Transcript of Interview: Radio National Drive with Waleed Aly

Interview

BPC064/2014

28 August 2014

E&OE

Waleed Aly: Actually, it was $2.84 billion that was the headline loss for Qantas. A horrific result and far more than the already horrific result that was expected. To discuss this and other matters politics and infrastructure, I'm joined by Jamie Briggs, Assistant Minister for Infrastructure and Development. Thank you very much for coming in.

Jamie Briggs: Thank you for having me.

Waleed Aly: Who do you blame?

Jamie Briggs: Well, I don't think it's the business of government to be assessing commercial companies' outcomes. I think what you saw today was obviously a concerning set of numbers, but with a path forward. There were obviously some factors, some one-off factors that the Qantas group took into account today, which made those numbers look worse. The biggest one of those, of course, was the write-down in respect of some of their international fleet and that was obviously due to the time of purchase of some of those new planes, the dollar compared to what the dollar is today. And there's been an impact there. So, they've taken some decisions which means that their number looks worse today than what it probably is. But, nonetheless, they've still got challenges and the Government wants to see a strong and competitive Qantas, that's why we moved legislation earlier this year to free up Qantas for investment so it can compete in a global market and that's why we got rid of the carbon tax and that's $106 million off Qantas' bill each year.

Waleed Aly: Well, $106 million doesn't even begin to scratch the surface. I would've thought it's an irrelevance when it comes to the question of Qantas' commercial wellbeing. Why is Qantas losing this much money when Cathay Pacific—and these are other airlines that are subject to similar sorts of pressures, not least in New Zealand where they have a very high dollar at the moment? Cathay Pacific made $3.8 billion, Singapore Airlines $2.5 billion, Air New Zealand $358 million. What have they done wrong?

Jamie Briggs: Well, I don't run Qantas, and I'm not an airline financial expert, but what I think Qantas have been trying to do in the last couple of years is make some decisions to address the spiralling debt challenges that they had. Not dissimilar to the Government's challenges with the budget. But, in the end, what we see today, I think, is some positive signs for the future. We've got an indication they'll be back in profit early next year. They've made some hard decisions about how their business is structured. The Government's trying to help them with legislation to ensure that they can compete. We're trying to get rid of unnecessary regulations, we've abolished unnecessary taxes, and we are doing what we can from the regulatory side of things to ensure that Qantas has got the best conditions it can have to compete in what is a very challenging global airline environment.

Waleed Aly: But your analysis of why this has happened is important, isn't it, because either you think it's something to do with the regulatory environment in Australia or you think it's something to do with the way that it's run and whatever your answer is, take it totally opposite directions. So, if you think it's just the regulatory environment, can you detail specifically what changes you would make that could make Qantas turn around a $2.8 billion loss?

Jamie Briggs: Well, I think that's a simplistic analysis of what Qantas have gone through. They've got a high cost base as an airline compared to some of their competitors and they're trying to address that. And that's an issue they've been working…

Waleed Aly: Well, what does that mean?

Jamie Briggs: They've got legacy issues as far as the cost of running their business and they've been saying that for some years, not just with Alan Joyce in charge…

Waleed Aly: But, yeah, sure, I'm just trying to figure out what that actually means though.

Jamie Briggs: Well, they had an ageing fleet, which they've been addressed and buying new planes is not cheap. They've had a workforce which they've decided was too big for their requirements. They've had many sites across the country where they've decided to shut down and to make a more efficient operation for the business and they're changes they've made in the last couple of years. So, they're actions that Qantas have taken themselves. We don't run Qantas; it's a commercial private sector business that sets about running itself. But where we can impact undoubtedly is where there are taxes, unnecessary taxes, which affect their performance and $106 million is not to be sneezed at and that's been taken off their bottom line.

We are getting rid of unnecessary red tape, and we moved legislation earlier this year to free up Qantas to compete. Now, we got a version of that through at the end of the last sitting period. We would've liked it to be broader, that's what we introduced, but we took the decision, with the Labor Party not willing to have that discussion that we should get what we could and that was Qantas's view as well and that's what we did. So, the Government is trying to create the circumstances for Qantas to be successful and for Virgin for that matter to be successful, it's important that we have strong competition in our airline industry and that's what we think we've got.

Waleed Aly: So, Ingrid Stitt who's from the Australian Services Union has complained today that the airline doesn't have a plan for growth; it doesn't really have a plan to turn the result around. This is what she said.

