Alan Joyce has said the Qantas Sale Act is preventing the national carrier from further capital raising. This is nonsense.
There must be a focus group of sorts reworking the messaging from Qantas.
Last night CEO Alan Joyce emerged from under a five-week cone of silence to try to identify the company’s still imprecise requests for government help. And in his speech to the Tourism and Transport Forum in Canberra — attended by a number of Coalition MPs — he was speaking their language: the need for more industrial relations reform.
It just might help divert the attention increasingly being paid to the actual performance of his management.
Apart from going on the record with a request for a debt guarantee from government for the capital raisings it can no longer get because its debt has been downgraded to junk by Standard & Poor’s, Joyce’s speech said very little that was new. But it did hit another messaging button — the one marked “bad news is coming” — when Joyce said that few of the strategic or structural changes that were under wraps would be popular.
There are factual problems with this recasting of the messaging about the state of Qantas.
According to none other than the chairman of the particular tourism forum, Liberal MP for Wannon Dan Tehan, Joyce said the Qantas Sale Act was preventing it from further capital raising. This is nonsense. Qantas never had the slightest problem making capital raisings — most of them oversubscribed, under the “restrictive” Qantas Sale Act — until the current management took over five years ago.
It was often argued that the QSA actually improved the attractiveness of Qantas to overseas investors because it guaranteed that at least 51% of the enterprise would be supported by Australian investors on the share register because of the cap on foreign domiciled shareholders. Qantas raised $1.2 billion from offers that were often jointly supported by domestic and foreign investors in nine offers pre-Joyce.
In terms of IR reforms, Qantas surrendered its control over enterprise bargaining outcomes to the compulsory arbitration of Fair Work Australia following the $200 million exercise in which it shut down the airline and stranded almost 100,000 of its customers in 2011. Exactly where Qantas can go with IR reforms for its key unions for the duration of those newly determined agreements is the question.
One answer may be to shut down more of the full-service and largely unionised Qantas brands and give even more of the business away to the world’s largest government-owned airline, Emirates, reducing further the scope for the QSA to apply to its operations to something closer to symbolic levels.
“… the more awkward, unresolved questions about the future of Qantas are being masked by an IR reform sideshow.”
What Qantas has been keen to suggest in private is that the QSA might be politically untouchable, but it is capable of constructive reinterpretation in so far as it never envisaged and thus does not specifically prohibit innovative uses of subsidiaries like Jetstar or Jetconnect .
Nor their sale, in full or in part.
There is confidence being heard that Qantas can dramatically improve its books by realising all or part of assets like terminals or the loyalty program. But some funds and analysts are concerned that the assets that now form part of the group value of Qantas might not support it as an investment in the medium term.
This part of the future of Qantas debate going on in the investment world is one that can be conveniently pushed out of centre stage by an IR diversion. It is clear that Qantas has not decided how far it will pursue some of the more controversial options to change it business or reduce its exposure to the now struggling domestic as well as international arms of the full-service brand.
Joyce has now set Qantas up to purchase from government some form of debt guarantee to lure capital investment back to the carrier. That is, it will spend money transferring the risk of such investments to taxpayers in order to get attractive terms from sources of additional funds.
It seems implausible, however, that such a guarantee could only be selectively made available to Qantas. If Qantas is to get such a leg up, why not Virgin Australia? The net advantage in this debt guarantee game might prove to be very small.
But for the moment, the more awkward, unresolved questions about the future of Qantas, and any government assistance, are being masked by an IR reform sideshow. Government will support IR reforms, a win for Qantas in terms of its message, but is far from convinced about assistance measures for any badly managed company, where no amount of spinning may save Joyce.