House debates

Thursday, 6 March 2014


Qantas Sale Amendment Bill 2014; Second Reading

9:29 am

Photo of Anthony AlbaneseAnthony Albanese (Grayndler, Australian Labor Party, Shadow Minister for Infrastructure and Transport) Share this | Hansard source

I am asked why. Well, the Leader of the National Party, the Deputy Prime Minister and former shadow minister for transport, very clearly indicated why: because there was not support of the Australian people for this. He said that in December. And why is there not support of the Australian people? It is because it is not in the national interest and not in the interests of Australian employment for this to be carried.

We had a process in 2009 that led to an aviation white paper. We had a green paper and then a full discussion with the transport and tourism sector—an open process of consultation. In December 2009, it recommended that Qantas should stay in majority Australian hands but that we should consider repealing the sections of the act that require a 35 per cent and 25 per cent rule—the limited restrictions on a single owner who is not Australian and also on ownership by other airlines of Qantas. We did that in a practical way. We were prepared to consider that.

What did those opposite do? On day one, the shadow transport minister and the shadow Treasurer, who are now the two key people for the passage of this legislation, rejected it, and they rejected it on the basis that it was not in the national interest. The shadow Treasurer outlined very, very clearly that it was his view that any diminution of the restrictions on foreign ownership was not in the national interest because the obligations of Qantas as an Australian company would mean that that was diminished, and he rejected the 35 per cent/25 per cent amendments. The shadow transport minister of the time did the same thing, particularly pointing towards the role that Qantas plays in regional Australia. So that was the position of the opposition back then.

As to the then government's position, we had, after that proper consultative process, fully put forward the view that we were prepared to make that minor change to the position but were not prepared to go further. Here is what the shadow transport minister said:

The Government’s decision to allow a single foreign investor to own 49 percent of Qantas would deliver effective control to a foreign investor, including possibly a competitor airline. Lost of effective Australian control could leave Australia without an airline primarily committed to our interests. What safeguards will be put in place for the Australian flying public, particularly those in regional areas?

What else did they go on to say? The shadow Treasurer said this:

Well this is something I have previously been on the record about. Very concerned about any dilution of Australian control of Qantas. Qantas has, over the years, tried to increase foreign investment in the airline. We have been very concerned for a number of reasons. First and foremost, Qantas is an Australian icon and Qantas undertakes significant tasks in the national interest and there have been numerous examples where Qantas—an Australian-owned airline and an airline that relies heavily on government regulation has undertaken tasks in the national interest. Our experience has been that when companies have majority foreign ownership or majority foreign control—not necessarily the same thing—but when they have majority foreign control, then it actually has an impact on the social responsibilities of those companies here in Australia. So, in short, we’ll see where we’re going.

These were not newly elected members of parliament. The shadow transport minister had been the transport minister, with responsibility for aviation and regulation in this country, prior to the 2007 election. The shadow Treasurer, now the Treasurer, was a senior member of the Howard government as well. They had thought through those issues. They had thought them through in a way which then determined the position of the coalition on the very day that the white paper was released. That was a very public process. They were on the record about that.

Then the coalition came to office in September last year. Prior to that, of course, Qantas had had difficulties. As to some of the decisions of the Qantas management, I maintain the view that I had at the time: that the grounding of Qantas by the management damaged the Qantas brand and was an error of judgement on the part of that management.

But I have worked constructively with Qantas. I have also worked constructively with Virgin and the other airlines that are based in Australia. Virgin, of course, have successfully expanded—and I supported their actions in expanding—their operations through the effective takeover of Skywest and Tiger. There is no doubt that, had the takeover of Tiger not been approved, it simply would have disappeared from the Australian aviation landscape.

Last year I provided, as the minister for transport, a letter which indicated that Qantas had a special relationship with the Australian people and a special role in terms of the national economic interest. That letter of comfort, which was requested—worked out in consultation with the appropriate bureaucracies in government—was successful. It was successful in ensuring that Qantas maintained its credit rating.

