Final call for the national carrier

The broad case for a national carrier was made in 2001, when Air New Zealand was re-nationalised amid the Ansett collapse. The thinking went that nationalising the airline was the only way to ensure routes were kept open and tourism allowed to flourish. The New Zealand government spent $726 million buying back into the carrier, a dozen years after privatisation. And it worked.

But Qantas is not Air New Zealand, and the case here for a national carrier is less clear. Planes will not stop coming if Qantas is increasingly foreign-owned. Routes will not close. The strictures of the Qantas Sale Act were thought odd 22 years ago, and 22 years is seven lifetimes in aviation. The Abbott government’s proposal to lift these strictures is sensible, if not immediately possible without the support of the Labor Party.

The Abbott proposal would end the 49 per cent cap on foreign investment in Qantas as a whole, and allow foreign airlines to buy more than 35 per cent of the company. It would also allow for maintenance and other functions to be taken offshore. The board would no longer need to be two-thirds Australian. There would be scope to split the domestic and international divisions, broadening foreign investment under key interest tests. Capacity allocations would continue to operate as they always have. Taken in essence, the moves would not affect the running of Qantas, but would allow foreign companies to underwrite parts of the airline.  The 1920 Air Navigation Act ensures the international arm would not be more than 49 per cent foreign-owned. Australians flying the airline would know no difference.

There is a model for an airline to function like this: Virgin. Abbott’s proposed changes allow Qantas to operate in much the same way as its major rival, to give chief executive Alan Joyce his “level playing field”. But it would also take from Qantas an advantage it has been using in its messy war with Virgin – knowing there would be government intervention, if things got really bad.

There is no doubt Qantas is troubled. Assets will be sold whatever the government does. Some 5000
staff will be sacked. The pay of remaining staff will be frozen. But a not insignificant part of Qantas’s parlous state has been caused by the game of chicken it has
been playing with Virgin since Joyce bested John Borghetti for his current job, and the vanquished left to run the rival. In the capacity war on domestic routes, Qantas had looked happy to bleed until Virgin was bloodless. But when Virgin succeeded in November with a $350 million entitlement offer – taken up by Air New Zealand, Etihad and Singapore Airlines – Qantas needed a similar transfusion.

Qantas is fondly remembered for its extraction of Australians trapped by crisis in Egypt and Lebanon, for its emergency flights out of Bali in 2002. Then there was the aircraft requisition in World War II and Vietnam. But there is no strong case to say Virgin could not make the same contribution. Qantas is paid for these extraordinary flights, as any other carrier might be.

Nationalism has kept Qantas a political issue when it should be, in so many respects, a business one. The 14 unions with which Qantas negotiates have done well to continue this focus – as has the kangaroo on the fleet’s tail. Nationalism might have forced a government into a costly debt guarantee or a partial bailout, and it is a mark of good sense that it has not.


This article was first published in the print edition of The Saturday Paper on March 7, 2014 as "Final call for the national carrier".

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