For all the gnashing of teeth and exhortations to action, the government has done very little about Qantas — other than allowing Virgin to unfairly stack the deck.
A strange thing happened shortly after 10am yesterday morning.
Firstly, self-styled activist investor Mark Carnegie went on Channel Nine’s Financial ReviewSunday program and declared that independent Channel Nine director Peter Costello should personally use his authority as the recently installed Future Fund chairman to negotiate a loan guarantee for Qantas. Carnegie clearly hadn’t run this past Costello, as at about the same time the former federal treasurer was disloyally appearing on the rival Network Ten and telling Andrew Bolt that there should be no government financial support of any sort for Qantas.
And so it goes with the ongoing circus of Qantas, where so much has been written about all this possible assistance from Canberra but the Abbott government is yet to do anything beyond poaching one of the airline’s directors to be governor-general.
And for all his words, Treasurer Joe Hockey has done nothing more than continue Labor’s policy of tilting the playing field further in favour of Virgin and its foreign government airline shareholders.
For some unexplained reason, Hockey approved Air New Zealand moving to 25.9% of Virgin even though the Qantas Sale Act specifically limits any single foreign investor owning more than 25% of its domestic rival.
While Hockey has certainly helped smooth the way for the creeping foreign carrier takeover of Virgin, it was Labor that really got this war moving in February 2012 when it turned a blind eye as Virgin came up with a new holding company structure. This allowed it to comply with the 49% foreign ownership limit required in the Air Navigation Act for Australian-based airlines that wish to access Australian rights in the global market, just as four foreign airlines (including Richard Branson’s residual 10% stake) brazenly moved to almost 80% of the company. The politically well-connected Lindsay Tanner, Tony Shepherd and Graham Bradley were the three independent directors appointed to Virgin’s sneaky but farcical “independent” holding company board.
“[Andrew] Sisson could do worse than tap … Sir Rod Eddington to succeed Clifford in the Qantas chair. Watch this space.”
As The Australian Financial Review notes this morning, Singapore Airlines and Etihad are both still awaiting Hockey’s approval to move above 20%. Each is sitting just below this cap, but they have paid for an additional 1.34% stake through a derivative arrangement with Swiss banking giant UBS courtesy of sub-underwriting last year’s capital raising. However, they won’t secure these additional votes unless Hockey and the FIRB approves it, and the same will apply for additional creeping the predator airlines desire within the Australian limit of 3% every six months.
Rather than amending the Qantas Sale Act, this is the most pressing immediate question for Hockey and Prime Minister Tony Abbott, who appear to be at odds over Qantas.
Cameron Stewart had a fascinating feature in The Weekend Australian, which disclosed that Qantas boss Alan Joyce made his pitch for government assistance to Abbott while he was waiting to board a Qantas flight to Nelson Mandela’s funeral in December. Stewart claims Abbott told Joyce about six times to “get his house in order”.
When you consider the way Abbott and Employment Minister Eric Abetz treated David Gonski when rejecting a handout to Coca-Cola Amatil on the grounds of excessive wages and poor work practices at SPC Ardmona, the message from government to Qantas was clear: it was time for a full frontal assault on the unions and the airline’s wages bill.
This is what Qantas announced on Thursday, although the claim of 5000 job cuts and an extraordinary $500 million redundancy bill for shareholders to fund is hard to believe without any explanation of where the cuts will be targeted.
Once Abbott decided to cut Qantas adrift by refusing to deliver anything, that was the moment when Joyce and Qantas chairman Leigh Clifford were suddenly under extreme pressure, as was clear after reading The Weekend Fin. They have failed to deliver a regulatory dividend.
Their future is now an open question for the independent Qantas directors and major institutional shareholders such as AXA, the Commonwealth Bank, NAB and Los Angeles-based Capital Group. However, the largest is United States fund Franklin Resources, which after recent purchases, now holds a pivotal 16.42% stake. Part of that is controlled by Melbourne-based Andrew Sisson, the man who famously refused the $5.60 a share private equity takeover bid in 2007.
Sisson could do worse than tap skilled diplomat and former Cathay Pacific, Ansett and British Airways CEO Sir Rod Eddington to succeed Clifford in the Qantas chair. Watch this space.
*Stephen Mayne is policy and engagement co-ordinator for the Australian Shareholders’ Association