We want Qantas to still call Australia home
Updated March 06, 2014 06:39:16
Qantas is not just another consumer product that we buy off the shelf, it is part of our economic history. Hence the need to treat it differently, writes Tim Harcourt.
As an "airport economist" I think a lot about the aviation industry. And I think a lot about our national carrier Qantas. I have visited 58 countries in the past five years - most of them thanks to Qantas - so I think a lot about the airline as a customer and (very) frequent flyer. Reflecting on my days at the Australian Trade Commission (Austrade) and in the private sector I think a lot about trade and aviation policy and the intricacies of landing "rights" in global aviation. And reflecting on my days when I was at the ACTU and coordinated the airline unions through the Qantas merger with Australian Airlines, the first enterprise bargaining agreements and the float of the merged airline that we now know as Qantas, I think a lot about employee issues and how to manage change in a complicated globally competitive business.
And as an economist and historian, I have come to see why Qantas is the great story of the Australian economy. Qantas itself reflects many transitions in Australian economic history and symbolises the mix between the private and public sector to serve the community that has made Australia so successful and globally connected.
Think about the Qantas story that is now 93 years old (soon to outlive another Australian legend, Sir Donald Bradman). It began as a small business in the Australian outback doing the mail run. In today's business jargon we would call it a "start-up". It became a global entity, formed a public-private sector partnership (ppp) under the Chifley government, undertook a merger with Australian Airlines, floated with employee share ownership, and then became a private sector company again.
As Qantas CEO Alan Joyce says, the story is one of "vision, innovation and resilience".
That's the history, now what are the key issues facing Qantas in today's competitive world?
Firstly, there's the Qantas Act. Qantas is one of the few publicly listed companies now in Australia that has an act of parliament regulating its business. On one hand it is expected to act like a private company, on the other it is regulated. This seems like the worst of both worlds. The act adds costs to the Qantas business, yet limits its financial opportunities and influences the views of shareholders and the public. And its competitors have no such restrictions.
Secondly, there is the structure of global aviation. Qantas operates on an unlevel playing field (or sky) in terms of the global competition. Competitors like Singapore Airlines and Etihad have the advantage of being a "hub" on the way to somewhere else, and not at the bottom of the world. They also have unlimited access to capital through their government ownership ties. Even Air New Zealand, another antipodean carrier, has better access to capital and government ties. Even in the domestic market, Virgin has access to foreign capital at cheap rates through its foreign ownership (which is essentially government guaranteed) underwritten by Singapore Airlines and Etihad.
Thirdly, there's the issue of people. You couldn't get more loyal employees than Qantas has. When I was at the ACTU we were going through the difficult issues of the merger with the old TAA, Australian Airlines, the float of the new entity and the introduction of employee share ownership - all while introducing enterprise bargaining. Yes, it was quite a busy workload!
All the employee surveys we undertook showed the "dual loyalty" of Qantas employees who were active union members who loved their company. The ACTU worked closely with the Qantas team (led by the late James Strong) to get the best outcomes for the brave new world of the new entity. On outsourcing in engineering and maintenance, Qantas asked the ACTU to prepare a business case for some in-house maintenance, and when our results came in cheaper than the outsourcing option they opted for it (and we avoided the landing gear safety issues facing the outsourced parts of the operation). Qantas has great people and having the goodwill of your employees really matters in tough times. As former aviation CEO Sir Rod Eddington used to say in his British Airways and Cathay Pacific days: "You can't run an airline by declaring war on your own workforce."
Fourthly, there's the debt issue. We expect Qantas as a national carrier to fly to places that we want to go, to help us in an emergency and to operate a significant international and domestic network. It is hard to ask the Federal Government to fund Qantas out of the budget or renationalise, but as my colleague Richard Holden has suggested, Canberra could buy out Qantas's long-term debt over the term of, say, 25 years to give it better access to cheaper capital to weather the financial storms of a volatile aviation market.
It's a novel idea given the public good aspect of Qantas as an essential service that connects Australia to the world.
Finally, there's the Qantas effect on the Australian economy and on Australia itself. Economically speaking, it is significant: Qantas employs 30,000 Australian workers, spends $6 billion each year on Australian goods and services, and contributes $1.4 billion in direct and indirect tax to the Australian federal budget. And Qantas passengers spent $28 billion last financial year in domestic tourism alone. Qantas provides what economists call "positive externalities". It provides benefits beyond its direct commercial interests in helping Australians trade, travel and connect with the world and bring the rest of the world to our shores.
Qantas is an essential part of the Australian "brand". Most people in the world - even those who haven't been to Australia - know Qantas and it helps our reputation and national brand. All countries have brands that shape their image and even companies that "represent" them.
The US has Coca Cola, Germany has BMW, Sweden has IKEA, Finland has NOKIA, Italy has Alfa Romeo, and Australia has Qantas. It's not just another consumer product that we buy off the shelf, it is part of our economic history, our outreach to the world and who we are as Australians.
Hence the need to treat Qantas differently - but rationally and practically, not ideologically or purely sentimentally, with private and public sector in partnership - as Qantas spreads its wings into the next phase of its rich but challenging history.
Tim Harcourt is the JW Nevile Fellow in Economics at the University of New South Wales and author of The Airport Economist. View his full profile here.
Topics:air-transport, industry, business-economics-and-finance
First posted February 27, 2014 08:30:52
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