The CEO of Qantas, Alan Joyce, claims that the national flag carrier is being subjected to unfair competition by its main domestic rival, Virgin Australia.
Qantas is restricted by two pieces of legislation, the Air Navigation Act limiting foreign ownership to 49% and the Qantas Sale Act dating from 1993 when the airline was privatised. By comparison, John Borghetti, the CEO of Virgin, has exploited the ownership loophole in the Air Navigation Act by, last February, splitting their operation into separate domestic and international airlines.
As a consequence, up to 100% foreign ownership is possible so that today its share register is dominated by three overseas airlines; Etihad Airways, and Singapore Airlines with 20% each, Air New Zealand with 23% plus Richard Branson’s Virgin Group’s 10%. This clearly gives Qantas’ rival a huge advantage when it comes to raising new capital and could also fund a serious fare discount war.
Currently Qantas appears to be holding its market share, at least domestically.
Alan Joyce is lobbying the Federal Government, with the argument that Virgin is no longer an Australia company and should, therefore, no longer be entitled to the benefits, under the Air Navigation Act, of access to overseas destinations. Even the unions, who have long been at odds with the Qantas management, are supporting Alan Joyce.
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I almost dropped my glass of wine. The Qantas CEO, Alan Joyce, has enlisted the support of the airline’s employees, writing to all 35,000 asking them to lobby their local federal MPs. The confrontational head of Australia’s national flag carrier has, reportedly, even turned to the unions for assistance in his message to Canberra.
This is the same CEO who has been aggressively sending jobs overseas and cutting maintenance staff for as long as one can remember. In his blind pursuit of cost-cutting, invariably at the expense of employees, rather than management, he even unilaterally shut down all flights worldwide for 24 hours. To hell with the passengers, sorry, “customers”.
Sadly, it appears on this occasion, Joyce may have a genuine case to put to the new federal government. The two pieces of legislation which limit foreign ownership are a vital safeguard to ensure the flying red roo remains in majority (i.e. 51%) Australian ownership. The brand is estimated to be worth at least 1.3 billion dollars, out of a total 2.5 billion dollars market value. But I still find it somewhat ironic that, when the chips are down, the Qantas head has turned to the very people he’s been antagonising since his appointment as CEO.
What do you think? Should the government act to ensure Qantas is not subjected to unfair competition from Virgin? Should the 49% cap on foreign ownership of Qantas be lifted?
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