Are Australian airports safe?

Workers protested at all main airports on Tuesday over poor pay and conditions as a report shows low standards are impacting on aviation safety and security. Protests also took place around the world as part of a global day of action by airport workers.
Protesters demanded an end to forced part-time hours that sees workers rostered to work as few as three hours a day and just 60 hours a month. Coupled with this, low pay and split shifts are forcing some workers to sleep at airports.
“My work roster changes week to week. Sometimes you can do overtime but it has to be on split shifts,” ramp and cargo worker Bob Popovski told media at the protest. “Split shifts are a major concern for all of us. Sleep patterns and family life are affected. Job security is really bad.”
A TWU report to the Productivity Commission inquiry on airport regulation links the poor conditions to safety and security breaches. The report calls on the Federal Government to mandate that airports and airlines take responsibility for labour standards in their supply chains.
“When service providers bid for contracts, workers are rushed in and there’s not enough time to train them,” Popovski continued. “That’s where accidents happen and that’s our biggest concern.”
“Airports and airlines are engaged in a public war of words over who is ‘gouging’ from who, but it is airport workers who are the real losers. Beyond the shiny facades of our airports and outside the slick airline lounges, workers are struggling to pay bills and are even forced to sleep at work. High staff turnover rates and poor conditions are impacting on safety, security and services. Airports and airlines at the top of the supply chain are highly profitable and they must be held to account for this,” said TWU National Secretary Michael Kaine.
The TWU report shows some aviation companies have almost their entire workforce on part-time hours. At the same time profits for the main airports were over $2 billion in 2016-17, while Qantas Group made profits of $1.6 billion.
Glaring examples show the impact on safety and security. High turnover means staff without full security clearances are accessing secure areas of the airports; in Sydney airport there were 132 injuries among a staff of 324 over a one-year period; in Perth airport an Aerocare baggage handler forced to unload an aircraft alone allowed passengers onto secure airside to collect their own baggage. Overseas Jetstar cabin crew are working domestic routes with no training on how to board domestic aircraft and base pay as low as $100 per week.
The report also shows airports and airlines outsource much of their work to companies without any required labour standards.
“Billions of dollars in public money are being poured in to building airports and there should be a better dividend for the community than what is currently happening. Billions of dollars are also being poured into trying to make our airports more secure while poor labour standards are clearly affecting safety and security. The Federal Government must put a stop to the race to the bottom in aviation. It’s not just the workers that are at risk here. It’s only a matter of time before something gives and there are no second chances at 30,000 feet,” Mr Kaine added.
 
 
 

