CANBERRA OBSERVED: by our national correspondentNews Weekly
Cabinet bid to 'set Qantas free' in global marketplace
, March 15, 2014
The end game of globalisation only becomes starkly apparent to everyday voting Australians when stunning developments, such as Qantas being prospectively placed on the market to be sold to the highest overseas bidder (or bidders), become a reality.
No Australian company is apparently safe from the “global economy”, not even a proud national icon like Qantas and one that so immediately symbolises Australia’s transformation from a young and largely agrarian nation to the highly affluent and urbanised country it is today.
Qantas was founded by two Gallipoli veterans in Longreach, Queensland, in 1920 and has a proud record as a safe, reliable national airline, with perhaps the best-recognised “brand” of any Australian company.
While many other, mostly small, nations still support — even underwrite — their loss-making national airlines, the Australian government has chosen to “set Qantas free” to compete in the international marketplace.
This will inevitably mean Qantas being broken up and perhaps owned by a much larger foreign-owned entity or entities.
In reality, the Abbott government had little choice but to make the decision to repeal the Qantas Sale Act of 1992, (a) which had placed restrictions on foreign ownership of Qantas to 49 per cent, (b) which limited foreign airline ownership to 34 per cent, and (c) which prevented a single foreign investor from owning more than 25 per cent of the company.
The restrictions set in 1992 were no more than arbitrary limits imposed by the former Hawke-Keating Labor government in order to placate the many vocal opponents of the original privatisation of the airline, including those inside the Labor Party.
The limits were simply a political stopgap with no thought given to Qantas’s long-term commercial future.
The decision to privatise Qantas in 1992 was the real decision, from which there was no turning back.
In its defence, the government of the day probably could not have foreseen the carnage in the airline industry over the last two decades, nor how international competition and rationalisation would have transformed air travel.
Now Qantas is under heavy attack from an aggressive competitor in the local market — Virgin Airlines — which is itself owned by several foreign-owned airlines, while Qantas’s international arm is simply unable to make a profit competing against the many lower-cost and, in many cases, much larger foreign competitors.
There is little doubt that over the last five years Qantas has not managed its business particularly well.
Many commentators are now pointing the finger at CEO Alan Joyce and the Qantas board for not making the tougher decisions earlier.
The idea of running to the government for assistance at the death knock has not gone down too well.
There have been a number of strategic blunders (including the decision to take on Virgin and other airlines in the cut-throat cheap air ticket Asian sector via subsidiary Jetstar). One of them has been a seeming inability to stand up to the some of the militant transport unions which had previously declared “guerrilla warfare” on any efficiency plans. Another has been Qantas’s procrastination over the necessary hard cost-cutting required to keep the airline profitable.
The only real choice for the Abbott government would have been to buy back Qantas — either by taking responsibility for its debt, as requested by the airline, or taking up a stake in the airline. Neither position was acceptable to the cash-strapped Abbott government, which is seeking to put an end to the actions of “rent-seekers” in the business community.
Labor opposes the government’s decision and, in effect, wants to reverse the decision it itself made back in 1992. The Labor Party is happy to make political mileage out of the public’s disquiet, but has no consistency whatsoever.
Qantas has been flying inside a political construct that has been overtaken by external factors, and something had to give.
The Abbott government has decided that the best way to do this is to permit the airline to compete with other airlines around the world, including having the ability to secure significant capital injections from overseas entities to enable it to operate.
No one knows what the ultimate outcome will be.
Unfortunately, there is no level playing-field in the international airline industry, and there are too many airlines competing for too few passengers.
Despite the dismay Australians feel at the prospect of Qantas no longer being “Australian”, the reality is that most choose to fly with other airlines when they travel overseas.
It is estimated that 75 per cent of Australians who fly overseas choose airlines that offer cheaper prices, and sometimes better service, than Qantas.
Why should the Australian government prop up a company that has not managed itself well, and which is only supported in a sentimental sense by the flying public?