Opinion – Alan Joyce

Published on 10th December 2013 at 10:00

Opinion – Alan Joyce (opens in new window)

Some myths in the level playing field debate

A number of misconceptions have arisen in the debate around the future of Qantas. Given what’s at stake, it’s important to correct them.

First, Qantas is not Holden. In stark contrast to Qantas, the car industry has received billions of dollars of taxpayers’ money over many years. Since privatisation in 1995, Qantas has performed strongly with no taxpayer subsidies and no tax concessions – nor are we asking for any now. Qantas receives no preferential treatment on airport access or government travel. We compete every day for government business under a policy called ‘best fare of the day’.

Not only has Qantas competed successfully in Australia and the world for nearly twenty years, it has done so while handcuffed by the Qantas Sale Act, which limits the company’s access to foreign capital.

 

Second, Qantas is not looking for protection from the free market. On the contrary, the challenges Qantas faces are precisely because of the absence of a free and fair market. Virgin Australia’s 2012 restructure has enabled it to circumvent Australia law and pretend to be an Australian airline, when it is majority owned by three foreign-government backed airlines.

Through Virgin, they are pouring money into our domestic market to weaken Qantas and ultimately funnel Australian traffic on their airlines and through their hubs. Qantas is here to make a profit, deliver returns to shareholders and serve Australia as its national carrier; Virgin Australia’s three biggest shareholders are focused on advancing the national interests of Singapore, Abu Dhabi and New Zealand.

 

Third, Qantas is not seeking an anti-competitive handout or bail out. We are talking to the Government because legislation and regulatory decisions (the Qantas Sale Act, the Air Navigation Act, and decisions by the Foreign Investment Review Board) have created the uneven playing field we find ourselves playing on. We are seeking a fair go as we continue to transform our business and make the tough decisions.

We understand that addressing these questions is difficult, and some of them are matters for the medium and long-term. But there are actions the Government can take right now and we are in discussions about them.

 

Fourth, Qantas is not afraid to make the hard decisions to succeed. In the competitive fight with Virgin we were winning until very recently when, using its artificial new structure, Virgin raised hundreds of millions of dollars from its foreign owners to shore up its loss-making strategy.

In 2011, I made the tough decisions necessary to make sure management had the right to run the business and protect it from the unrealistic demands of some union leaders.

We have cut unit costs by 19 percent in just four years. We have consolidated our maintenance bases from three to one – but remain the only major airline that does any heavy maintenance in this country.

We have cut loss-making international routes, reduced staff, and opened up new gateway alliances to maintain our global reach.

We have come through a major fleet investment phase, and we now have a modern, fuel efficient fleet with the lowest average aircraft age since privatisation.

We have put the partial sale of key assets on the table as part of a strategic review.

 

Fifth, Qantas has not erred by investing in Asia. The Jetstar businesses in Asia are a great example of Australian entrepreneurship. With Qantas’ input of modest upfront capital (not the inflated figures so often quoted) and Australian-made intellectual property we have attracted significant Asian companies as partners, including Mitsubishi, Japan Airlines, China Eastern Airlines and ShunTak Holdings.

All of them believe in the Jetstar airlines as a sound investment, and we know those businesses are already worth a lot more than what we have put into them. Today, one-sixth of the Qantas Group’s revenue comes from Asian operations.

 

Finally, there are some who say we should let the free and fair market take its course. That only works when there is a free and fair market. When there isn’t, steps need to be taken to correct the situation. That’s the position we are in now.