ACCC approves Qantas arrangements

The ACCC will re-authorise the Qantas Emirates alliance as well as allowing Jetstar’s Asian brands to coordinate.
Qantas and Emirates
The ACCC is proposing to grant re-authorisation to an alliance between Qantas Airways Limited and Emirates for a further five years.
The global alliance covers Qantas’ and Emirates’ air passenger and cargo transport operations. The ACCC first authorised the alliance in 2013 for five years.
“The ACCC considers that the alliance is likely to continue to result in a range of public benefits,” ACCC Commissioner Roger Featherston said.
“Combining the networks of Qantas and Emirates provides customers with access to more flights and destinations under a single airline code and improves connectivity.”
“Loyalty program members will also continue to benefit from the ability to earn and redeem points on both networks and use lounge access and other reciprocal benefits,” Mr Featherston said.
“However, the ACCC is concerned that the alliance is likely to significantly impact competition on one route, Sydney to Christchurch; Qantas and Emirates are the two major operators on this route and their only competition is from the Virgin Australia and Air New Zealand alliance.”
To address this concern, the ACCC proposes to impose a condition requiring the Qantas and Emirates alliance to provide the ACCC with regular reports on seats and passengers flown, fares and route profitability. The condition would also allow the ACCC, at any time, to set a minimum level of capacity on the route. For example, if these reports indicated that the alliance was limiting the number of seats on this route to raise airfares, the ACCC would require the alliance to add extra seats.
In 2013 the ACCC imposed reporting and capacity conditions on four routes between Australia and New Zealand. However, since starting direct services between Auckland and Dubai in March 2016, Emirates has withdrawn from the Sydney to Auckland route, and will withdraw from the Melbourne and Brisbane to Auckland routes in March 2018. The ACCC considers that the capacity conditions are no longer required on these routes.
The ACCC is seeking submissions from interested parties on its draft determination before making a final decision on whether to re-authorise the conduct and impose conditions. Submissions are due by 7 March 2018.
Jetstar
The ACCC has also decided to re-authorise the continued coordination of three Qantas Asian-based joint ventures: Jetstar Asia, Jetstar Pacific and Jetstar Japan.
The Jetstar joint venture airlines are also seeking to coordinate with their shareholding airlines Qantas, Japan Airlines and Vietnam Airlines, on passenger and cargo services within Asia.
The decision continues an ACCC authorisation made in 2013.
By coordinating, the Jetstar-branded airlines are able to operate as a single fully integrated organisation on matters such as flight scheduling, sales and marketing, and pricing.
“The ACCC considers that continuing this coordination should lead to public benefits, such as better products and services, and more convenient flight times for consumers,” Mr Featherston said.
“This conduct is likely to result in little, if any, lessening of competition. Our view is the joint venture airlines would be unlikely to compete directly with each other or their owners in the absence of the proposed coordination.”
The re-authorisation does not extend to allowing coordination between the owners of any of the joint venture airlines.

Transport union takes action against Jetstar

The Transport Workers’ Union will apply to the Fair Work Commission for good faith bargaining orders against Jetstar. The union is seeking the orders in response to threats by Jetstar that it would ground the airline, similar to the 2011 action of its parent company Qantas.

TWU National Secretary Tony Sheldon said: “The travelling public has a right to know that at Christmas time they are being used as pawns by Jetstar in how it treats its workforce. Hardworking aviation workers have a right to negotiate for better conditions without being threatened with being shut out of their jobs.”

TWU said Jetstar employees are the lowest paid workers directly employed by the Qantas group. After 12 months of negotiations Jetstar is still demanding an 18-month wage freeze; demanding workers be available for a six-day week without overtime; and refusing to bring job classifications into line with industry standards. 

“Aviation is an industry marked by the fact that 21 per cent earn below the poverty line of $863 for a couple with two children. Jetstar is owned by Qantas, a company which today forecast it will make up to $1 billion profit in the first six months of 2016. While its workforce are struggling to pay bills the company is paying its chief executive $12 million,” Sheldon said.

“Management have refused to constructively discuss our claims to ensure the workforce is able to earn a decent and fair wage. Jetstar’s tactics are more akin to the bargaining style of 18th century Victorian industrialists rather than a modern airline,” he added.

The TWU has written to Jetstar ahead of lodging an application to the Fair Work Commission today under the Fair Work Act 2009 which dictates that bargaining representatives must meet good faith bargaining requirements.

Qantas rises above turmoil

 
Qantas has announced a profit before tax of $288 million for the half-year to 31 December 2008, a 68.2 per cent decrease on the prior comparative period but still a healthy result compared to its competitors.
 
The company has also reaffirmed its full year profit before tax (PBT) outlook of around $500 million for the 12 months to 30 June 2009.
 
The chairman of Qantas, Mr Leigh Clifford, said that while Qantas was affected by the global economic downturn and the volatility in currency and oil prices, the group remained strong and profitable, benefiting from the structural flexibility of its two-brand strategy, its diversified portfolio of businesses, and prudent financial management.
 
“Our revenues have come under pressure, but through calibrating our network, stimulating demand through attractive pricing, maximising the performance of our diversified businesses, and restraining costs, we have achieved a very good result in challenging times,” he said.
 
The board declared an interim fully franked ordinary dividend of six cents per share, which represents a 54 per cent payout ratio.
 
