Transcript of Interview, 7:30 with Sarah Ferguson

Interview

WTC001/2014

04 March 2014

Qantas Sale Act changes

Infrastructure Minister Warren Truss says the Government can't be a bottomless pit and businesses like Qantas must be able to stand on their own feet.

Sarah Ferguson: Earlier I spoke with Deputy Prime Minister Warren Truss in Canberra.

Warren Truss, welcome to 7:30.

Warren Truss: Good evening.

Sarah Ferguson: Now, recently you said that putting up legislation to change the Qantas Sale Act would be simply a waste of time and political energy. What has changed?

Warren Truss: Well, I was pessimistic then that the Government could be, that the Opposition could be persuaded to vote for this kind of legislation, even though it was quite clear that there does need to be changes made to give Qantas an opportunity to compete fairly in Australia.

Sarah Ferguson: But nothing has changed since then?

Warren Truss: Well, since that time a number of things have changed. Qantas’ credit rating has been downgraded twice. They've clearly got issues now in raising of capital, etc. And, of course, they've announced a very disappointing half-yearly return. So the situation in Qantas has deteriorated and that should create a sense of urgency also in the Parliament to address the issue and to address it in the best possible way, to give Qantas the opportunity to compete fair and square on an even playing field with their competitors in Australia.

Sarah Ferguson: But to take your word, Mr Truss, you were the one who said there's no point progressing legislation that cannot proceed and the Senate has made it clear, the numbers are clear in the Senate that it's not going to happen?

Warren Truss: Well then, those Senators who want to oppose this measure need to have some kind of a better alternative that's going to actually deliver this kind of an outcome for Qantas.

The idea that we would continue to subsidise Qantas and have it compete with Government subsidies against other airlines, is simply unsustainable. That would be very unfair to Virgin and Rex and every other operator in this country.

Sarah Ferguson: But if vast amounts of time and political energy are expended, really only for the legislation to be blocked in the Senate, what purpose will it have achieved?

Warren Truss: Well, we want this legislation to pass. We believe that this is the best option for Qantas, it's the best option for the future of aviation in Australia and we will continue to pursue it.

Sarah Ferguson: It makes me wonder whether this is really more about spelling out the Government's philosophical position, rather than actually helping Qantas. Is that the case?

Warren Truss: Well, we want to deliver the best result for Qantas. This is the issue that's confronting us at the present time. We would hope to deal with it consistent with our philosophical and political direction, but what we are about is trying to find the best future possible for Qantas.

Sarah Ferguson: But you accept it's not likely to pass. You've also acknowledged the need that Qantas has right now is urgent. You've also said there is no plan B. Is it literally true there is no other option for Qantas now?

Warren Truss: Well, any other option is inferior. It leaves Qantas with an either an unlevel playing field or some access to endless amounts of Government funding, which puts other airlines then at a clearly strategic disadvantage.

Sarah Ferguson: You've been briefed by Qantas. How long do you think they can last with the situation as it is currently?

Warren Truss: Well, Qantas has substantial financial reserves, cash available, substantial assets, things like its frequent flyer program, its aircraft fleet terminals and the like and, of course, the great brand name that is Qantas. Those are all very valuable assets and I don't think Qantas is in any imminent risk of failure. It's also important…

Sarah Ferguson: And yet—sorry, excuse me for interrupting, but you did just say just a moment ago that you accepted that their need for a resolution was urgent?

Warren Truss: Well, I think Qantas need to go where they can and be able to trade in the best possible way.

It's also important to note that Qantas has a better credit rating than Virgin. They actually have a better credit rating than Delta and United, the two biggest airlines in the world. And so there's no doubt at all that they have a significant capacity to continue to be able to be very competitive.

But there has in Australia been a lot of extra capacity loaded into the market over recent times. That means that the load factors are down, the revenue is down and both Qantas and Virgin and, for that matter, other airlines have been bleeding as a result. And therefore there is a cash issue that all of the Australian airline operators will have to manage.

Sarah Ferguson: Let's just talk about what this would mean if you were to be eventually successful in achieving a repeal of the Qantas Sale Act. You accept that there will be consequences for jobs were there to be a majority foreign ownership of the domestic arm of Qantas?

Warren Truss: Well, I think that when you're running a domestic airline you need local staff to do that job. It's completely unthinkable that you would have staff being flown in from Beijing or somewhere else to run a service between Melbourne and Adelaide.

Sarah Ferguson: What about maintenance though?

Warren Truss: Well, Virgin is a company that may well have the structure that Qantas would be looking towards and Virgin does 75 per cent of its maintenance in Australia.

Sarah Ferguson: Can I just…I'm sorry, I do need to come in there because Virgin says that they actually complete 75 per cent of their maintenance in Australia, they don't do 75 per cent of their maintenance here. In fact, all of Virgin's heavy maintenance is done overseas. Do you expect that that's what we will see with Qantas, with those jobs going overseas?

Warren Truss: Well, Qantas is inevitably moving a lot of its maintenance overseas now. You can't maintain a maintenance facility in Australia for 747s, for instance, if you've only got eight or 10 in your fleet. If you've only got 12 380s, you can't service them in Australia.

But on the other hand, they're not going to fly their aircraft to Singapore or to some other place just for a grease and oil change. The reality is that the routine maintenance will continue to be done in Australia. That is the only practical option, regardless of where an airline may be owned.

Qantas will always be linked with Australia and, irrespective of whether some of its domestic operations are overseas-owned or not, the reality will be that Qantas will be an Australian icon, an Australian flag carrier committed to this country.

Sarah Ferguson: So just to go back to the first point: you are insisting that you're going to persist with putting up this legislation, despite the fact that it's going to fail and despite the fact you've already stated that that would be a waste of time?

Warren Truss: Well, we are pursuing the legislation because it is the best thing for Qantas. It gives it its best chance to have a robust and strong future.

Sarah Ferguson: Thank you very much indeed for joining us, Warren Truss.

Warren Truss: You're welcome.