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Alan Joyce joins 7.30 -

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Alan Joyce joins the program to discuss industrial disputes, rising fuel prices and how the
Government's new carbon tax will impact the airline industry.

Transcript

LEIGH SALES, PRESENTER: One of the sectors to be most impacted by the carbon tax is the airline
industry, which is already in difficult times. Airlines are facing soaring fuel prices, and in the
case of Qantas, industrial disputes on multiple fronts. Last year, the Qantas chief executive Alan
Joyce warned Australia not to go it alone in imposing a carbon tax, but he now says he's
supportive, depending on the devil in the detail. Alan Joyce joined me a short time ago in the
Sydney studio.

Alan Joyce, welcome to the program.

ALAN JOYCE, QANTAS CEO: Thanks, Leigh. Lovely to be here.

LEIGH SALES: You're a member of the Gillard Government's business roundtable on climate change.
Aviation experts have estimated that a carbon tax could hit the Qantas annual profit in the range
of $100 million. Is that a fair estimate?

ALAN JOYCE: It depends on what the price of carbon's going to be and whether it applies to domestic
or international. But if we're talking about something between $20 and $30 and applies to domestic
only, then it would be around $100 million.

LEIGH SALES: How is going to Qantas deal with that? Will it be passed on to passengers?

ALAN JOYCE: Well, it will be. I mean, apparently what we're looking at is that we can't digest the
full cost of the carbon costs. We believe that it will need to be passed on to passengers. But in
the terms of the scope of the airfares, we carry a lot of people domestically and we're talking
about something in the region of maybe around $6 a passenger in the domestic market. So - and the
ability for us to pass on will obviously at the time depend on how robust the market is, how robust
demand is, but it would be our intention that it would have to be passed on to the passengers
'cause the margins that we make in this business isn't sufficient enough for us to digest this
charge.

LEIGH SALES: In October last year you said that Australia shouldn't go it alone on a carbon tax
because it would distort competition in the aviation industry, that is should be a global approach.
Presumably that's no longer your view.

ALAN JOYCE: Well what we believe is fundamentally we can understand why the Government wants to
introduce a carbon tax, we understand the reasons behind it. We have, like a lot of industries,
have a number of principles that we believe are important for the implementation of the carbon tax.
We believe that trade-exposed industries shouldn't be disadvantaged by this. We believe that
certainly should be a given to the industry. We're buying aircraft that are going to be operating
for the next 20 years, so very important for us to have certainty about what the carbon price is
going to be. We also believe that it should be revenue-tax neutral so that whatever is actually
raised in terms of the tax is either passed back to the consumers or the revenue is actually
invested in things that makes a difference for CO2.

LEIGH SALES: There are suggestions that some participants in the business roundtable on climate
change feel that the Government isn't listening to them. What's been your experience?

ALAN JOYCE: Well we've been - I think the climate change roundtable has been very uniform on this,
that we've talked to the Government about the principles we want to apply to this. The Government
has been listening to that. The Government has responded by identifying those principles and coming
out with its own principles.

LEIGH SALES: So you're happy with how it's going so far?

ALAN JOYCE: So far. And I mean - I think the devil's in the detail on this and of course you know
we have a lot of work that needs to be done with the roundtable and with the working groups around
the roundtable and the detail of how this will be applied and what the mechanisms will be and
whether those principles are abided by I think are key to this. And business is in constructive
dialogue with the Government. The Government has been very open in terms of the dialogue with us
and we hope that will continue in that form.

LEIGH SALES: OK. Qantas is facing some substantial industrial unrest. Unions are threatening
strikes mid-year and saying this could be a bigger industrial battle than the waterfront in 1998.
With that sort of disruption potentially looming, why would anybody plan a trip using Qantas within
the next few months?

ALAN JOYCE: Well, we - we've had the unions talk about industrial action a number of times over a
number of years. And, you know, in a lot of cases we've managed our way through it, we've talked to
the unions and we've come to constructive agreement with them. If we end up having a dispute with
any of these unions we will minimise the impact to our customers.