At a glance:
  • Profit before tax of $288 million.
  • Net profit after tax of $216 million.
  • Revenue of $7.9 billion.
  • Earnings per share of 10.9 cents.
  • Cash balances on hand of $2.8 billion.
  • Interim fully franked ordinary dividend of 6 cents per share.
  • Three new A380s now in service.
Key drivers of the results were:
  • highly volatile prices – crude oil ranging from $US141 per barrel to $US34 per barrel;
  • the Australian dollar weakened by 31 percent against the US dollar;
  • Qantas Airlines was affected by a downturn in premium and international travel, with a decline in passenger revenue, and the impact of industrial disruption, but nevertheless produced a $199 million profit;
  • Jetstar continued to expand its network in Australia and internationally, increasing overall
  • capacity by 13.4 percent. Jetstar produced a $72 million profit before tax; and
  • in a volatile environment, the group’s effective financing strategies – encompassing operating cost management, fuel hedging and capital acquisitions – proved significant in containing costs.
 The chief executive officer of Qantas Mr Alan Joyce said Qantas was not immune from the challenges posed by current global economic conditions.
 
“The aviation sector is experiencing a high degree of volatility,” Mr Joyce said. “Numerous airlines have failed over the past year, while many are unable to produce profits and are at risk of becoming unsustainable.”
 
He said the Qantas Group is differentiated in the aviation industry by its high degree of structural flexibility.
 
“With two flying brands and a diversified portfolio of businesses, the Group has the scale and scope to respond rapidly to market developments and will be well-positioned to resume growth as soon as conditions improve.”
 
The group continues to hold a leading position in the domestic market, with 65 per cent share (as reported by the Bureau of Transport and Regional Economics for the year to date Nov08).
 
The group’s international market share was up to 30.1 per cent (BTRE) a 1.8 point increase on the prior year.
 
“The two flying brands of Qantas and Jetstar continue to give the group the strategic flexibility to calibrate routes, products and prices to meet and stimulate customer demand and produce the greatest return to shareholders,” Mr Joyce said.
 
He said Qantas Airlines continued to redefine premium airline standards with ongoing investments in fleet, product and service, including:
  • a $10 million Centre of Service Excellence, a state-of-the-art Qantas training facility, opened in January 2009;
  • Qantas now has three A380s in service and four more are expected by the end of 2009; and
  • the ongoing rollout of Premium Economy.
“Our low-cost, value-based airline Jetstar continues to be very important to the Group’s overall strategy, both in the domestic and international markets,” he said.
 
“Jetstar continues to replace Qantas successfully on some international leisure routes and grow new markets. With aggressive marketing and sustained market leadership on costs, Jetstar is now the fastest growing airline operating to and from Australia and is also now the major Australian carrier serving the Japanese, Thai, and Indonesian markets.”
 
Mr Joyce said Qantas had already responded to the downturn by significantly reducing planned capacity for the next 18 months.
 
“We will continue to monitor all our routes and make further decisions as necessary to protect our bottom line,” he said.
 
“We are accelerating initiatives to reduce costs in the short-term, while continuing to seek permanent efficiency improvements.”
 
The group also benefited from a portfolio of businesses which contributed to the diversification of earnings:
  • the Frequent Flyer Segment delivered a 20.8 per cent improvement in revenue on the prior half-year result. The relaunch of the Qantas Frequent Flyer program in July 2008, including new Any Seat Awards and a significantly enhanced Frequent Flyer Store, proved successful in increasing revenue and member appeal. In November 2008 a major alliance was also announced with national retailer Woolworths;
  • despite strong competition from lower cost freight options, Qantas Freight Enterprises continued to achieve revenue growth; and
  • July 2008 saw the merger of Jetset Travelworld Limited with Qantas Holidays and Qantas Business Travel to become the Jetset Travelworld Group, an integrated full service leisure and corporate travel business.
Qantas has separately announced an equity raising offer to shareholders.
 
Outlook
 
While fuel prices have eased over the past few months, the offset of weaker demand is mitigating these savings. In the current economic and competitive environment, cost savings have been passed on to passengers where possible, including via reduction of surcharges.
 