[Excerpt]

Ingrid Stitt: What we see is more cuts and we don't think that's a sustainable position. We think that the board and the senior management of Qantas need to take responsibility for this result and there needs to be some drastic action at the top.

[End of excerpt]

Waleed Aly: And meanwhile the company, of course, is saying, well the unions are part of the problem here. Do you agree with that assessment and, if so, do you have any industrial relations responses?

Jamie Briggs: Well, I think Qantas has made their points about their industrial relations situation for some time; I think the CEO and their board and other members of Qantas have made the point that they haven't had a cooperative relationship with some of the unions and some of the unions seem intent on causing harm, rather than working with the company. But that is an issue for Qantas and the relevant unions, so I think…

Waleed Aly: You've cited that, though. Do you agree with that assessment? Because if you do, surely you need a legislative response on industrial relations.

Jamie Briggs: Well, not necessarily. Industrial relations is ultimately an issue which is sorted out between the parties. Governments don't decide the framework for the different businesses and the way they deal with their employees. We decide a broader framework on how you can negotiate in that sense, but Qantas will go through its negotiations with its workers from time to time, as it has been. Now, it was obviously a very public dispute three years ago where it ended up shutting down the airline because it became so difficult, so I do have sympathy for the situation Qantas has faced.

In saying that, we all want Qantas to be successful. Now, I think they fronted up today to their results. They've taken some hard decisions in respect of writing down some of their assets. It's obviously impacted on the overall number, but there are still some underlying challenges, particularly with the international arm of their airline, and they're the first to acknowledge that. I think we see some positive news in that the future they have been dealing with their debt issues. We welcome that. They look like they've got a path back to profit, which is important for them, and they look like they will continue to be a very successful and strong business that they have been for some time.

Waleed Aly: Just one other on matter on infrastructure, before I let you go, Jamie Briggs.

Jamie Briggs: Of course.

Waleed Aly: Have you seen this ad?

[Except]

Speaker: Romania, timeless home of (inaudible), dracula, fast horses, fast horse cars and a faster average internet speed than Australia.

Speaker: Australia's internet sucks.

[End of excerpt]

Waleed Aly: Funny ad. It does raise the NBN, though, and I note a report that came out from the Government today saying—sorry, yesterday I think it was—that the proposed NBN proposal is going to be good for the economy. I'm interested, though, in the assumptions because it seems to assume that our current internet usage is only going to go up incrementally, rather than evolve in a way that incorporates the internet into our everyday lives and so requires us to have much higher demand for internet speed.

Jamie Briggs: Well, I think Malcolm Turnbull's obviously working his way through the mess that was left to us. The report, which is the first cost-benefit analysis done—you know, there are those in the infrastructure debate who are jumping up on their high horse every day demanding cost-benefit analysis be done on nearly every project, the business cases are released as quickly as possible and…

Waleed Aly: Yeah, and it's great to have one, but it's only as good as the assumptions on which it's based, and these assume [indistinct]…

Jamie Briggs: Well, it's a very good point you make…

Waleed Aly: …usage compared to the way it's grown in the past.

Jamie Briggs: Well, I hope you have the same view on some of the road projects across the country as well.

Waleed Aly: Sure.

Jamie Briggs: At the end of the day, what we've done is we've gone into government, the NBN was a mess, and I point to not me saying that, not Malcolm Turnbull, but the Productivity Commission, the Independent Productivity Commission and its report on public infrastructure pointed to the NBN as the worst example in Australia's history of how not to do an infrastructure project. And so what Malcolm's been doing, in a very coherent and considered fashion, is working through how we roll this out appropriately and get the best value, not just for taxpayers but to drive the economy. Obviously Malcolm made this point very well today: if you purely built an NBN based on a cost-benefit analysis, you wouldn't extend it anywhere out of the city limits because it would never make economic sense in the country.

Waleed Aly: Sure.

Jamie Briggs: But what we want to do, of course, is have regional areas with the access to the best services we can get on what is a very wide land. At the end of the day, where there are real internet issues with people not being able to access reasonable speeds are generally on the edges of our cities and into our regional areas.

Waleed Aly: Alright, well, we'll have to see whether or not those assumptions ultimately stack up. It's going to be very interesting to see that unfold.

Jamie Briggs, I'm indebted to you for your time. Thank you very much for dropping by.

Jamie Briggs: My pleasure. Thanks for having me.

Waleed Aly: Assistant Minister for Infrastructure and Development.