Transcript of Interview, Sky News AM Agenda with David Lipson



05 March 2014

Qantas Sale Act changes,
Second Sydney airport

David Lipson: Now to my interview with the Deputy Prime Minister, Warren Truss. I spoke to him earlier about reports in this morning's papers that the Coalition and Qantas are at war, and also further details about exactly how the Government came to refuse the debt guarantee for Qantas.

[Excerpt begins]

Warren Truss, thanks for your time. Is the Government at war with Qantas?

Warren Truss: Well, we want to help Qantas. We believe Qantas is a very, very important part of Australia's aviation infrastructure. It's vital for the future of our country. We're in there to help them.

David Lipson: The Qantas board put out a statement right in the middle of the Cabinet meeting saying that the carbon tax wasn't having a big impact on the company, and the Prime Minister says that the company can flourish if it has strong management. How is the relationship been allowed to sour so much?

Warren Truss: Well, we've been a bit surprised at some of the comments that Qantas has made; clearly an airline that doesn't think $106 million off its profit line, its cost of the carbon tax, is important must be in very good financial shape. The carbon tax is a burden on all Australian airlines. Virgin are complaining about it, Rex are complaining about it, people in the private sector with aviation are complaining about it, and Qantas has been very forthright in complaining about it when explaining why they have had these losses, so the statement was a surprise.

David Lipson: And so did that statement play into Cabinet's final decision as to Qantas, if you say they weren't in such trouble after all?

Warren Truss: Well, we had some due diligence on Qantas's financial position, and our advice was that it remains a strong company. It's got substantial cash reserves, it's got valuable assets like its frequent flier program, and aircraft and terminal buildings, and of course the great name that Qantas is. Those are all still very important assets that will hold the company in good stead in the years ahead.

David Lipson: What was the extent of that due diligence?

Warren Truss: Well, we engaged one of the leading companies to have a look, with the cooperation of Qantas, at its financial affairs, and clearly Qantas has been open about that request. It is obliged to report to the stock exchange and to its shareholders on a regular basis about its financial affairs, and so I guess there were no surprises in that regard. But it certainly does confirm that Qantas has got substantial assets, but like Virgin, with the current capacity war that's going on, they're bleeding cash. This has been a costly exercise for both of the airlines, as they put more seats on the routes, where they upgrade their product. The passengers are doing well and really feeling very pleased about the aviation experiences that they're having in this country, but it is, at this stage, costing the airlines quite a bit of money.

David Lipson: The changes to the Sales Act that you want are, well, they appear doomed in the Senate. The Labor Party, the Greens, Clive Palmer, all lining up against them. Why is there no plan B from the Government?

Warren Truss: Because what we're proposing to do is the best thing to do. It's what Qantas have asked for, it gives them a level playing field, gives them the opportunity to compete fairly and squarely with other airlines in this country, and to be a strong carrier. What it does is it puts in place arrangements for their international arm that are the same as other airlines operating as Australian-designated carriers. Namely, it'll still have to have 51 per cent Australian ownership. It'll still have to have its board and office and all those kinds of things located in Australia. When it comes to the domestic arm, it'll have the same freedom as other airlines as to what its shareholding will be.

Bear in mind, Virgin and Rex and Skywest and many other Australian airlines have been 100 per cent foreign-owned at times, and while they were 100 per cent foreign-owned, they still employed thousands and thousands of Australians. It is not possible to run a domestic airline with crew being flown in from other parts of the world, with people who have got foreign nationalities. You know, it's not just the aviation law that companies in Australia have to abide by, but it's also our fair work laws, our Migration Act, our Companies Acts, our Air Navigation Act, et cetera. All of those sort of things place criteria on all airlines operating in Australia, and they will continue to apply to Qantas irrespective of what its shareholding might be.

David Lipson: That's all very well, and you may well win the debate in the public arena over what is best for Qantas—the Sales Act, as you say, but the political reality means that you won't get it through the Senate, so are you comfortable with that dead lock remaining, and no help being extended to Qantas in the meantime?

Warren Truss: Well, I'm not comfortable about their being a deadlock, and I just hope that the Opposition and other parties in the Senate will realise that this is the best thing to do for Qantas. I'm sure they love Qantas the way we love Qantas. And we want that airline to be prosperous and successful in the future, and this is the best way to achieve that. And I think as they do their due diligence, as they look at what the options might be, they will also come to the conclusion that this is the best way forward.

David Lipson: So will the Government seek to pass amendments to form some sort of compromise, if it is blocked?

Warren Truss: Well, this is very simple legislation. It's only going to be, you know, a few lines long. So I don't imagine that there's going to be terribly much potential room for amendments, which achieve this objective.

David Lipson: [Interrupting] I suppose I'm pointing towards the 25 and 35 per cent restrictions on foreign airlines and single shareholders. Could that be a way forward with the 49 per cent restriction on overall foreign investment remaining in place?

Warren Truss: Well, the illumination of those two sub-conditions might be a help, but it won't make a fundamental difference. There's been no one knocking on the door at either of those barriers over recent times anyhow. So I think the reform needs to put Qantas on exactly the same playing field as Virgin operate now, and you need—you can only do that in the way in which we're proposing with our legislation.

David Lipson: And when can we expect that legislation? Is still by the end of this week?

Warren Truss: I hope we might be able to introduce it tomorrow. As I said, it's relatively simple legislation, but we still have to check the details sure that it's in the right space to go into the Parliament.

David Lipson: Sure. The Prime Minister met with Sydney MPs this week about Badgerys Creek airport, the potential airport there. When will a final decision be made on that?

Warren Truss: Well, we've indicated we will make that decision about where Sydney's second airport should be in our first term, and we're still on schedule to do that.

David Lipson: Can you give an indication of anything earlier? Perhaps by the end of this month, has been one suggestion?

Warren Truss: Well, there's been a lot of suggestions about when it will be, but you know, I don't expect it to be all that far away.

David Lipson: Okay. And what are the remaining considerations that you have to look at for that airport?

Warren Truss: Well, it's a substantial decision to be made. Once we identify a site, then the process starts about how we should—how it will be built. The current operators of Kingsford Smith Airport have that first right of refusal. It is about a 12 month process to negotiate whether or not they will be the builder for the new airport, or whether we need to go into an open market. But what we are looking at if we're going to make a... if the decision is made to build this airport in Western Sydney is not just a second airport for Sydney, this is about a plan for the west.

This is about a plan for ensuring that Western Sydney is able to achieve its potential; that there's jobs there, there's education and social opportunities in Western Sydney. It's an area that has a population of, you know, three million, going up and up and up, and any area of that size needs a range of facilities, like universities, like sports facilities, and the like; like an adequate road system and rail system, et cetera. But it really is the kind of population base that you'd expect to see an airport, and that is one of the other important pieces of infrastructure that communities of three  million people need.

David Lipson: Deputy Prime Minister, thanks for your time.

Warren Truss: You're welcome.