Qantas reconfirms that it expects 2008/09 PBT to be around $500 million. This remains subject to no further significant change in market conditions and fuel prices.
 
Group revenue
 
Total revenue for the half-year was $7.9 billion, an increase of $134 million or 1.7 per cent on the prior half-year compared to capacity growth, measured in Available Seat Kilometres (ASK), of 0.4 per cent.
 
Net passenger revenue including fuel surcharge recoveries decreased $45 million or 0.7 per cent to $6.4 billion. Traffic, measured in Revenue Passenger Kilometres (RPK), decreased by 2.4 per cent while yield improved by 1.2 per cent.
 
Other revenue categories increased by $179 million to $1.5 billion, primarily reflecting improvements in Frequent Flyer and Freight revenue as well as the profit on sale of Qantas Holidays.
 
Expenditure
 
Total operating expenditure increased by 13.4 per cent or $802 million to $7.6 billion, excluding depreciation and non-cancellable operating lease rentals. This was higher than the impact of capacity growth and inflationary price rises.
 
Employee-related costs increased by $219 million or 12.7 per cent. Wage and salary increases, as well as recovery from industrial action, contributed to the increased costs. The reduction in long term bond rates has had an adverse impact on employee benefit provisions. Redundancy costs totalled $55 million, with approximately 1,000 managed redundancies affected or announced during the half-year.
 
Total fuel costs of $2.2 billion for the half-year were $486 million, or 28.5 per cent, higher than the previous half-year. The underlying into-plane fuel price was 40 per cent higher, increasing costs by $536 million. Hedging benefits reduced the impact of higher market fuel prices by $179 million, resulting in a net fuel price increase of $357 million. Unfavourable foreign exchange rate movements increased fuel costs by $151 million. Fuel costs would have been $38 million higher had it not been for fuel conservation initiatives delivered under Sustainable Future Program.
 
Aircraft operating variable costs increased $188 million or 13.7 per cent to $1.6 billion, reflecting increases across all categories, particularly in engineering heavy maintenance as the group focused on reducing maintenance backlogs and improving on-time performance.
 
Depreciation and non-cancellable operating lease rentals decreased by 13.8 per cent or $106 million as the prior half-year included higher accelerated depreciation on various aircraft. Net financing income decreased by $9 million due to a lower interest rate environment.
 
Future (open) hedge positions resulted in ineffective accounting expenses of $1 million due to timing differences from the recognition of future hedge instruments under Australian accounting standards. This compared to ineffective derivative expenses on open positions of $33 million in the previous year.
 
The net effect of foreign exchange rate movements on overall profit before tax was a favourable impact of $163 million.
 
Qantas
 
Qantas which includes Qantas Airlines, QantasLink, Qantas Engineering and our Services businesses (Airports, Catering and Flight Training) achieved a PBT of $199 million. The result was a $637 million, or 76.2 per cent, reduction compared to the previous half-year and included $86 million profit on sale of Qantas Holidays, asset write-downs and provisions of $73 million. Passenger revenue decreased by $186 million to $5 billion, or 3.4 per cent, together with a 2.7 per cent decrease in seat factor to 80.1 per cent. This is reflective of the 2.0 per cent decrease in capacity from previously announced capacity cuts. Yield however improved by 1.9 per cent per RPK.
 
Net expenditure, excluding fuel, increased by $421 million or 9.2 per cent. Costs across the business were impacted the industrial action earlier in the half, especially in manpower, as well as other unfavourable impacts such as foreign exchange and a concentration in efforts on maintenance in aircraft operating variable costs.
 
Jetstar Brands
 
Jetstar Brands comprises Jetstar’s Australia-based operations, Express Ground Handling and Qantas’ equity investment in Pacific Airlines and Jetstar Asia.
 
