Dick Smith knows how to get people to think about difficult ideas, whether it is population and sustainability, or airline safety.
His argument, published in a Steve Creedy article in the Australian yesterday, that Qantas had no option but to shift everything it could to China, worked very well, considering it was up against the carbon tax and the News phone-hacking-scandal.
But did he mean it? Well, Yes, but he also meant it to encourage Australians to support the Australian icon, as he makes clear in this extract from an email to Richard Woodward, the vice president of the Australian and International Pilots Association, which is reproduced with Smith’s permission.
In my opinion Smith should also be encouraging Qantas management to support the national icon, instead of attacking it, by keeping it as Australian as possible, and coming clean on how much cross subsidisation of the Jetstar franchise is affecting the claimed dismal performance of the full service international brand.
This is not a question of saying Joyce is wrong about the outlook for international, it’s tough and that’s his job to deal with, but being able to get a full account of how much Jetstar gets by way of fuel, fleet, training and other costs would give everyone a much clearer picture.
As Smith well knows a Qantas that was set up in China, with its air traffic rights intact (somehow), would no longer be an Australian airline worthy of patriotic support, and that such significant employers of Australian aviation expertise as Emirates, Singapore Airlines and Cathay Pacific would take quickly take their share of what is left by an already diminished Qantas operation.
Nor is defeatism something Smith would ever truly endorse. His real argument appears to be against ‘open skies’ agreements, free trade deals and the dismantling of protection for Australian ventures in general.
When I asked if he would support the protection of Qantas at the cost of our mineral and agricultural exports on world markets, and China in particular, he said he wouldn’t.
Let us contemplate what would have happened if past governments had not liberalised international air services to the extent that they have. Halving the frequency of Emirates flights doesn’t mean all of those displaced passengers automatically fly Qantas. It means some of them would still fly Thai or Singapore Airlines because of superior networks and one stop flights to cities in Europe, for example, that Qantas hands over to British Airways at London to complete their journey via an additional time wasting and frustrating stop.
Nor does it automatically means that the non-Australian airlines would crank up their prices. But it would mean that developing non-UK centric markets in the middle East, Eastern Europe and Africa would be cut off. And more trade doors in terms of resources and agriculture would be if not shut, made harder to pass through.
Where does the solution lie? Surely not in defeatism or a village economy policy in Australia. If Qantas can’t exist without turning Chinese, or Asian, or whatever, then it won’t really be Qantas anyhow.
As an astute businessman Smith would, instead of recommending relocation, come out in favor of liquidation, which would be a much cleaner and more profitable death.
In his speech announcing the impending Qantas reorganisation to be announced on August 24, Qantas CEO Alan Joyce, referred to a cost advantage of up to 24 per cent being held by its full service competitors.
This is not an unclosable gap for an Australian carrier. In terms of capital costs Qantas has an advantage over its cheaper cost base competitors because of the strength of our currency. Both fuel and fleet cost less for carriers with AUD balance sheets than those in China, or the Middle East, but Qantas and Virgin Australia are disadvantaged without doubt by Australian taxes and depreciation rules. Generally speaking Australian pilots work in the UAE to make more money than they can in this country after tax, not less.
In the foreseeable future as China, Vietnam and eastern Europe and southern American nations become more prosperous, their costs also begin to rise, just as the size of their national demand for air travel and other goods and services grow.
Short term defeatism (and I’m sure Smith isn’t at heart a defeatist) would cost Australia longer term opportunities too awful to contemplate. That is why fairly negotiated agreements at Qantas to retain its standards of excellence in piloting and engineering are so badly needed, with a commitment to having highly trained Australian based pilots and engineers flying or servicing a truly Australian airline.