buyers more than a fleet of 213 jets. Australia's biggest airline would complete Macquarie's stranglehold on the Sydney travel market.

If a bid is successful, a typical traveler could drive on the M5 motorway, half-owned by Macquarie-advised Sydney Roads Group, to Sydney Airport, whose biggest investor is Macquarie Airports, then pile their baggage on to Macquarie's trolleys and fly on planes owned by the investment bank.

Macquarie, the world's largest private manager of infrastructure, posted 14 straight years of record profit by bundling assets into funds it oversees for investors and arranging deals. The bank may split Qantas's freight, property, catering and holiday units and sell them to funds that it manages, earning returns and fees, investors said.

``Those assets are the key to unlocking the full value of Qantas,'' said Jason Teh, who helps manage the equivalent of $4 billion at Investors Mutual Ltd. in Sydney, including stock in the Sydney-based carrier. ``Qantas has the mix of these other businesses which no one values but the likes of Macquarie Bank or Texas Pacific would.''

The Sydney-based airline, which is valued at A$9.8 billion ($7.6 billion) based on today's closing price for its shares, posted a pretax profit of A$579 million from its mainline flying businesses last year. It added a further A$11 million from discount airline Jetstar Airways, A$45 million from its holiday retailer and A$37 million from flight catering.

Terminal Interest

Those figures don't include the value of its T3 passenger terminal at Sydney, Australia's busiest airfield.

T3 moves all of Qantas's domestic traffic at Sydney and is controlled by the airline. The terminal is valued at A$350 million by Craig Stafford, an analyst at UBS AG who has a ``neutral'' recommendation on Macquarie Airports stock. UBS AG has been hired as an adviser to Qantas.

Texas Pacific adds airlines expertise to any bid. David Bonderman, a founder of the Fort Worth, Texas-based firm, bought Continental Airlines Inc. in 1993, when the U.S. carrier hadn't produced a profit in 15 years. Two years later, it was making money and in 1998, he sold his stake for about $700 million, a 10-fold return.

The firm has also invested in America West Airlines Inc., Ryanair Holdings Plc and Tiger Airways Pte.

Allco Finance Group Ltd., an Australian manager of assets such as ships, property and aircraft that already leases planes to Qantas, said today it may join Macquarie and Texas Pacific.

Toll Roads

Qantas doesn't fit the typical acquisition criteria for Macquarie, said Carlos Castillo, an analyst at Commonwealth Securities Ltd. in Sydney. The airline's earnings are closely tied to the volatile performance of crude oil, outside of the control of the company.

Other assets Macquarie has bundled into funds it oversees for investors and manages for a fee included the Indiana Toll Road and the Chicago Skyway in the U.S.

This year it also advised Alinta Ltd., Australia's biggest energy transmission company, on a A$6.3 billion asset and debt swap with Australian Gas Light Co.

Macquarie helped Grupo Ferrovial SA in its 10.1 billion pound ($19.2 billion) acquisition of BAA Plc., the world's largest airport operator, and last month it led a group that agreed to buy Thames Water for 4.8 billion pounds.

``Macquarie's just looking to put it together and maybe take a few bits that it likes,'' said Matt Crowe, a transport analyst at JPMorgan Chase & Co. in Sydney who has a ``neutral'' recommendation on Qantas shares. ``They're not really that interested in airlines.''

Freight Business

He said Macquarie may take the same approach with Qantas's fleet of aircraft and lease them back to the company.

Breaking up Qantas may yield more than A$3 billion in asset sales, said Paul Ryan, an analyst at Goldman Sachs JBWere who has a ``hold'' recommendation on Qantas stock.

He values the company's freight business at as much as A$1.4 billion, according to a report yesterday. Ryan said the bidders may pay more than A$5.50 a share for Qantas, which could be justified by lower fuel spending, selling some parts of the business and raising the debt-to-equity ratio to 200 percent from 79 percent.

Qantas shares, which gained 15 percent yesterday, fell 7 cents to A$4.93 at the 4:10 p.m. market close in Sydney today.

Political Headwind

Still, the proposal must overcome an alliance of politicians, labor unions and individual shareholders if its pursuit of Qantas is to succeed.

``There will be a backlash,'' said Stephen Matthews, chairman of the Australian Shareholders Association, which represents individual investors. ``Our members and retail shareholders are saying these people are financial engineers.''

Government policy remains that Qantas should be majority- owned by Australians, Treasurer Peter Costello said.

``I don't believe there are any grounds to amend the law,'' Costello told reporters in Brisbane.

``I can't see why any proposal to split the thing up would be in anybody's interests.''

Macquarie said any offer for the airline will conform with the ownership restrictions.

The bid has also stirred concern that Macquarie, whose chief executive officer, Allan Moss, is the highest-paid in Australia, will seek to profit by breaking up and piling debt on to a company regarded as a national icon since its founding in 1920.

The carrier, which started with two war-surplus 100 horsepower biplanes serving the Australian outback, carries two of every three domestic travelers and one of every three travelers leaving Australia.

To contact the reporter of this story: Vesna Poljak in Sydney vpoljak@bloomberg.net;

Last Updated: November 23, 2006 01:40 EST