At this morning’s Senate committee hearing into two proposed bills that would affect Qantas, its CEO Alan Joyce and Jetstar group CEO Bruce Buchanan insisted that flying foreign cabin crew on domestic sectors was essential for the future of the budget brand.

However in the same session, Buchanan said the use of foreign flight attendants on ‘concentrated tag flights’ had ended, and although he had not been in touch with Immigration, he was confident the airline was in compliance with the immigration laws.

Tag flights is the term applied to those in which an aircraft operates a domestic sector to or from a city from which it also flies an inbound or outbound international sector, and they are used by many airlines worldwide, including Qantas, Cathay Pacific and United within Australia.

The difference in the case of Jetstar was that it wasn’t just operating one tag flight beyond the city of international arrival and departure but several purely domestic sectors with foreign cabin crew before it returned abroad.

Joyce began his appearance at today’s session by saying that without the foreign crewed domestic Jetstar flights the budget carrier would have to dump its Darwin and Cairns flights.

He also warned that in the broader context, the restrictions that would be placed on the operations of the Qantas full service and Jetstar low cost brand by the proposed legislation would force the Qantas group to choose between letting Jetstar fail within the confines of the Qantas Sale Act of 1992  or selling it to allow it to succeed outside of it.

Joyce said Qantas was faced with a situation where it was generating free cash flows of $1.7 billion a year with which to pay for an investment of $2.5 billion a year in new fleet, and having to borrow the $800 million difference.

Joyce made repeated references to the possibility of selling Jetstar during his testimony this morning.

The airline had to end the unsustainable losses it was experiencing on its international long haul routes on the way to lifting its ability to meet its capital expenditure commitments without additional finance,  or stop such investments,  risking a spiral into the costs associated with the maintenance and higher fuel bills of an aging fleet.

He told the hearing that achieving this required the flexibility to manage its business to take full advantage of new technology, changes in demand, and improved maintenance procedures that it would be denied under the proposed legislation, which would also unfairly apply to it but not other Australian or foreign competitors.

Joyce said that this flexibility included improved alliance or joint business ventures with other airlines, and a premium carrier based in Asia that would have the same ability to grow its franchise to the advantage of Qantas as its offshore Jetstar franchise, which currently comprises Jetstar New Zealand, Jetstar Asia(Singapore) and Jetstar Pacific (Vietnam) and the forthcoming Jetstar Japan venture.

Asked by independent senator Nick Xenophon, a proponent of the new bills with Greens leader Bob Brown, where he saw the Qantas/Jetstar relativities in the near future, Joyce said he hoped they would remain the same as they are today.

“I would like to see growth return to the Qantas international brand at the same rate as Jetstar is growing,” he said, but he conceded that Jetstar could continue to grow faster than the full service brands, and eclipse them, but that this would also be of benefit to the Australian economy.

Jetstar group CEO Bruce Buchanan, said the tag flying that was done predominantly from Darwin was critical to the continuation of regional services to both Darwin and Cairns, both domestic and international.

He said loss of foreign cabin crew on those tag flights “would make Jetstar unsustainable across a range of regional destinations.”

Buchanan also said that for an investment of around $200 million to date the Qantas group had secured 20% of the low cost carrier market in the Asia-Pacific at this stage, and Joyce said that there was an inverse relationship between the billions required for new aircraft in the Qantas brands and their profitability, in particular in international.

Joyce said “It could be possible for Jetstar to outpace Qantas, but where it is today no-one in their right minds would put any more money into Qantas international.”

He said his plan was to make Qantas international long haul break even within three years and start making its costs of capital within five years.

He reaffirmed the importance of the Asia based premium carrier in conjunction with Asia based stakeholders without giving any update on the plans.

In an overview of the major areas of Qantas long haul operations Joyce said Europe was losing money and its was talking to various airlines, including of course British Airways,  but that in North America Qantas was in a strong competitive position because of its strengthened relationship with American Airlines, now under reconstruction under bankruptcy protection.

He said Qantas domestic and Qantaslink, its regional brand, were performing strongly and had recovered completely from the effects of the industrial disputes of last year and the lock-out and grounding by which Qantas secured Fair Work Australia intervention to end protected industrial actions by the pilots, licensed engineers and ground staff.

During the hearing the art of Dorothy Dix questions appeared to come into strong play, or so it seemed to this observer, leading to long meandering dissertations about shearing sheds, the bankruptcy of established airlines, some of which occurred in the 80s, rural cost pressures, the impact of the strong Australian dollar and the failure rate of engines on twin engine aircraft, in which Joyce pointed out Qantas was experiencing only three per million hours of operations, compared to a world wide average of seven per million hours.