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Hockey raises Qantas’s hopes of levelling the playing field

written by australianaviation.com.au | February 13, 2014
Qantas CFO Gareth Evans has gone on the offensive to defend recent criticism.
Treasurer Joe Hockey has raised Qantas’s hopes of being able to compete on a “level playing field”.

Federal Treasurer Joe Hockey has given the first indication that the Coalition government may be willing to step in to support Qantas.

Speaking to Fairfax media on February 13, Hockey said that Qantas had requested the government provide a debt guarantee after the airline was downgraded by ratings agencies in December, and that the request met all four of the conditions he had imposed on such a request.

Hockey said the Qantas Sale Act which prevents the airline from foreign ownership of greater than 49 per cent was a “ball and chain” around the airline’s leg, and that competitor Virgin Australia, which has no such restrictions, was a “2,000 pound gorilla.”

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“Number one is existing restrictions on the business imposed by the Parliament,” Hockey said. “Number two is if it’s an essential national service, and number three is if it is in an environment where other sovereigns are engaging in direct competition to the massive disadvantage of an Australian business, then you need to take that into account. And the fourth thing is the business has to do its own heavy lifting on its own reform. We are not going to run the business or tell them how to reform.”

Other government members also chimed in, with Liberal Senator Sean Edwards saying ”The Qantas Sale Act needs to go. This is a restriction on the management of Qantas, the likes of which no other airline in the world has to suffer.”

The government’s apparent change of heart came the day after Qantas CEO Alan Joyce addressed a Tourism Task Force forum, where he again called for a “level playing field” so his airline could compete fairly with Virgin and other foreign-owned airlines.

“At the heart of the discussion is the role of Qantas as national carrier,” Joyce said. “I think everyone agrees that Qantas plays a vital role in Australian life. Qantas is a resource for Australians in times of crisis. A partner for charities and good causes. And a bridge between regional Australia, our major cities and global markets. We spend around $6 billion each year on Australian goods and services. We also contribute over $1.4 billion in direct and indirect tax each year.”

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“The power of that role should not be underestimated,” he added. “It is a role that we are proud to play. And it is a role that we want to continue playing for many decades to come. But to do so, we have to change – and so does government policy.”

Joyce added that the airline had never asked for a handout, and wasn’t asking for one now, but added, “Over the past five years, we have done everything in our control to reform Qantas for the changing global economy. But when one set of rules applies to Qantas, and another to our competitors, then a clear distortion exists.”

Joyce said the act limited the airline’s financial options, but admitted there was “little appetite” to repeal it. He instead asked the government to “look for other solutions” to address to uneven playing field.

Following Hockey’s remarks, Qantas released a brief statement saying it welcomed the Treasurer’s latest comments, and added that the airline’s discussions with government on levelling the playing field are ongoing, as is our work to strengthen our business.”

Unsurprisingly, Virgin Australia’s response to the Treasurer’s comments was not as positive. In a statement released on February 13, it said while it had “no issue with the government repealing the Qantas Sale Act,” it was less enthusiastic about the prospect of the debt guarantee. “What Australia does not need is the government giving Qantas a significant advantage through financial assistance, such as a taxpayer guarantee,” the statement read. “This would be to the detriment of the entire industry, including the smaller regional carriers. Any such guarantee should be given to all players.”

It added that Qantas already had “significant advantages” such as being the recipient of the majority of government travel, and holding much greater cash and asset reserves and a larger fleet than Virgin, and holding a superior credit rating.

“Qantas are in their current financial position because of their loss-making strategy of maintaining 65 per cent of the domestic aviation market at all costs,” the statement continued. “We believe this is at the detriment of the entire industry. Any form of government assistance to Qantas is a means to enabling them to reinstate their monopoly.”

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10 Comments

  • Dane

    says:

    The guarantee should be given on one condition; Alan Joyce and the entire Qantas board resign.

  • And uh

    says:

    Great another cost to the tax payers. If Joyce’s already failed plan fails again. Then we all pay. No such luck to ansett, Holden, ford, Toyota or spc. Get a grip Australian govt. Qantas is a private company. You stated your not in the business or running business. Well stay out of this one and concentrate on running the country your elected to do ( by some )

  • Lorenzo

    says:

    Qantas needs to become a more financially saavy business. If the Gov agree to this guarantee there must be conditions put in place and the major one being that they cut their expenses. Its disturbing knowing that Qantas’s average wages are twice the size of the airline giants like Emirates and Singapore Airlines. My presumption would be that those average wages are so high because of the managements exuberant salary packets. Something needs to be done.

  • Glen

    says:

    The Qantas board needs to cut costs and stop asking the gov for help there as private company . Ford is classic example of just throwing good money after bad there is pretty much no car industry left in Aus what a huge waste of tax payers money that was and I can see the same thing happening with Qantas. I think everyone would better off if gov stopped infering with private companies

  • Scott

    says:

    Free trade into Australia from country’s and companies with vast economies of scale make it imposible for local businesses. I think car manufacturing was doomed many years ago, but the recent pressure on QF was not so much mis management, but the unlevel playing field as claimed. Quite frankly, I am ok with my tax dollard helping secure the future of our National Airline because it is still majority Australian owned. We must stop this un-Australian thinking about no domestic protection, when the very countries we trade with, exploit us for their profit and our demise… Only Aussies, can care about and look after other Aussies…

  • NJP

    says:

    Qantas needs to stop moaning about Virgin’s foreign ownership in Australia whilst Qantas is the foreign owner of Jetstar Japan, Jetstar Singapore, Jetstar Vietnam etc etc and wants to set up Jetstar HongKong. Qantas keeps buying new aircraft for these ventures whilst we all suffer on QF 767’s and will eventually give QF the old A330’s once JQ gets it’s 787’s – Joyce will give up QF as fast as possible if he could and make it all JQ

  • JBBF

    says:

    well said NJP i could not agree with you more whole hearted with Joyce setting up asian fleets with Australian earned money that he could be spending here at home to help out our economy and not that of asia.

  • Marc

    says:

    This issue has been covered before- It’s astouding Qantas hasn’t bought into efficient 777s while persisting with a costly fleet of 747s. It must be one of the few, if any, world majors without.

  • Apples and apples boys

    says:

    No Lorenzo, have you seen the average wage across the Australian economy – its not a problem isolated to Qantas – the entire australian economy needs a shake up. Suddenly you’ve gone quiet at the prospect of a pay cut? Its ok when others have to foot your principle, but I don’t see you offering to fall on your sword?

    The federal government cant resind the Qantas Sale Act because they dont have the numbers in the senate till mid year, and Labor (whose bastard child the QSA is anyway) along with the greens wont support the measure. So the only way the governement can offer assistance is to financial gurrantee qantas debt. Do you think Labor would pass up a political opportunity to stick the knife in the LNP – of course not. So Shorten will use Qantas as political fodder to prove that Tony Abbott is only out to help his rich well off mates in the airline industry while the poor everyday worker at Ford/Holden/Toyota gets nothing.

  • E Lester

    says:

    It seems that any article relating to Qantas in this forum unleashes yet another tirade of Joyce bashing.
    Did he not inherit a lot of the issues he’s contending with from Dixon?

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