Canberra's Qantas death threat Stephen Bartholomeusz http://www.businessspectator.com.au Published 12:27 PM, 4 Nov 2011 Last update 6:05 PM, 4 Nov 2011
Today’s Senate committee hearing into proposed amendments to Qantas-specific legislation is bordering on the farcical.
What national parliament would spend any time at all considering proposals that, if enacted, would destroy their national flag carrier, shrink the number two Australian airline, cut the industry off from the rest of the world, severely damage the tourism industry and result in massive job losses?
Those would be the effects on the ridiculously titled Qantas Sale Amendment (Still Call Australia Home) bill and associated amendments to the Air Navigation and Civil Aviation Act sponsored by independent senator Nick Xenophon and Greens leader Bob Brown.
Under their proposals, the Australian Parliament would determine (further) the make-up of the board of Qantas, a privately-owned, publicly-listed company.
Parliament would attempt to regulate Qantas’ minority interests in associates within Asia, effectively forcing their disposal, and (this demonstrates how ludicrous the proposals are) attempt to impose Australian wages and conditions on foreign airlines with which Qantas, and Virgin Australia for that matter, have code-sharing arrangements. It would truncate the growth of the Jetstar brand.
It would force Qantas to undertake all heavy maintenance in Australia, regardless of whether or not it is economic to do so.
For Virgin Australia it would almost inevitably kill off all but its domestic operations. Its New Zealand-based businesses would be shut down. Its code share alliances with Air New Zealand, Etihad and United would be torn up, as would Qantas’ relationships with its OneWorld partners and other airlines.
Why would anyone waste their time with this nonsense?
Even in its existing configuration, and leaving aside for a moment what happened last weekend, Qantas is under extreme pressure. Its international operations are bleeding because it is struggling to compete with newer, lower-cost carriers operating out of hubs with much stronger economic bases than Qantas’ end-of-the-line network configuration. Its share of in-bound and out-bound traffic has halved since the market was liberalised and is still being eroded.
Cutting off its ability to recreate its international operations and attempt to build an Asian hub of its own would condemn Qantas’ international operations and damage its domestic core even without the additional baggage of steep parliament-imposed increases in its costs.
As Alan Joyce told the committee this morning: “No company can hide from the threats and opportunities of globalisation. Qantas operates in a global aviation industry and if we want to survive and compete we must be able to pursue global opportunities.”
What’s the justification for even considering changes to the legislation?
Last weekend’s dramatic grounding of the entire Qantas fleet is obviously at the core of the anger that the Gillard government, Brown and Xenophon have been demonstrating towards the group.
Joyce tried valiantly, and repeatedly, to explain to the committee that this was the option of last resort, one that he decided to excise only when he felt he had no other option if the threat to Qantas’ viability posed by the protracted and damaging industrial actions taken by three Qantas unions were to be truncated.
While Brown and Xenophon remained skeptical, what airline chief executive would choose to ground an entire fleet, strand tens of thousands of passengers, cause severe brand damage and leave the business facing heavy revenue losses – tens of millions of dollars – and big compensation payouts if they believed there was any other realistic option?
Some of the reactions to Qantas’ actions last weekend overlook the fact that it was lawful and effective, however unpleasant for both the airline and its passengers.
It forced the federal government to intervene (Qantas, under the Fair Work Act, couldn’t lawfully ask the government to intervene) and got the planes back into the skies. It ended a union strategy of killing Qantas slowly, costing it $15 million a week and triggering a swelling implosion in forward bookings, unless it surrendered and effectively gave them a significant voice in the management of the group.
The eventual outcome of the dispute, if Qantas and the unions are unable to reach an agreement of their own, will be determined by a Fair Work Tribunal which doesn’t have the legislative authority to meddle in management affairs.
It might have been costly and disruptive but it was ultimately effective and, unless parliament interferes, provides at least the possibility that Qantas might be able to create a future for its international operations by tapping into the exponential growth in demand for travel within Asia.
Whether it succeeds or not, the alternative – and the one that Joyce was forced to confront last weekend – is that without significant and creative change in its business model, those operations probably have no future. If Xenophon and Brown had their way, that would become a certainty.
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