In November, Virgin, because of the pressures that had been placed on it in terms of capacity, needed an injection of capital. It received that injection of capital of around $380 million from partner airlines Etihad, Air New Zealand and Singapore Airlines. All three of those airlines are government backed. So effectively you had a transfer of support from the governments of New Zealand, Singapore and the United Arab Emirates for Virgin. Why did that occur? It is in the commercial interests of those airlines to provide that support to Virgin, which, of course, is primarily a domestic carrier. They have an interest, as shareholders in Virgin, in Virgin's success, but they also have an indirect interest because they benefit in terms of the codeshare operations that occur with Virgin as a domestic carrier and feeding in passengers through those three international government backed airlines.

That was the first thing that changed, in November. In December, Qantas received a downgrade in its credit rating to junk status. They are the two events that changed the political landscape in terms of whether government should go further in providing support for Qantas. Every indication was made by the Treasurer that that support would be forthcoming. The Treasurer outlined four principles which that would be based upon. He said this. This is the first principle:

… has the Parliament and the Government imposed restrictions on that … business that are not imposed on other businesses in the same industry?

And he said:

The answer in relation to Qantas is yes.

He said:

Secondly, is that business fundamental to the economy, is it providing an essential service to the economy, such that if it were to have significant issues that inhibited its day to day operations, it would have a detrimental impact on the economy?

The Treasurer said:

In the case of Qantas, the answer is yes.

He went on to say:

The third factor that needs to be considered is; are other Governments actively supporting other players in that industry?

There he said:

The answer in relation to Qantas is yes. These are crucial tests we apply.

And he said:

The fourth hugely important test is, is the enterprise trying to fix up its own balance sheet? Quite obviously Qantas is trying to do it.

There is nothing equivocal about the statement of the Treasurer on 13 February—nothing equivocal at all.

And there was a response to that. There was a response by Qantas management. There was a response, of course, in the impact on the Qantas workforce, where 5,000 people will lose their jobs. And there was a response by Qantas shareholders which saw the share price rise by more than 10 per cent. That was the response.

The Treasurer was arguing, as late as Monday night, in the cabinet room for that proposition. What did the opposition do? We indicated very clearly from day one and consistently that we would be constructive. We indicated where the line would be drawn. The line is very clearly drawn in terms of majority Australian ownership. We indicated and continue to indicate to the government that we are prepared to consider supporting other options—other than that—for the very reasons outlined so eloquently by people such as the Treasurer and the transport minister in the past.

This legislation being brought before this chamber is legislation not only that we oppose but that those opposite, in their heart of hearts—people such as the Treasurer—also have not been arguing for. Indeed, they have rejected in the past any dilution. Even the 35-25 per cent rules, a relatively minor change, were rejected.

So what did they come up with on Monday night, where we know—because the Prime Minister indicated it in his press conference—that every single member of cabinet made a contribution? I have sat around a cabinet room. Every member only makes a contribution where there is a lot of conflict, where there is real conflict about a way forward. That is not surprising given the contradictions that are there from those opposite. The fact is the Minister for Infrastructure and Regional Development said just now in his second reading speech:

The government recognises that the best possible way it can assist Qantas is by removing the regulatory imbalance in Australia's aviation industry—in effect, to free Qantas from the regulations that hold it back and which are a remnant of the previous century.

The problem for this bloke is he was the transport minister in this century. He was the transport minister; he was responsible for these regulations.

The other problem is that we know what Qantas wanted because Qantas stated it, the Treasurer stated it and the transport minister stated it: they wanted a debt guarantee. You have had every red herring thrown up in this debate, including the red herring of the carbon price, even though we know that both Qantas and Virgin actually asked to be included in the carbon pricing scheme. We know from the statements that were leaked from the cabinet meeting on Monday night—the cabinet is leaking and they have not been there that long—that they had a discussion in the cabinet room about the Qantas statement on Monday that carbon pricing was not the real issue here, that it was not what they were talking about. We know the Treasurer read out the Qantas statement at the cabinet meeting on Monday. So they read it out, leaked it and clearly they then had discussions with Qantas about that view.

