Constant changes

Eames’ article also chimes with a companion feature in this issue, looking at the mental health of those in our industry. What it reveals is those who are slightly older seem to be coping a touch better, and, possibly, the perspective of understanding the boom-and-bust nature of aviation plays a part. Things never seem quite so bad when you’ve seen it all before.

Finally, as Eames’ brilliant first line reflects, there’s still plenty of red ink, political manoeuvres and dire predictions left for the industry to come. Enjoy.

Watching the daily drama that has engulfed the Australian aviation industry in recent weeks, with its copious supplies of red ink, its political manoeuvres and dire predictions, has once again brought to mind that somewhat hackneyed phrase that is as relevant today as it was when that Qantas Avro 504K first left the ground at Charleville in 1920.

The one constant in aviation has been change.

In our particular case, however, when it has come to aviation, Australia has always punched above its weight. Its isolation from the rest of the world, along with its own internal widely scattered centres of population, resulted in a breed of airmen who were unsurpassed when it came to achievement.

Almost lost in history now is the fact that Australians were the first to cross all the great oceans of the world with the exception of the Atlantic, and Harry Hawker almost made that.

Kingsford Smith and Ulm conquered the Pacific and the Tasman and PG Taylor the south Pacific and the Indian oceans. And as for the Atlantic, long before Lindberg Hawker made a valiant attempt, until a failing engine forced him to ditch and complete the crossing by ship.

Australians too were prominent in the formation of ICAO immediately post-war and have played a leading role in some of the most significant of aviation developments, from landing systems to ‘black’ boxes and slide rafts.

That said, however, who would have thought not so many years ago that issues such as the Qantas Sale Act, taxpayer-funded debt rescues and ‘level playing fields’ would see a national icon tossed into the same mix as a fruit company headquartered in north-eastern Victoria.

What it does demonstrate is that, right from its very earliest days, there has rarely been a level playing field in aviation, particularly in the international sense, although one could certainly argue, at least in relation to its Australian domestic version, Australia’s Two-Airline Policy came the closest to having the goal posts equal distances apart.

That policy, introduced by the Menzies government in the 1950s, saw a government-owned Trans-Australia Airlines and Ansett share a duopoly on major trunk routes and regional services throughout Australia for decades to come. Protected by legislation that prohibited the importation of aircraft over a certain size, the two airlines operated the same equipment on parallel schedules and charged identical fares.

“Right from its very earliest days, there has rarely been a level playing field in aviation.”

There were challenges of course, notably by companies like IPEC, but its attempts to make the transition from freight to passenger carriage died on the altar of the government’s legislative policy.

Internationally through, Qantas remained a source of admiration and pride as the sole Australian flag carrier. But as the industry has changed in more recent years, the Flying Kangaroo long ago left behind that ‘Bradmanesque’ quality in the Australian psyche that helped sustain its reputation as the airline of first choice when it came to travelling overseas. And it had nothing to do with its enviable safety record and its technical and engineering expertise, but with a public’s increasingly agitated hip pocket nerve.

Even before the average airline fare became little more than a giveaway, the challenges were there, at least in the international sphere, first across the Pacific in the seventies when the route became a dumping ground for the excess capacity of American airlines relishing the opportunities provided by a generous air service agreement.

Airlines like Continental, Northwest and American came and went, each finally reaching the conclusion that throwing thousands of seats our way didn’t fix more basic problems at home.

The next seismic shift came with the growth of the Asian airlines, strategically straddling Qantas’s traditional Kangaroo Route and able to access sixth freedom end-to-end traffic while at the same time bringing to bear stark labour cost advantages.

This latter Asian element has been one of the more interesting side issues of the current Qantas predicament, at least for those who have been around the industry for some time.

If Qantas learned any lessons with the infamous ICAP idea, designed to restrict the access of any ‘interlopers’ to sixth freedom traffic, it was to develop a healthy respect for dealing with airlines in that part of the world. Indeed the one mistake you would never make was to go into the Asian environment with all guns blazing and confident predictions about setting up low-cost airlines on their turf.

Perhaps that has had some bearing on why Qantas/Jetstar still has a brace of brand new Airbus aircraft designed for Asian operations sitting in Toulouse with nowhere to go.

On the domestic front, as the Two Airline Policy gradually fragmented, we have also witnessed the recurring theme of those only too willing to fall prey to the lure of engine noise and the illusive romance of operating an airline, as Compass I and II came and went. Then the industry watched in disdain as Ansett, first under Sir Peter Abeles and later News Limited and Air New Zealand finally paid the price of poor management decisions, excessive labour costs and an inefficient assortment of aircraft types to end more than 60 years of existence in 2002, although not before achieving international status via Indonesia, China, South Korea, Taiwan and Malaysia.

In fact, the period covering the ’80s and ’90s saw a raft of changes that have led us down the circuitous path of alliances, mergers and privatisations, to the industry as we know it today.

