Commentary

Emirates president Tim Clark (left) showing Alan Joyce where his customers will sit: File photo

While there are no leaks as yet as to what Qantas Group CEO Alan Joyce told private meetings with Government in Canberra last night, his public comments add nothing new to his case for ‘help’ in ‘leveling the playing field’ with Virgin Australia.

Nor is there a word about culpability by his management for the situation that confronts Qantas in any of the media reports this morning.

Not a word about his absurd decisions to tackle the customers of the airline rather than the unions by shutting it down back in 2011 and then surrendering the carrier to compulsory FWA arbitration which did nothing to improve the labour issues he continues to complain about.

Not a word in this morning’s press about his responsibility for wasting extravagant sums of money on overseas ventures very similar in nature to the Virgin Australia Holdings arrangements with foreign airline investors in this country which he finds so objectionable.

And nothing about the lunacy of growing capacity in the carrier faster than it can grow its business, a key factor in continuing for investors what so far are five years without dividends and a totally trashed share price.

In mid-October last year , Joyce told The Australian Financial Review the airline remained on target to return its embattled international business to a break-even position by the 2014-15 financial year despite recent pressure on fares due to additional capacity entering the market.

Yet early in December the airline revealed that first half financial year results would show a loss of between $250-300 million leading to the carrier losing its precious investment grade rating on its unsecured debt, meaning among other things, that it could no longer readily access capital raisings.

These events are not indicative of a well run enterprise, and suggest that its management was until recently incredibly unaware of the true state of its affairs, which is a charitable alternative to suggesting that it just goes out and lies about its performance when it knows better, which in turn amounts to misleading the market.

It is true that Qantas is disadvantaged by the terms of the Qantas Sale Act, but it is also true it has been massively advantaged by that act, and that it has squandered its brand value, and its underlying financial strength, by a series of very poor business decisions.

Mr 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 however implausible that if such a guarantee is given, it will not be extended equally to other Australian enterprises, including Virgin Australia,  which is an Australian airline, managed in Australia and flying in Australia.

The net advantage in this debt guarantee game seems of itself to be at risk.

A much simpler but perhaps politically unsalable way of leveling the the playing field would be to repeal the Qantas Sale Act, refuse a debt guarantee, and invite Qantas to purge its own board and management.

Virgin Australia’s engagement with foreign airlines has been to take money from them for its own purposes as an Australian airline.

The Qantas engagement with the largest foreign owned airline of all, Emirates, has been to give away chunks of its business to that carrier for no money, and insult its loyal customers by telling them it is actually OK to fly on a non-Australian airline while pretending to ‘Still call Australia home’.

There are so many things wrong with Qantas as presently managed that turning Government into the guarantor for their future plans for puppet airlines in Asia would seem unsound.

Turning the debate into one about workplace reform seems silly. Qantas put the unions where it wanted them when it gave control over failed enterprise agreement negotiations to FWA.  It is difficult to imagine what further reform avenues are open for it until the FWA determinations it sought come up for renewal.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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