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Monday, 31 October 2011
Page: 12133


Mr MORRISON (Cook) (21:40): Thousands of shire residents in my electorate are employed by Qantas and thousands more have their jobs on the line, both in the disputes that came to a head last weekend and how Qantas responds to the commercial challenges ahead. It is important we do not give our community a false sense of security about these issues; rather, we must deal candidly and honestly about what is ahead.

I welcome the fact that Qantas planes are back in the air. However, I am disappointed the government failed to act by refusing the powers they had inserted into the Fair Work Act for this purpose and were unprepared, despite warnings from Qantas that grounding the fleet was a possibility. Had Qantas not implemented their decision to ground the fleet on Saturday, this dispute would be continuing. The government would still be sitting on their hands, the airline would still be bleeding $15 million per week and the economy $100 million per week.

Now that this matter has been brought to a head by Qantas, it must be addressed. Any resolution requires certainty about the future role, structure and business model for Qantas, which is at the core of these disputes. This requires confronting some unpleasant realities about the changes Qantas now seek to make to their business in order to secure their commercial viability for the future and the jobs this will sustain.

I do not welcome these changes. Nor do I believe that Qantas welcome these changes, anymore than they welcomed the difficult decision they had to make last Saturday to ground their fleet. It simply underscores the deep challenges the airline faces and what is at stake if they fail to act.

Qantas international does not compete on a level playing field, yet its revenue is critical for the airline's success. International customers account for 21 per cent of passengers but 50 per cent of passenger revenue. It faces increased competition that has seen market share decline from 35 to 19 per cent in the past 10 years. The successful launch of Jetstar, with its low-cost model, has enabled the group to reclaim eight per cent of this share.

Qantas have overcome serious challenges in recent years: an appreciating dollar, rising fuel costs, the GFC and global events such as SARS and volcanic ash, just to name a few. Yet the business is not getting any easier. A report by Credit Suisse in July noted that 'the main long-term determinant of survival is based on having the lowest cost base'. Qantas's cost base is 20 per cent higher than key competitors, with airlines such as Emirates holding an even greater cost advantage. An analysis of the value of the Qantas group showed the main line had a negative equity of half a billion dollars. This is not sustainable. The key factors identified were the impact of industrial disputes and the market's faith in the ability of the management to deliver on a plan to address the losses of the business.

The changes put forward by Qantas are geared toward making the company's international operations profitable. We may not like them, we may not agree with them, but they must be evaluated against viable alternatives. When Labor began the process of privatising Qantas in 1992, the decision was made for Qantas to compete as a commercial enterprise, not a government airline, subject to the Qantas Sale Act. I note the minister confirmed today Qantas had not breached these conditions in any of their proposals to date.

If the government's wish is to run the airline and second-guess the management, they should buy it back. I am not in favour of such a move, either by design or default. Such default was on show with the collapse of Ansett and across the Tasman when Air New Zealand was bailed out by their government. The devastation of the Ansett collapse is still being felt by my constituents to this day, more than 10 years later. No-one wants to see this repeated—employees, management or the general public.

This imposes a heavy burden on the Qantas board and management to get it right. Acknowledging the challenges Qantas face in reducing their cost base does not provide a blank cheque to marginalise and undermine the brand values of safety, service and reliability that have made the airline great. This is the balance Qantas must get right and will be evaluated against by their shareholders and their customers. If they fail, so will Qantas.

Qantas hold no special guarantee of survival in a highly dynamic and fiercely competitive environment. They have done this for 90 years. Qantas now contributes more than $31 billion to our national economy, including $5.5 billion in national exports, employing almost 33,000 people. For the shire's sake and Australia's sake, they must do this and more for another 90 years. This will be achieved by management and staff responding cooperatively and creatively to the challenges that Qantas face, consistent with the company's longstanding reputation and brand as the spirit of Australia and, indeed, the shire.