In the mix were a Qantas-led consortium of American Airlines and JAL for a share of Air New Zealand; industrial restructuring which saw 3,500 staff reductions in Qantas (not that much less than the total announced by Alan Joyce in late February); and the Australian government decisions to privatise Australian Airlines and Qantas, which would eventually result in a merger of the two.

Along the way too were the 20 per cent trade sale of Qantas to British Airways for $665 million (despite a furious subterranean – and largely unknown – move within the airline for a preference for Singapore Airlines with its significant network, cost and regional alliance advantages), and a long sought-after Qantas capital injection which saw the airline’s debt/equity ratio achieve an acceptable level for the first time in its history. By the mid-1990s, Qantas had been privatised on the back of a young although under utilised fleet, in stark contrast to its Ansett competitor with an ageing fleet and a critical need for industrial restructuring. One only has to recall the farcical situation of Ansett flying the only 767s in the world with a flight engineer on the flightdeck to underline its problems.

But a further change was taking place as the ’90s were gradually left behind, with the emergence of Virgin Blue and Impulse, the enormous impact of 9/11, war in the Middle East and SARS.

In the end, both Ansett and Impulse had gone and while Qantas continued to watch the capacity onslaught from the Middle East and other directions, with few reciprocal benefits, Jetstar and Virgin entered into a drawn-out battle for the lower-cost market.

In more recent times, the rapid expansion of Jetstar on some of the more traditional Qantas routes has been accompanied by an order book for new aircraft like the Boeing 787 heavily tilted towards the Jetstar arm as the full service airline’s ageing 747s and 767s struggled to be competitive.

“Qantas always struggled with uncompetitive staff costs in a labour intensive industry.”

Of course not all of the latter could be laid at the feet of the Alan Joyce team. There are many who believe that the decision in Geoff Dixon’s time not to buy the 777 left Qantas with a gaping hole in its route structure while some of its major competitors, among them Virgin Australia and Cathay Pacific, reaped the rewards from their Boeing purchases.

To add to the airline’s equipment woes came years of crippling delays in the entry of the 787s into airline service, a period when the 777s might have eased the pain.

There’s also no shortage of ‘Monday morning quarterbacks’ who, while claiming the ‘old’ Qantas types who would never have so noisily flagged the excursion into Asia, would also wonder about the chances of once again bringing the international arm back into profitability using refurbished 747s.

They might also have pointed out the loss of that valuable corporate memory, which first began to disappear soon after the arrival of James Strong, Geoff Dixon and their respective teams. Certainly personnel change was necessary in many instances but with that transition went many who still had years of experience to contribute to the airline’s future. Matched with the obvious confidence of the new breed, it might have been a winning formula, but such is rarely the way of the corporate world when it comes to such changes.

The years since have not been short of irony, particularly when it came to the arrival of Jetstar. Low-cost airlines as an offshoot of full-service carriers have had a chequered career but for a time it appeared that the Qantas initiative might prove the exception. Perhaps simplistically, part of the secret has surely been to keep the balance right so that the temptation to push too far with the low-cost venture doesn’t result in route permutations that damage the intrinsic service reputation and brand value of the original full-service airline.

The extent to which that balance has been achieved is for others to judge, but the results so far do raise some doubts.

Thus we have come to the current impasse where both Virgin and Qantas’ domestic arms have been drawn into a bloodletting at the end of which neither will be able to claim more than a Pyrrhic victory. And while lines are drawn in the sand for the protection of domestic marketshare, Qantas watchers measure the ever-increasing size of the Emirates shadow across Australia’s aviation landscape.

If you talk to those select few who, in senior positions, guided Qantas through the challenges of past years they might be tempted to remind you that Qantas always struggled with uncompetitive staff costs in a labour intensive industry. Added to that has been unrestricted access to Australian traffic by others, a pitiful debt/equity ratio, which at one stage amounted to a government contribution of around $200 million, roughly equivalent to the cost of one of its 18 747s, and the regular onslaught of oil shocks, world economic crises and other diversions well beyond its control.

What needs to be understood, perhaps, is that while change is constant, that unlevel playing field will remain in place, whether it be through subsidies provided by governments in their own national interests, be they via lower labour costs, tax and regulatory conditions or, in the case of the Middle Eastern airlines, the price of oil.

As the Australian Parliament weighs up its options in the case of Qantas it faces the obvious conflicts related to supporting a shareholder-owned company against demands of equal treatment for its domestic competitors and a change to the Qantas Sale Act, and its implications for Australian control.

Hidden in there somewhere is the national interest, something that has become synonymous with the Qantas of the past, which, along with flying the Australian flag through World War II, Korea and Vietnam, lifted thousands out of Darwin after Cyclone Tracy, as well as other occasions where Australians have been at risk.

Sadly though, there appears little scope for any nostalgia for events past when it comes to our most prominent national icon today. Change has certainly delivered that.

Jim Eames is former director of public affairs for Qantas and press secretary to a minister for aviation, and a published author. His latest book, Taking to the Skies, details some of the forgotten stories of Australian aviation and was published in January.