Jetstar Brands achieved a PBT of $72 million, a 48.2 per cent decrease on the prior half-year. Passenger revenue increased by $111 million or 15.5 per cent. This was largely driven by a 13.4 per cent increase in capacity arising from the continued expansion of the Jetstar International network and the reallocation of routes from capacity cuts in Qantas.
 
Despite the capacity increase, seat factor decreased by 0.6 percentage point to 77.9 per cent while yields improved by 2.7 per cent reflecting the growth of international operations. Jetstar’s total expenditure cost per ASK increased 6.7 per cent to 7.5 cents. Excluding fuel and foreign exchange, unit costs reduced 2.4 per cent to 4.93 cents per ASK compared to the prior period.
 
Passenger volumes had increased 13.7 per cent compared to the prior half-year.
 
Qantas Freight Enterprises
 
Qantas Freight Enterprises (QFE) includes Qantas Cargo, Express Freighters Australia and the group’s equity investments in Star Track Express Holdings Pty Limited and Australian air Express Pty Limited. QFE has reported a PBT of $41 million for the half-year which is $5 million down on the previous comparative period. The result reflected a tough international operating environment offset by yield improvement initiatives.
 
Cash flow and balance sheet
 
Net cash held at 31 December 2008 was $2,831 million, a decrease of $79 million compared to 31 December 2007.
 
Cash flow from operations totalled $378 million, a decrease of $845 million or 69.1 per cent, primarily due to lower Earnings Before Interest, Taxation, Depreciation, Amortisation and Rentals (EBITDAR) by $668 million and working capital movements including reduced revenue received in advance and lower tax provisions.
 
Net capital expenditure totalled $1,380 million, up $562 million on the prior half-year, and included the purchase of the first three A380 aircraft, progress payments on A380, A330, A320, B738 and B787 aircraft, modifications, spares and related equipment. Proceeds from disposals increased to $373 million, up $361 million from the prior half-year, as a result of sale and lease back transactions.
 
Net cash inflows from financing activities totalled $845 million which included funding of aircraft purchases of $1,198 million offset by $139 million in dividend payments (reflecting $183 million cash conserved by the DRP portion of the final 2007/08 dividend), net debt repayments of $154 million and other financing activities of $60 million. The prior half-year included the repurchase of 91.1 million shares under the share buy-back.
 
In addition to cash held at 31 December 2008, Qantas had access to additional funding of $500 million in stand-by facilities.
 
Earnings per share (EPS) were 10.9 cents per share, a 65.5 per cent decrease compared to the previous half-year, reflecting the decline in net profit and the higher share base as a result of the 60 per cent participation in the DRP for the final 2007/08 dividend.
 
The gearing ratio as at 31 December 2008 adjusted for foreign currency impact on gross debt was 52 per cent compared to 47 per cent at 30 June 2008.
 
Interim dividend
 
An interim dividend of 6 cents per share represents a payout ratio of 54 per cent and an annualised fully franked dividend yield of approximately 6.5 per cent (based on the 31 December 2008 share price of $2.63). The interim dividend is payable on Wednesday, 8 April 2009 with a record date (books close) of Friday, 6 March 2009.
 
The Dividend Reinvestment Plan (DRP) was reinstated last year and will continue to operate.
 
 

Qantas revamps Asian structure

 
Qantas has constructed a new ownership structure for Singapore-based Jetstar Asia and Valuair to “provide a new platform for growth in line with its pan Asian growth strategy”.
 
The Qantas Group (Qantas) and the Singapore Company Westbrook Investments Pte Ltd (Westbrook) said it had acquired all shares in Orangestar Investment Holdings Pte Ltd (Orangestar), the previous ownership holding structure, via a new holding company Newstar Investment Holdings Pte Ltd (Newstar).
 
Westbrook, wholly owned by Mr Choo Teck Wong (Mr Dennis Choo), will have a 51 per cent shareholding in Newstar and Qantas will hold the remaining 49 per cent. Mr Choo, a Singapore national and partner with the Qantas Group for more than two decades, has significant experience in the travel and tourism industry and will become chairman of Newstar. Jetstar chief executive officer Bruce Buchanan and Orangestar director Paul
Edwards will also serve on the board of the new entity. Ms Chong Phit-Lian will remain as chief executive officer of both Jetstar Asia and Valuair.
 