Why is the inconsistency there? I go back to Joe Hockey's four criteria that it is worthwhile in terms of support for the national carrier. In terms of support for the national carrier, we know that there is a position whereby the three government backed airlines have made the injection into Virgin. We know also that when we talk about aviation we are not talking about an area where the free market operates. It is not actually the way it works. Aviation is regulated by the Chicago Convention on International Civil Aviation. Agreements are made between nation-states. The agreements are made government to government. This is not an area whereby you have the private sector going off, having negotiations and coming up with agreements without government regulation. The air services agreements are not between Qantas, Virgin and United—they have their own arrangements; the air services agreements are between the Australian government and the US government, the Australian government and the Japanese government, the Australian government and the Chinese government. They are based upon the principle of where the airlines are based, the majority ownership of that country in order to access those traffic rights between countries.

Let us have a look at the Skytrax ranking of the top airlines around the world. Skytrax is the world airline awards. Emirates is 91 per cent owned by the UAE government and comes in at No.1; Qatar Airways, 50 per cent owned by the Qatari government, comes in at No. 2; and Singapore Airlines, 54.5 per cent owned by the Singaporean government, comes in at No. 3. When you look around the world including at the future giants of aviation, there are at least three but there are many more. The three very big carriers from China are getting bigger every day. They are supported by government.

What we had here was a request from the national carrier for government support, an indication by the government that that would be forthcoming. Then at the last minute that was withdrawn and legislation was put forward which has no prospect of passing this Senate or the future Senate. So I say to government again, as I have said since December, we are prepared to be constructive. We clearly indicated that from 2009 we have had a position on the 25 per cent and 35 per cent rules and we would be prepared to have constructive discussions about that or any other support that would be available.

Why is that the case? What has this come down to? At the end of the day, this is not about the people who sit in this place. At the end of the day, this is about two things. The first issue is the national interest, where national governments around the world recognise that aviation is worthy of support. The second issue is that it is about the workforce, those 5,000 people who are losing their jobs at Qantas. We asked the Prime Minister yesterday what response there was from the government for those 5,000 workers. Did we get a commitment about retraining, about income support, about counselling or about any of a range of options that should be there when you have people who, in many cases, will have worked for decades for the company known as the flying kangaroo? No, we did not. We just got more politics. This is completely unacceptable.

Look at what the consequences of this legislation. The consequences of passing this legislation is that what you would have is a break-up of Qantas. That is what the legislation is designed to do—to separate out the company so that you will have Qantas international separated from Qantas domestic and Qantas domestic completely freed up in terms of foreign ownership. So you are freeing up to foreign capital the profitable section of the airline—and you are saying that the international arm will be able to continue as it is as a separate entity with different owners.

Qantas is very different in terms of its corporate structure from Virgin. Virgin have the big owners—the three government-backed airlines and of course Virgin international through Richard Branson. Qantas's ownership structure is very different. If you split the company and you have a profitable arm with up to 100 per cent foreign ownership, why should there be that cross-relationship in terms of shareholder interests with Qantas international? And yet the national interest and the whole of Qantas's interest is often served particularly by routes in regional Australia being protected, because whilst they may not be delivering a positive return in the short term, they deliver that in the longer term. That is what the Treasurer was talking about and the transport minister when they spoke about the national interest.

What we know is that when this has occurred, such as in Air Canada, the potential for a hostile takeover essentially and a breaking up of the company would be very much there. Why is that the case? In terms of the ownership provisions that are there providing some defence of the national interest being protected, at the moment the Qantas share price is hovering just above a dollar. We know that the value of assets that Qantas has—the Frequent Flyer program, key terminals, Jetstar—is certainly many times more than the total share value. So the consequences in terms of a break-up—and I think the Treasurer gets this, which is why he took a different position, to be fair to him—and the potential for a break-up of this company with consequences for the national interest are ones that we take very seriously indeed.

Then the government says, 'But don't worry, because for the potential buyers the FIRB provisions will ensure that there can't be a takeover that isn't in the Australian national interest.' Which are the airlines that will potentially invest? Are there any of them that are not government backed? The two obvious places are from China and the UAE. That is the strength of global aviation at the moment. Singapore, of course, is also very strong, but they are in partnership with Virgin. So the government is going down this road but saying, 'Don't worry, cause we'll stop it—there is another process.' But, of course, FIRB make recommendations to the Treasurer, so it will end up back with him.


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