Don't cry for the flying kangaroo

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Discussion of government assistance to Qantas is inevitably clouded by emotion, despite increasing commentary on management blunders. No patriotic Australian wants to see the ‘flying kangaroo’ go out of business, as Australia’s other airline icon Ansett did a little more than a decade ago. But if Qantas is to properly serve the Australian people, it has to be on the basis of good business and not emotion.

There is a real possibility that the world’s oldest continuously operating airline could fail, in a fast changing aviation marketplace that requires companies to have the ability to attract vast amounts of capital in order to survive. The bad news for Qantas is that the credit rating agency Standard and Poors has downgraded Qantas to junk status, which means it will lose comparatively easy access to the funds it needs to survive. 

This follows the airline’s advice to the Australian Stock Exchange on Thursday that it is in big trouble. It cited an underlying  $250-300 million loss  before tax in the six months to 31 December. This is forcing the loss of another 1000 jobs, and the share price has plunged in recent days. 

There is consequent pressure for a massive government cash injection to help Qantas return to profitability and put the brakes on its successful competitor Virgin by halting a $350 million capital injection by its foreign shareholders.

However lessening competition means only one thing for the Australian people, and that is higher fares. This would mean a reversal of one of the great economic miracles of recent times that has proved capitalism can promote social inclusion. That is the explosion of competition in the global aviation marketplace and the low fares revolution this has produced. 

As recently as two decades ago, low income citizens of western countries could not afford to fly. In the new age of competition and low fares, many people living close to the poverty line can fly interstate or even overseas to visit family or attend to their business and cultural needs. But if the Australian Government helped Qantas out of trouble by making it less attractive for foreign airline interests to invest in the Australian market, fares would rise significantly and flying would once again become the preserve of the wealthy.

The improvement in the access of ordinary people to the skies ranks alongside advances in health an education that have improved the lives of many. Pope Francis said as much in his recent apostolic exhortation Evangelii Gaudium when he suggested ‘we can only praise the steps being taken to improve people’s welfare in areas such as health care, education and communications’. In the section headed ‘No to an economy of exclusion’, he insisted that ‘those excluded are no longer society’s underside or its fringes or its disenfranchised – they are no longer even a part of it’.

According to the pope’s critique, any government assistance to Qantas that thwarts competition will also thwart those on the margins of society who have been enabled to fly by the low fares that are the result of competition. If the flying kangaroo cannot compete, it should be put out of its misery, or at least change its management. 


Michael MullinsMichael Mullins is editor of Eureka Street. 

Topic tags: Michael Mullins, Qantas, Virgin, aviation, competition, Pope Francis, Evangelii Gaudium

 

 

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Existing comments

My understanding of Alan Joyce's bid for government assistance relates to lack of a level playing (or flying!) field. Airlines like Virgin currently are permitted to have greater foreign investment in their companies than Qantas is allowed. While it's true that it's never been cheaper for low income citizens to travel by plane, usually the budget airlines such as Qantas' Jetstar are used. If Qantas is put under increased financial pressure Jetstar may be first to flounder. It would be a shame if an iconic brand like Qantas were to be grounded. I still have a maroon travel bag with the Qantas logo - I'm sure there are quite a few of them sitting around in cupboards. Long live the flying kangaroo.
Pam | 06 December 2013


If Qantas were to go to the wall I think the days of cheap domestic air travel will be well and truly over. That would not be a socially equitable outcome. I do not think it is possible to oversimplify the many problems facing our national carrier nor should we look for simplistic moral or economic arguments to allow it to go to the wall. The government needs to consider this case very carefully because the implications are very wide ranging.
Edward F | 08 December 2013


The author is right. Long running businesses must support themselves. The government needs to support new and emerging businesses.
Jyo Aadarsh | 09 December 2013


Qantas lost the plot years ago. As a Life Member of Qantas Club, because of poor service issues, I stopped flying Qantas and opted for airlines who appreciated one's custom and who did a far better and more professional job as well as having better fare structures and options. Qantas can blame only itself.
Benjamin | 09 December 2013


Perhaps we do need to look at some more government support, as I think it would be a tragedy if QANTAS as an icon were allowed to fail, if it could be saved. However, I have to agree with Benjamin. Despite being very satisfied with QANTAS for many years up to the late 90s, I also started preferring to fly with other airlines several years ago, because the service and friendliness of QANTAS staff and the general attitude of the company towards customers became woeful compared to other airlines. Every time I see Alan Joyce on TV or read what he says in the paper, I get a vision of Sol Trujillo and what he "did for Telstra". And what, from my point of view, he did for Telstra was to make it for its customers one of the most hated companies in Australia, and the butt of jokes about poor service, and top management who lived in a fairyland of their own creation. So rather than QANTAS divesting itself of so many of its loyal and valuable frontline staff, perhaps it's time for Alan Joyce to say "Adios" as well!
Paul | 09 December 2013


Of course we would love to see Qantas remain Australian owned. Of course we would love to see better service. Of course we would love to see Qantas in profit. Who is addressing the sub-plot of this drama which is the struggle with union demands?
Chris | 09 December 2013


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