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Wednesday, 3 October 1984
Page: 1555


Mr LINDSAY(12.26 a.m.) —In this debate I shall confine my remarks to the Qantas Airways Limited (Loan Guarantee) Bill. This Bill authorises the Treasurer, on behalf of the Commonwealth, to guarantee borrowings raised by Qantas Airways Ltd to finance the purchase by the company of two Boeing 767-200 extended range aircraft and related spare parts and equipment. Sub-clause (2) of clause 4 sets down a loan guarantee limit of $US200m or its equivalent in other currencies. Clause 5 provides for a number of conditions to be complied with prior to the Treasurer giving a guarantee of the kind referred to in sub-clause (2) of clause 4.

In November last year the Federal Government approved a fleet modernisation program put forward by Qantas. It was a further mark of the Hawke Government's confidence in Qantas that approval was given for this major re-equipment program , totalling $860m. The cost of this program is to be funded from the company's internal sources but with guarantees by the Hawke Government of some of the associated borrowings by Qantas. The Qantas modernisation program will see the retirement of six of the company's older B747-200 aircraft and their replacement by nine new Boeing aircraft-that is, three new B747-300 stretched upper deck aircraft and six B767-200 extended range aircraft. The company expects to take delivery of the first two B767-200 extended range aircraft in July 1985 and to introduce them into service as soon as possible thereafter. The remaining four aircraft on order will be delivered progressively by March 1986.

The story of the Qantas order for $860m-worth of new Boeings began in 1979 when the Boeing Airplane Company recognised that Qantas would ultimately look to Boeing's new generation twin-engined aircraft for routes where 400-passenger Jumbos were too big for either frequent or profitable services. At about this time Qantas's financial fortunes, along with those of most other international airlines, had not been good. for many international and domestic airlines it was the worst economic crisis in their history. Qantas's operating loss of $47.6m in 1982-83 was the largest on record and brought the accumulative total of operating losses over the four years to 31 March 1983 to around $123m.

Against this background Qantas decided on a fleet modernisation program. The campaign by the Boeing Airplane Company for this order was successful. In September 1983 it was announced that Boeing had won the order. At about that time the Qantas Chairman, Mr J. B. Leslie, said:

It is a very attractive deal. We believe that this is the best time ever to get deals from the airframe and the engine manufacturers, because they have had such a tough time. We think the signs are that the world economy will pick up and aviation with it, and if we deferred action much longer, we would not have been able to get such a deal.

Significantly, Qantas was able to secure from the Boeing Airplane Company a buy- back option of the six old B747s Qantas intends to dispose of. If Qantas cannot sell these 12-year-old Jumbos on the open market as it takes delivery of the new aircraft over the next three years, it can ask the Boeing Airplane Company to take them. Business Editor, Terry McCrann, in an article published in the Age newspaper on 8 September 1983 said:

The deal puts a floor price of something like $US120 million on these aircraft- whereas at the moment Qantas would be lucky to get $US8 million for each one in the open market-or barely more than their scrap value.

However, in March 1984 Qantas announced an unaudited profit of $57.98 million for the year 1983-84 from airline operations. Qantas had correctly calculated that the recession would have ended in time for the new equipment to add to its efficiency and profitability.

For travellers the Boeing 767ER aircraft promises an exciting potential expansion of the Qantas network. This aircraft embodies technological improvements which Qantas knows that it could not afford to be without. The aircraft will accommodate 18 business class passengers and 193 economy passengers flying between the international airport of Townsville and Japan or Honolulu. Above all, the Boeing 767ER aircraft will give Qantas the flexibility to provide improved services to smaller gateway points on the more thinly trafficked regional routes. The smaller size of this aircraft will enable Qantas to provide better frequencies of service than it can with the current fleet of the larger Boeing 747 aircraft. It will enable the establishment of regular flights between Townsville and Noumea and Townsville and Fiji. It will enable the expansion of flights between Townsville and Singapore and Townsville and Auckland. North Queensland exporters of fresh fruit and vegetables to South East Asia should soon be able to avail themselves of the large cargo capacity of this aircraft, which can also carry up to six tonnes of cargo in standard containers or on pallets.

Qantas continues to face a very challenging trading environment. At present there are signs of improvement in travel demand and economies on the international-Australasian routes after many years of recession. However, the return to profitable flying by Qantas has been in spite of the market for international travel, not because of it. In 1979 Qantas needed to fill 70 per cent of total system seats to break even, that is, the percentage of seats which must be sold on average per flight in order to recover costs. It now needs to fill perhaps 58 per cent of the seats to break even. The Qantas Board of Directors, led by the able Jim Leslie, has undertaken vigorous and sustained efforts to contain costs and increase productivity within the company.

Another less publicised contribution to profit- ability has come from aggressive marketing. In June this year it was announced that a national advertising campaign was to begin this month to motivate more Australians to travel overseas. The national advertising and merchandising manager for Qantas said that about 50 per cent of Australians had never travelled overseas and another 26 per cent had made only one trip. The $3m holiday travel campaign is to be aimed at encouraging these people to 'escape from the daily routine'. The campaign represents a massive investment by a newly confident Qantas in a reviving travel market.

In addition, since Qantas has offered comparable incentives to travel agents to offer air travel with Qantas, the company has started to recapture a higher share of the tourist market. The combined efforts of Qantas and Australia's very effective State and Commonwealth tourism organisations have resulted in a big increase in inwards tourism to Australia. Some years ago only 30 per cent of the total traffic carried by Qantas originated overseas while today approximately 50 per cent of Qantas traffic comes from outside Australia, and this percentage continues to grow.

The survival of an airline in today's fiercely competitive environment depends very much on having the most cost-effective and latest technology aircraft available. Australia has in Qantas an airline of which it can be justly proud. The Qantas fleet modernisation decision demonstrates confidence in Australia's future and its desire to improve international accessibility to our vast national tourist attractions with the most modern cost-efficient and suitable equipment available. The decision reaffirms the determination of Qantas to provide safe, efficient and regular air services at the lowest possible price. The Hawke Government, an authentic Australian government, has provided new guidelines for the future oversight of Qantas which will further enhance the company's ability to perform as a commercially successful international carrier and to meet the needs not only of Australians who wish to travel abroad but also of the Australian tourism industry.