Qantas chief executive officer Alan Joyce said the change in shareholder structure would see Jetstar Asia and Valuair more closely align with Jetstar’s Australian operations and provide a platform for the Jetstar brand to grow into more markets in the region in anticipation of more open skies across Asia.
 
“The new structure for Jetstar Asia and Valuair will provide a platform for growth and strengthen existing Qantas group services in Singapore,” Mr Joyce said.
 
“A unified and simpler shareholder structure and vision for Jetstar Asia and Valuair provides certainty for these airlines and greater commercial and operational alignment, achieving new synergies across the airlines.
 
“The airlines will continue to operate the same network with no impact on existing  employees, customers, flight bookings or supplier relationships.”
 
Mr Buchanan said coordination of Jetstar Asia, Valuair and Jetstar operations would provide better opportunities for customers by aligning their product offerings, while ensuring the highly efficient Jetstar business model is applied across each business.
 
Singapore nationals will hold the majority of board director positions in Newstar and its airline operations will continue to enjoy Singapore traffic rights.
 

Virgin to lose routes

Virgin Blue may soon join other airlines’ recent moves to cut services due to surging fuel prices.

With fuel costs remaining record high, the company has been forced to review some of its Queensland routes, a Virgin spokeswoman told the ABC.

She said that along with the reduction of its Gold Coast schedule, the airline is also considering introducing a luggage tax, as toughened security screening made it more costly to check-in luggage than it did to check-in people.

The Queensland Government is urgently injecting $4 million in tourism funding to alleviate the impact of reduced flight services announced by Jetstar and Qantas last week.

Amidst fears of a possible recession in its tourism industry, the mayor of Whitsunday Regional Council Mike Brunker told the ABC that it was better to increase fares than to have no flights available.

“Hopefully, Virgin is actually smart enough to do that and we’ll give Virgin the red carpet treatment when they come to the Witsundays,” he said. 

Virgin is expected to make an announcement on the charges and schedule adjustments this week.

AaE opens new freight handling facility in Melbourne

AeE domestic freight handling facility in Melbourne.

Australian air Express (AaE) has officially opened its new domestic freight handling facility at Melbourne Airport.

The $20-million facility at Tullamarine features a covered freight sorting, loading and unloading area of 12,000 sqm to allow more efficient freight handling practices.

At the opening ceremony, AaE chief executive Wayne Dunne said: “I have a tremendous sense of pride as I stand here today; pride because I have witnessed the collaboration from the whole AaE team to make the dream our reality.

“For AaE the success formula is simple: provide a quality, superior and reliable service which can adapt to our customers changing needs.”

The facility is equipped with an automated-sortation system, which has the capacity to sort in excess of 100,000 items of freight each day. It was designed to handle a range of different sized and shaped parcels, satchel, mailbags and tubs at the same time, combining monitoring technologies.

The project followed a comprehensive freight survey, which was analysed by experts at RMIT and AeE staff. A freight properties database was developed to profile freight quantities, arrival times and package types. 

AaE, a joint venture between Qantas and Australia Post, has exclusive access to over 500 daily Qantas and Jetstar passenger flights and its own dedicated freighter aircraft.

Qantas to slash international services

Following adjustments in its domestic services, Qantas has announced changes to its international services to manage the impact of soaring oil prices.

The airline’s chief executive officer Geoff Dixon said the cost of fuel had forced the company to restructure its business over the next two years.

“We have to look closely at each individual market, including the number of frequencies we operate and which of our flying businesses is better suited to serve those destinations,” Mr Dixon said.

The changes will most affect its services to Japan and South East Asia, with the withdrawal of its thrice-weekly Melbourne-Tokyo return services and a reduction in Sydney-Tokyo return services from this September, and the replacement of its 14 weekly Cairns-Tokyo services with a daily Jetstar non-stop service from this December.