LEIGH SALES: And how will do you that?

ALAN JOYCE: There's various mechanisms that we can do to try and minimise as best we can. We've had
disputes in the past where we've managed to do that and managed to be constructive in how we keep
the operation going.

I should say though you're absolutely right in the premise of your question: that we're in a very
difficult time for the aviation industry. We have fuel prices at record levels, the highest that
we've seen since 2008. We've seen multiple crises in Japan, in New Zealand, in Queensland. That's
cost the airline over $140 million this year. And as a consequence of all of that, these are the
toughest times we've experienced. Some airlines are talking about going into losses in this second
half. Now Qantas, while it's been very financially strong, can't take things for granted and talk
about industrial action will make things worse; it doesn't make them better.

LEIGH SALES: I'll come back to the point you make about the tough times in a second, but I just
wanted to ask first of all: you said there are various mechanisms to minimise disruptions for
passengers. Would Qantas consider bringing in a non-unionised perhaps overseas-trained workforce to
minimise disruptions for passengers?

ALAN JOYCE: No, well, what we've done in the past when we've had arrangements that were needed is
that we've had our own management do various tasks. One time back I think in 2006, I was on
check-in when I was a manager back then. So, we try to minimise as best we can. We can look at what
we can do with our operations to put on - to put on - we have done this in the past - management to
work on ground-handling equipment to minimise the impact there. So there's always contingencies of
some form of another that can be put into place. But I'm hoping that we will not ever get there. I
mean, the contingencies and getting into industrial action is the last resort. We're hoping that
the dialogue we're having with the pilots, with the engineers - we haven't even started the
dialogue with the ground staff yet 'cause that agreement doesn't open till July. But they're the
groups that we believe we need constructive dialogue with to resolve the issues before we get to a
strike. A strike means everybody loses. And I don't think anybody's talking about a strike, a
walk-off. People are talking about industrial action of different formats and we're not talking
about any contingencies needed because people are not talking about getting to strike action.

LEIGH SALES: On the tough times point, we hear this - we've heard it in the past from Qantas. I
interviewed your predecessor Geoff Dixon 18 months ago and he said Qantas had never faced tougher
times then and then in the same week he announced a 44 per cent increase in net profit. You
announced a four-fold profit increase in February. Are you exaggerating the challenges that Qantas
is facing to strengthen your negotiating position against the unions and to ensure you have public
support?

ALAN JOYCE: No, we're not. I mean, I know that accusation's been made by some of the unions and it
couldn't be further from the truth. You can look at the fuel price and you can know that fuel price
has reached $133 a barrel for jet kerosene. Each one dollar movement in a barrel of jet kerosene
costs the airline $32 million. Our fuel bill this year will be $3.7 billion. Hundreds of millions
of dollars in this half more than the previous half.

LEIGH SALES: But fuel prices are often volatile. Presumably you must hedge against that in your
forward planning?

ALAN JOYCE: We do. Yeah, we do, but, I mean, I have to say: the way things are looking, we are
seeing the fuel price in the forward curve is maintaining these higher levels for some period of
time, so we have to plan on that. Our hedging is one of the best in the world, so it gives us time
to adapt. But, you look at Air New Zealand and Virgin who've said they're gonna lose money this
half. You look at what Moody's, the rating agency has downgraded to Qantas - has looked at Qantas,
and they're with negative watch for the outlook going forward. They're not issues that we're making
up. They're the reality of the situation. And they show that this is the toughest time that we've
seen for aviation since the Global Financial Crisis. And the great thing about Qantas: it is
financially sound. It's only one or two airlines in the world that has an investment grade credit
rating, with over $3 billion in cash in the bank. We have a diversity of a portfolio that gives us
financial strength. For our ability to act, our ability to be flexible are key and have always been
key to us making sure we outperform the competition.

LEIGH SALES: Alan Joyce from Qantas, thankyou very much for joining us.

ALAN JOYCE: Thanks, Leigh. Thankyou.