* How to junk an Australian airline -Senator explains .
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In a powerful speech , Senator Nick Xenophon (South Australia),raised deep concerns about the running of the national carrier , Qantas. At 90, Qantas, he said , was the world's oldest continuously running airline, an iconic Australian company,its story woven into the story of the nation (especially the Northern Territory.)
Qantas , he told parliament , was being deliberately trashed by management in the pursuit of short-term profits and at the expense of its workers and passengers. For a long time, Qantas management had been pushing the line that Qantas international was losing money and that Jetstar was profitable.
It was imperative to expose those claims as misinformation. Qantas had long been used to subsidise Jetstar in order to make Jetstar look profitable and Qantas appear a burden. He spoke of detailed allegations of cost-shifting obtained from within the Qantas Group.These set a pattern that where there was a cost to be paid, Qantas paid it , and when a profit was to be be made, Jetstar made it.
To understand that, the senator said you needed to go back to the days when Qantas was privatised. The Qantas Sale Act 1992 imposed a number of conditions, which in turn created a number of problems for any management group that wanted to "flog off" parts of the business. Basically, Qantas had to maintain its principal place of operations here in Australia, but that did not stop management selling any subsidiaries- hence Jetstar.
Qantas had systematically built up the low-cost carrier at the expense of the parent company. Senator Xenophon continued : “ I have been provided with a significant number of examples where costs which should have been billed back to Jetstar have in fact been paid for by Qantas. These are practices that I believe Qantas and Jetstar management need to explain.
“For example, when Jetstar took over the Cairns-Darwin-Singapore route, replacing Qantas flights, a deal was struck that required Qantas to provide Jetstar with $6 million a year in revenue. Why? Why would one part of the business give up a profitable route like that and then be asked to pay for the privilege?
“ Then there are other subsidies when it comes to freight. On every sector Jetstar operates an A330, Qantas pays $6200 to $6400 for freight space regardless of actual uplift. When you do the calculations, this turns out to be a small fortune. Based on 82 departures a week, that is nearly half-a-million dollars a week or $25½ million a year.
“Then there are the arrangements within the airport gates. In Melbourne, for example, my information from inside the Qantas group is that Jetstar does not pay for any gates, but instead Qantas domestic is charged for the gates. My question for Qantas management is simple: are these arrangements replicated right around Australia and why is Qantas paying Jetstar's bills?
“Why does Qantas lease five check-in counters at Sydney Terminal 2, only to let Jetstar use one for free?” he asked . There were other areas reported to him where Jetstar’s costs “magically” become Qantas's costs, including bearing the legal department costs and Jetstar pocketing rebooking on Qantas flights.
Given these extensive allegations of hidden costs, it would be foolish to take management's word that Qantas international was losing money, he added . To explain why Qantas wanted to make it look like Qantas International was losing money, he recalled the failed 2007 private equity bid by the Allco Finance Group to buy the airline . However, what was happening now effectively a strategy of private equity sell-off by stealth.
It worked this way ... Qantas had to be kept flying to avoid breaching the Qantas Sale Act but that did not stop moving assets out of Qantas and putting them into an airline that you own not controlled by the Qantas Sale Act. Then the figures were worked to make it appear as though the international arm of Qantas was losing money.
This was used to justify the slashing of jobs, maintenance standards and employment of foreign crews and, ultimately, the creation of an entirely new airlines to be based in Asia and which would not be called Qantas. The end result? Technically ,Qantas would still exist, but it would end up a shell of its former self and the Qantas Group would end up with all these subsidiaries it could base overseas using poorly paid foreign crews with engineering and safety standards that do not match Australian standards. In time, if the Qantas Group wanted to make a buck, they could “ flog these subsidiaries off ” for a tidy profit. NOTE : If there are any aviation reporters in Darwin , they could ask Qantas for an explanation about the annual $6million payment Qantas has to make to Jetstar for giving up the Cairns-Darwin-Singapore run. The NT Government should also examine this matter very closely as it has implications for the Territory .
Qantas , he told parliament , was being deliberately trashed by management in the pursuit of short-term profits and at the expense of its workers and passengers. For a long time, Qantas management had been pushing the line that Qantas international was losing money and that Jetstar was profitable.
It was imperative to expose those claims as misinformation. Qantas had long been used to subsidise Jetstar in order to make Jetstar look profitable and Qantas appear a burden. He spoke of detailed allegations of cost-shifting obtained from within the Qantas Group.These set a pattern that where there was a cost to be paid, Qantas paid it , and when a profit was to be be made, Jetstar made it.
To understand that, the senator said you needed to go back to the days when Qantas was privatised. The Qantas Sale Act 1992 imposed a number of conditions, which in turn created a number of problems for any management group that wanted to "flog off" parts of the business. Basically, Qantas had to maintain its principal place of operations here in Australia, but that did not stop management selling any subsidiaries- hence Jetstar.
Qantas had systematically built up the low-cost carrier at the expense of the parent company. Senator Xenophon continued : “ I have been provided with a significant number of examples where costs which should have been billed back to Jetstar have in fact been paid for by Qantas. These are practices that I believe Qantas and Jetstar management need to explain.
“For example, when Jetstar took over the Cairns-Darwin-Singapore route, replacing Qantas flights, a deal was struck that required Qantas to provide Jetstar with $6 million a year in revenue. Why? Why would one part of the business give up a profitable route like that and then be asked to pay for the privilege?
“ Then there are other subsidies when it comes to freight. On every sector Jetstar operates an A330, Qantas pays $6200 to $6400 for freight space regardless of actual uplift. When you do the calculations, this turns out to be a small fortune. Based on 82 departures a week, that is nearly half-a-million dollars a week or $25½ million a year.
“Then there are the arrangements within the airport gates. In Melbourne, for example, my information from inside the Qantas group is that Jetstar does not pay for any gates, but instead Qantas domestic is charged for the gates. My question for Qantas management is simple: are these arrangements replicated right around Australia and why is Qantas paying Jetstar's bills?
“Why does Qantas lease five check-in counters at Sydney Terminal 2, only to let Jetstar use one for free?” he asked . There were other areas reported to him where Jetstar’s costs “magically” become Qantas's costs, including bearing the legal department costs and Jetstar pocketing rebooking on Qantas flights.
Given these extensive allegations of hidden costs, it would be foolish to take management's word that Qantas international was losing money, he added . To explain why Qantas wanted to make it look like Qantas International was losing money, he recalled the failed 2007 private equity bid by the Allco Finance Group to buy the airline . However, what was happening now effectively a strategy of private equity sell-off by stealth.
It worked this way ... Qantas had to be kept flying to avoid breaching the Qantas Sale Act but that did not stop moving assets out of Qantas and putting them into an airline that you own not controlled by the Qantas Sale Act. Then the figures were worked to make it appear as though the international arm of Qantas was losing money.
This was used to justify the slashing of jobs, maintenance standards and employment of foreign crews and, ultimately, the creation of an entirely new airlines to be based in Asia and which would not be called Qantas. The end result? Technically ,Qantas would still exist, but it would end up a shell of its former self and the Qantas Group would end up with all these subsidiaries it could base overseas using poorly paid foreign crews with engineering and safety standards that do not match Australian standards. In time, if the Qantas Group wanted to make a buck, they could “ flog these subsidiaries off ” for a tidy profit. NOTE : If there are any aviation reporters in Darwin , they could ask Qantas for an explanation about the annual $6million payment Qantas has to make to Jetstar for giving up the Cairns-Darwin-Singapore run. The NT Government should also examine this matter very closely as it has implications for the Territory .