To supplement the schedule changes, Jetstar would exit its Sydney-Kuala Lumpur operation to make an A330 aircraft available, and replace Qantas on the Perth-Denpasar and Perth-Jakarta routes.

Mr Dixon said the airline’s pilot base in Cairns would close, with around 40 pilots returning to Sydney or other bases, but maintain its existing cabin crew base in the location.

As a result of the international schedule changes, he said there would be a small number of job losses in Cairns and Japan, in addition to those flagged in last week’s announcement, and would also be managed initially on a voluntary basis.

Mr Dixon said : “Qantas had done everything possible to mitigate the effects of the schedule changes we have been forced to make.

“We will continue to work with individual markets and look for opportunities as conditions improve to address capacity issues and reinstate services where and when we can.”

Qantas-BA merger hits turbulence even before takeoff

Qantas.

Qantas is likely to continue the merger talks despite an overwhelming amount of scepticism.

Proudly-Australian airline Qantas’ merger talks with British Airways (BA) have generated hostile reactions, signalling a bumpy road ahead.

The merger speculation surfaced as BA revealed talks were underway to explore a potential merger via a dual-listed company structure, following Federal Transport Minister Anthony Albanese’s revelation that he’d allow foreign investors, including airlines, to take a stake of up to 49 per cent in Qantas.

Qantas, the world’s 10th biggest airline, also confirmed the negotiation, but said “there is no guarantee that any transaction will be forthcoming and a further announcement will be made in due course, if appropriate.”

Fuelled by the news, Qantas shares experienced a short-lived increase of nearly 10 per cent to $2.46.

The deal is expected to create a company worth more than $8 billion. While Qantas’ market value is somewhat higher than that of BA, it is understood the companies are considering taking a half each in holdings.

BA, which was forced to sell its considerable shareholding in Qantas when faced with choking debt, is also reportedly continuing merger talks with Spanish airline Iberia. The consolidation of the three carriers will create the world’s biggest airline, comfortably beating American Airlines.

The move is in line with the argument put forward by Qantas former chief executive Geoff Dixon, who has been making headlines regurgitating the need for consolidation as a survival option for the beleaguered airline industry.

It is also speculated the merger would encompass Qantas’ budget offshoot Jetstar and the freight division.

Australian, it is and will be

The foremost impediment to the merger process would be Qantas’ obligations under Australia’s international Air Services Agreements and the Qantas Sale Act, which stipulates a cap on foreign ownership at 49 per cent and total foreign airline ownership at 35 per cent.

The Act also demands the carrier’s main operational base and headquarters must remain in Australia, and it must be Australia-incorporated, with at least two-thirds of the Qantas board and the board chairman to be Australian citizens.

The Government was quick to denounce the deal, saying it would not stand by the proposal. 

“The Australian Government believes in an Australian-based and majority Australian-owned Qantas.

“At no stage as the Government indicated support for any proposal – in principle or otherwise,” Mr Albanese said in a statement.

The government went further, pre-emptively indicating it would not support any foreign mergers of other Australian airlines including Jetstar, V Australia and Pacific Blue, as well as all Australian international freight operators such as Heavy Lift Cargo, Tasman Cargo and Express Freighters.

Mr Albanese reaffirmed the Qantas Sale Act would remain unchanged except for the review of the additional ownership restriction, and stressed retaining national airlines was imperative for economic growth and national security.

“The Government is committed to growing a strong Australian-based aviation industry and Qantas is a key part of Australia’s aviation future,” he said. 

Dogged pursuit of consolidation

Despite facing a massive backlash, Qantas is likely to remain firm on its stance favouring consolidation with an aim to create a transcontinental airline.

Qantas made an attempt to merge with Malaysia Airlines earlier this year but the move was muddied by disagreement over management issues. 

According to media reports, the Australian airline also wants to join forces with Hong Kong carrier Cathay Pacific, a starter in the emerging Chinese market with a 20 per cent stake in Air China.

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