Tourism group backs Joyce in mortal battle over Qantas

February 7, 2012 Aviation, Headline News 2 Comments  Print  Email

Qantas chief executive Alan Joyce has told a Senate Inquiry that he holds “grave fears” for the future of the airline if laws are changed to keep heavy maintenance in Australia and ensure that international crew are paid wages at Australian levels.

Joyce said the Qantas group might either have to sell Jetstar or watch it fail, and withdraw from services connecting Darwin and Cairns to Asia and Europe, if Senator Nick Xenophon’s proposed amendments get the green light.

Joyce was addressing the Senate Inquiry into Air Navigation and Civil Aviation Amendment (Aircraft Crew) Bill 2011 and the Qantas Sale Amendment (Still Call Australia Home) Bill 2011.

Joyce and Jetstar chief executive Bruce Buchanan faced the inquiry in Canberra yesterday. The inquiry is looking at various issues, including whether Jetstar has broken Australian immigration laws by hiring foreign flight attendants at lower wages and having them work long daily rosters so they can service domestic flights.

There is also concern about whether such aircrews are subject to safety regulation enforcement by CASA, and whether they may be too exhausted to deal with any emergency.

At least one tourism body is backing Qantas on the issue. The Australian Tourism Export Council (ATEC) issued a statement saying that Senator Xenophon’s proposed amendments to the Air Navigation Act “would cause serious damage to the nation’s aviation access with Asia, our tourism hubs, hundreds of small businesses and the jobs of thousands of Australians”.

ATEC Managing Director, Felicia Mariani called the bill “an unfair and a direct assault on Qantas’ capacity to be competitive in the Asian market”.

Joyce told the inquiry he had “grave fears for the future of Qantas” if the legislative proposals take effect. The text of his opening speech appears below.

Senator Nick Xenophon’s proposed amendments would require Qantas Group airlines such as Jetstar to conduct most of their heavy maintenance in Australia. This used to be standard practice, with Australian engineering considered among the world’s best and safest. That may still be the case, but it is not necessarily the cheapest.  Joyce says the passage of Xenophon’s amendments would benefit Jetstar’s competitors, who would “enjoy a lower cost base by doing virtually none of their heavy maintenance in Australia”.

Joyce said Qantas must adapt or die.

Mariani’s statement in support of Joyce said that aviation “is a tough, competitive business and Qantas needs to stay ahead of the game. Introducing significant limitations on how the airline operates and its capacity to be productive and viable could drive it into the ground, and many local tourism businesses with it.

“Qantas provides a critical link not only across Australia, but in connecting us to the burgeoning markets of Asia and the tourism industry cannot afford to have this opportunity destroyed by Mr Xenophon’s amendments.”

Mariani said if Qantas was forced to amend its wages and conditions for international crews, important tourism destinations such as Cairns and Darwin would lose access to the Asian market, the very lifeblood of two destinations suffering under the current pressure of the high Australian dollar and unprecedented outbound travel by Australians

“It is very clear that Qantas can’t afford to operate the Cairns-Darwin-Singapore route if these amendments are introduced and they plan to withdraw if the amendments go ahead. With more than 300,000 international arrivals at Cairns airport each year, this would be a significant blow to the local tourism economy and those destinations that link to it.

“Aviation is the lifeblood of the Australian tourism industry and ATEC is very concerned by Senator Xenophon’s narrow sighted view of Qantas’ role in our community. Qantas is a instrumental player in the success of Australia’s tourism industry now and into the future.”

Mariani said Qantas played a crucial role in Australia’s tourism sector, not only in providing our most comprehensive aviation network, but by supporting the growth and development of the industry through its partnerships with organisations such as ATEC.

“These proposed amendments deliver yet another threat to our tourism industry, dominated by SME’s and employing more than half a million Australians – there is much more to be considered here than wages paid to Qantas’ international cabin crew.

“The tourism industry is on a positive path to engaging and growing the lucrative Asian tourism market and we need all the support we can get from Government and the policies they employ. The amendments being sought by Senator Xenophon are a direct attack on Australia’s tourism industry and the local, regional and rural communities they economically support.”

OPENING STATEMENT BY ALAN JOYCE MONDAY, 6 FEBRUARY 2012

As you know I appeared before this Committee on 4 November last year.

I took more than three hours of your questions.

Since then the Qantas Group has answered your 20 Questions on Notice.

We have responded to more than 200 Supplementary Questions.

And just a week ago we received yet more amendments to the Bills. We responded to them as well. We have been rigorous in responding to all that this Committee has put to us. We have endured examinations and insinuations based on politics rather than policy. We have done so for one reason. We have grave fears for the future of Qantas if these legislative proposals come into effect.

We want our position clearly understood, and on the record, because history will judge.

The legislation proposed would constitute a major threat to our business, to Australian jobs in the cities and regions, to investment and to growth.

