Inquiry into the future of Qantas

Introductory remarks by Qantas CEO Alan Joyce

Friday March 14, 2014

Each one of us is here today because we know that the future of Qantas is important to the future of Australia:

• Qantas is a national strategic asset, with the capacity to provide aircraft, personnel and expertise to Australia in a crisis.
• Qantas strengthens our national brand in the world, flying the flag for the best of Australian culture, society, wine and produce.
• Qantas provides vital infrastructure for our regions and rural Australia.
• And even after the transformation we are going through, Qantas will still be a major employer of over 27,000 people.

We are here today because we believe that what happens to Qantas, matters to Australia.

I want to make a couple of brief points before we begin.

Right now in our core domestic market, Qantas faces a manifestly un-level playing field, which threatens our future prospects.

Three foreign airlines, all totally or majority government-owned, have taken 70% majority ownership of Virgin.

Late last year they poured more than $300 million into the airline to bankroll continued major capacity increases into the market by Virgin at a time when – it has since admitted – Virgin was making significant losses.

It would be naïve for anyone to think these sovereign airlines don’t have an agenda in bankrolling our competitor.  They do.

It is a strategy directed at weakening Qantas and promoting the interests of Virgin’s foreign owners.

Since the Virgin restructure in early 2012, we have been talking to successive Australian Governments about measures to address this clear distortion of the market.

I am not going to talk about specific private conversations with the Gillard, Rudd and Abbott Governments.

But every major political party has agreed that the playing field is not level.

Having considered various options, a decision has been taken by this Government to ask the Parliament to amend the Qantas Sale Act.

We support this as a long-term measure to help level the playing field.

Qantas also faces a range of other challenges:

• Over the past five years Australia has been flooded with capacity at more than double the rate of global capacity growth, mostly by airlines in partial or full government ownership.
• The high Australian dollar, while supporting outbound travel, has hurt inbound tourism and has attracted more foreign carriers, adding to the rate of capacity growth
• Qantas this year faces a record fuel bill of an estimated $4.6 billion.
• The carbon tax cost us $106m last year and is a significant cost across the industry.
• And the loss of our investment grade credit rating has been a significant blow.

Remember, unlike many of our international competitors Qantas receives no preferential treatment from government.  No tax concessions, no discounts on fuel, no preferred access to airports, no government-mandated travel, no assistance in raising capital or in the cost of our capital, and less favourable aircraft depreciation rates than our foreign competitors.

Even airlines without official government backing, in markets like Japan, Canada and the United States, have been able to undertake restructuring with the benefit of government sponsorship.

Qantas is simply asking for a level playing field.   And we are confident that in any fair competition, Qantas will win.

I am not a politician, and today I do not propose to speculate on the likely ins-and-outs of the legislative process that is underway.  That is a matter for the Government, and for you in the Parliament.

Right now I am focused on what I can control to secure a future for Qantas, and that is:

• Lowering our cost base, which regrettably but unavoidably involves significant job losses;
• Cutting our capital commitments ;
• Suspending growth in non-essential areas; and
• Protecting our core business, which means our domestic market position and the experience for our customers.

There are those who say that Qantas no longer really matters to Australia.  That whether Qantas sinks or swims as a business is immaterial to the future of this country.  They are wrong.

No other airline in the world can be relied upon to always put Australia first.

We do so because of our history and our heritage.

Because of our brand.

Because of the passion of our staff for Australia.

And because when Australians get on a Qantas aircraft anywhere in the world, they feel they are already home.

With the backing of the Qantas Board, Qantas is taking the right steps to secure a future for this great company.

We do so on behalf of thousands of loyal employees, millions of customers, and all of Australia.

Thank you.