More costs cut as Qantas debate approaches

In Government, National Headlines, Tourism Routes, Transport

Qantas future clouded by Sale Act debate

From, 9th July 2014

Qantas has announced more job losses as it continues a $2 billion cost-cutting program that will ultimately see around 5,000 staff go.

Yesterday, the airline laid off another 167 staff, including a large number of aircraft engineers.

However, the losses keep coming in the meantime, with forecasts of a $700 million full-year deficit this financial year.

Chief executive Alan Joyce is pinning his hopes on the repeal of the Qantas Sale Act, but it is not guaranteed to get through the Senate.

“It’s about time the Government brought on this debate,” Labor’s transport spokesman Anthony Albanese argued.

Yesterday, Labor submitted its formal amendments to the Qantas Sale Act which would remove restrictions on individuals owning more than 25 per cent and foreign-owned airlines owning more than 35 per cent of the airline.

However, the Opposition is refusing to budge on keeping the Flying Kangaroo majority Australian-owned, and it says the Government’s bill to remove all ownership restrictions will not get the numbers in the Senate.

“It doesn’t have the support of Labor, of The Greens political party, of the Palmer United Party, of Nick Xenophon,” Mr Albanese added.

“I think it’s important that Qantas has access to capital. It employs 30,000 Australians, adds $1.4 billion to the budget. So I think it’s alright to allow some foreign ownership, some foreign investment, but at the end of the day, I think it’s got to be a majority Australian-owned airline.”

The Government needs the minor party Senators who hold the balance of power to vote with them to get the bill through, and that is by no means guaranteed.

The Liberal Democratic Party’s David Leyonhjelm is one of the few it can count on.

“I don’t think it achieves any public purpose to restrict investment in Qantas,” he said.

“We need investment. I don’t think there’s anything particularly special about Qantas. Most Australians don’t even fly on Qantas.”

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Video: The dogfight over the Qantas Sale Act (The Business)


Qantas-Virgin capacity war

Despite its $2 billion cost-cutting drive, analysts are forecasting the airline will post a full-year loss of more than $700 million next month.

“The key drivers there from our perspective are excess capacity in both domestic and international, also a weak macro environment,” said Morningstar’s avaiation analyst Scott Caroll.

Domestically, Qantas and its main competitor, Virgin, have been engaged in a costly market share dogfight.

“Qantas saw weak loads, which is a measure of seat utilisation, really across the board in both domestic and international,” Mr Caroll added.

Qantas has been exiting loss-making routes and forged new alliances in its tie-up with Emirates, but it still feels the international squeeze in hub locations.

Some airlines though are forging ahead with plans for expansion. Turkish Airlines is one of Europe’s largest carriers and it has plans to double its air fleet.

“The biggest challenge for any company is to make sure that we are capacity, we’re not over capacity,” said the airline’s CEO Temel Kotil.

“This means what we are selling on the market is well-established and they accept it. So this mean we keep continue growing.”

Turkish Airlines was fully government-owned until a decade ago. It is still almost half government-owned and flying at a profit.

“Ultimately, no-one has made money in the aviation industry since the Wright brothers,” said the author of The Airport Economist, Tim Harcourt.

“So to some extent, you’ve got to have some government backing to succeed as an international airline.”

The Transport Minister Warren Truss was unavailable for an interview, but a spokesperson says the Government will continue to pursue the bill in the Senate.

A win in the Senate cannot come soon enough for Qantas, which is looking for a soft landing on a level playing field.

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