Alan Joyce Speech to Tourism and Transport Forum Friends of Tourism Event

Canberra | Published on 13th February 2014 at 8:42

Qantas CEO Alan Joyce (opens in new window) (opens in new window)

It’s great to be among so many proud supporters of Australian tourism.

I’d like to start by acknowledging Bruce, Ken Morrison and TTF – as well as IBM.

Bruce himself was chair of the Coalition Friends of Tourism for many years and has been a tireless leader of the industry.

I’d like acknowledge the MPs and TTF members who have taken the time to join us tonight.

In particular, I’d like to acknowledge Steve Ciobo and Dan Tehan, the former and current chairmen of the Friends of Tourism.

We were sad to see Steve relinquish the post.  But we were very pleased to see him take up his new role as Parliamentary Secretary to the Treasurer.

Steve, thank you for your contribution and we know you’ll remain a strong voice for tourism in your new job.

To Dan – welcome, and we very much look forward to working with you as the new chairman.

Over the past few months, Australia has been having a national discussion about the future of our aviation industry.

For me, this discussion centres on three topics, which I would like to briefly address tonight.

First, the role of Qantas as the national carrier.

Second, the ongoing transformation of Qantas.

And third, the playing field in Australian aviation.

The Role of the National Carrier

At the heart of the discussion is the role of Qantas as national carrier.

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.

With more than 30,000 employees, Qantas supports jobs and generates economic activity across the country.

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.

Let me give you a few examples.

Bruce Scott’s electorate is home to the Qantas Founders Museum in Longreach.

The museum is a tourism attraction that gets 40,000 visitors and earns $9 million for the local economy every year.

Sussan Ley’s electorate provides much of the Merino wool for the new Qantas uniforms.

Barnaby Joyce’s electorate is home to the QantasLink heavy maintenance facility in Tamworth.

That facility employs 63 highly skilled engineers – part of a workforce of more than 4,000 Qantas engineering staff around Australia.

I have to mention the community of Moree, in Mark Coulton’s electorate of Parkes.

We have been overwhelmed by the response from the people of Moree since we stepped in to provide emergency flights for the town.

And we were delighted to announce last Friday that we will tender to operate the route permanently once again.

Qantas is present in so many facets of Australian life.

And of course, we are the biggest private sector supporter of Australian tourism.

In financial year 2013, Qantas passengers spent around $28 billion as tourists in this country.

We have marketing agreements with the states worth $72 million.

We sponsor major events like Modern Family’s visit to Australia later this month – to film an episode that will be seen by 100 million people around the world.

Many airlines fly to Australia.

But only Qantas offers the unique advantages of a national carrier, telling Australia’s story around the world, on every single flight.

The power of that role should not be underestimated.

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.

The ongoing Transformation of Qantas

Globalisation has permanently reshaped the Australian aviation sector.

The Asia-Pacific has become the world’s most competitive aviation region.

And Australia has become the most open and competitive market in that region.

This process was not slowed by the GFC.  In fact, the process has sped up since then, because of the relatively strong Australian economy.

At the same time, we have seen record fuel costs and a record high Australian dollar.

Over the past five years, Qantas has responded decisively to these historic changes.

The decisions I have made as CEO have not been easy and they have not been popular with everyone.

When I grounded Qantas in response to industrial action in 2011, it was incredibly difficult for our customers, employees and shareholders.

But it was necessary to make sure that Qantas was not locked into industrial arrangements that would prevent us from modernising.

These difficult decisions have been part of the biggest transformation since Qantas was privatised.

We’ve reduced unit costs by 20 per cent over four years.

Renewed our fleet with 130 new, fuel efficient aircraft.

Introduced new technology on a large scale.

And closed maintenance bases that had become marginal because of our younger, more efficient fleet.

Yet at the same time, we have achieved record customer satisfaction – thanks to our investment in aircraft, product and service.

We have done more than any other Australian company to reform in the face of new economic realities.

The lesson we see from around the world is that national carriers cannot stand still.

They must modernise to keep pace with economic and technological change.

Now Qantas is moving into a new, accelerated phase of transformation – targeting $2 billion in cost reductions over three years.

To put that in context – we will need to make cost reductions that are proportionally greater than the cuts made by American Airlines during its restructure under Chapter 11 protection.

Much of Qantas’ cost base is a legacy of 48 years of government ownership from 1947 until 1995.

Over the next two years we will drive it down so that we close the gap between Qantas and its major competitors.

I should point out, by the way, that Jetstar already has the lowest cost base in the Australian market.

There is no doubt that there will be more hard decisions for Qantas over the months to come.

We will look at all options and consider all steps to strengthen our business.

Few of the decisions we make will be popular.

Nobody should doubt that there is a hard road ahead for Qantas – but everything we do will be in the best, long term interests of a strong national carrier for Australia and for our employees.

This accelerated transformation builds on our progress so far.  But it also recognises fundamental changes in the market.

The Playing Field in Australian Aviation

We are pleased that all sides of politics have recognised the uneven playing field in Australian aviation – led by the Treasurer, Joe Hockey.

And we were especially pleased last week to see the Treasurer make the distinction between Qantas and companies like Holden and SPC.

Quite obviously, Qantas is not Holden.

Since being privatised, Qantas has succeeded without the benefits that many of our competitors receive from their governments.

No preferred access to airports, no tax breaks, no free infrastructure, no public subsidy.

We have never asked for a handout.  And we are not asking for one now.

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.

As the Treasurer has said:

“In the case of Qantas, there is specific legislation that restricts the entity.”

The Qantas Sale Act limits our financial options, it adds cost to our business, and it influences our actions as a publicly listed company.

Over the long term, repealing it is essential to remove the distortions in our aviation system.

However, we recognise there is little political and community appetite for changing the Act in the short term.

We have encouraged the government to look for other solutions to address the uneven playing field as it stands right now.

We think there are appropriate solutions that would not create precedents and would not come at a cost to taxpayers.

My colleagues and I greatly appreciate the engagement we have had from government on this issue, from the Prime Minister and senior ministers down.

We look forward to continuing our discussions, recognising the urgency of the challenges Qantas faces.

Let me repeat though – nothing we are talking about with the government will change our determination to make the right decisions for Qantas’ future.

We will do whatever is required to build a stronger Qantas.

And we will do whatever is required to ensure that Qantas can keep playing the vital role of national carrier, in the national interest of Australia.

Thanks once again to Bruce and to Dan for the invitation to be here tonight.

And thank you all for your support of Qantas and the Australian tourism industry.