I want to make three specific points before taking your questions.

First, the Qantas Sale Act Amendments go way beyond the original aims of the legislation, and would strangle our capacity to run our business.

We all know that the primary purpose of the Qantas Sale Act was to ensure that Qantas remained a majority Australian-owned flag carrier while pursuing its destiny as a non-government company running its own business and answering to its shareholders.

That outcome meant Australian taxpayers had all the benefits of a national airline without bearing the cost.

Nothing Qantas is doing is in contravention of the spirit or intent of that Act. The Government has recently confirmed this. We continue to work hard to secure a viable future for our business, deliver sustainable returns for our shareholders, and fly the flag for Australian jobs and success.

These amendments would not increase protection for Qantas. They would not make us more Australian. They would not save or grow Australian jobs. They would have the opposite effect.

Senator Xenophon’s most recent proposed amendments would have serious and, I assume, unintended consequences. To take just one example, he wishes to require that a Qantas Group airline such as Jetstar conduct the majority of its heavy maintenance in Australia. Jetstar would then be confronting competitors who enjoy a lower cost base by doing virtually none of their heavy maintenance in Australia.

Those of us running Qantas would have to face a choice: allow Jetstar to fail within the confines of the Qantas Sale Act, or sell it to allow it to succeed outside it. That is a simple statement of the dilemma this legislation would construct.

These amendments in total – from the makeup of the Qantas Board to the location of our flight training – would apply intrusions and restrictions on Qantas Group airlines that do not apply to our competitors. If Australians want a truly competitive national carrier, this Parliament cannot tie up Qantas in this way. You would be responsible for making Qantas less competitive just when we most need the freedom to compete.

This is not a controversial view. The Secretary of the Department of Infrastructure and Transport Mr Mike Mrdak told you himself that: “Australian airlines need to continue to have flexibility to adapt their business strategies to changing market circumstances”. He said, “[T]he two bills being considered by the committee raise significant issues for the operations of all Australian airlines and their ability to compete internationally…”

Let me turn to my second point which relates to the combined impacts of the Qantas Sale Act Amendments and the Cabin Crew Bill.

I note that this is the “Standing Committee on Rural Affairs” as well as Transport. But the amendments to the Cabin Crew Bill would not preserve Australian jobs. They would destroy them, especially in regional Australia.

As you know, for many years now we have had a liberalised aviation sector, with domestic Open Skies in Australia.

But this has not led to new or sustained international air services by foreign carriers to many of our regional centres.

The fact is that the Qantas Group network remains critical to maintaining and growing those direct services.

And that means as a business we need to be strong and profitable to retain sufficient scale in our regional, national and international networks.

Whenever Qantas Group airlines use foreign crew and Australian crew on the same flights, Australian crew operate under Australian wages and conditions and foreign-based crews on the terms and conditions of their domicile country – where they are employed and where they live. This is standard practice adopted by airlines all over the world.

There are a limited number of routes where this occurs within Australia – what we call “tag flights” involving a domestic sector of an international flight primarily serving Australian regional destinations. These “tag flights” enable us to service regional destinations in Australia, such as Cairns and Darwin.

If the amendments are passed, and international crews are treated as Australian in terms of wages and conditions on domestic legs of international flights, we will no longer be able to viably operate those international services.

The proposed amendments would quite simply force the Qantas Group to withdraw from services connecting Darwin and Cairns to the tourism and trade markets of Asia and Europe.

The impact on regional tourism and development would be immediate and negative. It would result in loss of employment and investment in regional Australia, with flow-on effects for the rural communities who rely on regional centres.

Strangling our international business and forcing us to pay uncompetitive wages compared to our foreign airline competition is no way to make us stronger, better or more Australian.

The third point I want to make is that we need to be aware of the global and national realities that frame our times. We confront very serious global economic challenges in Europe and the United States, we have warnings of deep downturns from the IMF and World Bank, and we have daily news of more job losses here in Australia.

The reality is simple – we must all adapt or die. At Qantas we want to adapt. We MUST adapt if we are to survive.

We are working very hard to make this company fit, productive and competitive so that we can continue to employ many thousands of Australians, provide great aviation services to our customers, and play a vital role in regional and rural Australia.

The amendments that this Inquiry was set up to examine, if passed, would force the Qantas Group to reduce and withdraw services. I want it clearly understood that the certain consequences of these Bills would be job losses and reduced aviation access.

Every State in Australia would be affected.

Measures targeted at lowering our competitiveness, closing us off from global markets, and raising our cost-base is not patriotic, nor are they smart. Frankly they are not workable.

Qantas is committed to Australia, to employing Australians and to growing and investing in Australia.

We cannot be constrained by misguided legislation that will achieve precisely the opposite of its aims.

Written by :  Peter Needham