Qantas: just another airline

Sometime in the next year, it’s highly likely that Qantas will no longer be the official Australian national carrier. Instead, it will just be another Australian “flag carrier”, as Virgin Australia is, with its air international air services mandated by treaties with foreign governments – just as Ansett was before that with its services to Hong Kong, New Zealand, Bali and Japan.

The time bomb that has been in Qantas’s kit bag for two decades has finally gone off: a condition of its privatisation in 1993 was that it must remain at least 50.1 per cent Australian-owned – no problem when it is flying high, but a major issue when it is not.

The privatisation of Qantas was accompanied by an ultra-liberal regime maintained by governments of both persuasions under which restrictions on Qantas’s competitors, except in a few cases, have been removed.

Not only are domestic airlines now allowed to be 100 per cent foreign-owned – one of few countries where that is permitted – but the new bipartisan policy is that, for the sake of its tourism industry, Australia will no longer stand in the way of foreign airlines that want to fly here, whereas prior to the 1990s Australia would first ask Qantas whether any new competition should be sanctioned.

Most spectacularly, that has enabled the new relatively low-cost carriers from the Middle East like Emirates to eat Qantas’s lunch on services to Europe – Emirates now has more than 14 daily return services to Australia from Dubai – while, in the other direction, Qantas faces new competition from both Virgin Australia and US giant Delta.

But, with operating costs calculated to be 20 to 30 per cent higher than Emirates and other major competitors like Singapore Airlines, Qantas is unable to exploit the loophole opened up by Virgin Australia under the leadership of former Qantas executive John Borghetti.

At the beginning of last year, Virgin Australia created a new entity to operate its domestic airline business with as much foreign ownership as it liked and established a second majority-Australian-owned structure to comply with the sovereignty provisions of the Air Navigation Act, which governs international air services.

Even Borghetti concedes the ownership restrictions on Qantas are now intolerable and should be removed. There is unanimity in the airline industry that this should happen and the new federal government has signalled its reluctance to sign up taxpayers for more handouts to industry.

''If Australia wants to place regulatory handcuffs on Qantas, then we need to accept that that will come at the cost of taxpayers,” treasurer Joe Hockey said last week. “Frankly, it's not something that I am willingly prepared to do - I don't like the idea of putting taxpayer's money or taxpayer's support behind Qantas.

“But if it is the view of the Australian people that we should have a national carrier that carries our flag then that does come at a cost.''

Politics will eventually decide whether Qantas has the level playing field it says it needs that has allowed Virgin Australia to obtain cheap funds from government-controlled foreign partners like Etihad Airways, Singapore Airlines and Air New Zealand.

The Greens and Labor both oppose removing Qantas’s ownership restrictions but their majority in the Senate will be removed next July in favour of a hodge-podge of minor parties that are more likely to go along with the repeal of the Qantas Sale Act later next year.

Meantime, Qantas faces gale-force headwinds. Last week, it reported sharply deteriorating market conditions in November, though it hasn’t yet reported statistics for the month, forecast a big loss in the first six months of the current financial year and announced 1000 more job losses to further cut costs.

With his battering ram enjoying an operating cost advantage over Qantas of around 15 per cent, Borghetti plans to press home his advantage and steal even more of the domestic market share that has been crossing the road in the past two years to fly with the upstart – especially the highly prized business flyers who have taken Virgin Australia’s share of the corporate market from around 10 per cent to more than 20 per cent.

Does 'politics' enter the equation when you choose an airline? Do you still feel a sense of ownership over Qantas? Have Qantas’s efforts to improve customer service over the past few years won you over – or stopped you from leaving? Do you think we need a 'national airline'?