Qantas moves to quash misleading reports

20th Dec 2006

The Chief Executive Officer of Qantas Airways, Mr Geoff
Dixon, has said that much of the speculation and comment surrounding the proposed
takeover of Qantas was wrong and, in some cases, deliberately misleading.Mr Dixon said that any proposed ownership change for Qantas needed informed debate
and needed to take into account the market in which Qantas operated.
“The international aviation market is grossly distorted by government ownership and
financial support for airlines and airports.
“In this context, Qantas is one of the least protected airlines in the world and it is fanciful in
the extreme to suggest otherwise.
“It is also laughable to see some editorial writers and commentators, in particular, calling
for more competition for Qantas from city states and countries that skew all their aviation
assets for national purposes,” he said.
Mr Dixon said many of those making near hysterical statements now were the same
people who had opposed just about every change Qantas had made since privatisation 11 years ago.
“They are, of course, supported by the usual gaggle of monopoly airport providers in
Australia and the government owned and supported carriers such as Singapore Airlines.
“If Qantas had not fought for its position against such blatant self interest and if we had not
changed work practices, attacked inefficiencies and invested billions of dollars on product
and service, we would be a much diminished airline now and Australia would be much the poorer for it,” he said.
Mr Dixon said Qantas had for many years and, increasingly so since its privatisation,
maintained a “social compact” with the Australian community.
This had, among many things, involved:
-  Qantas and government working together to achieve balanced outcomes for Australia
in the regulatory system that provided market access for airlines worldwide;
- Qantas making significant compromises in restructuring its various businesses to keep
jobs in Australia;
-  Qantas providing extensive financial, operational and people resources in times of
crisis, from Cyclone Tracy some 32 years ago to the collapse of Ansett, the Bali
bombings and the Asian tsunami in more recent times; and
-  Qantas support, year in and year out, for large and small charitable, cultural and
sporting organisations.
Mr Dixon said this sense of responsibility to Australia was a core part of Qantas’ DNA and
would not change under what would remain majority Australian ownership if the bid for
Qantas by Airline Partners Australia was successful.
“We acknowledge that Qantas’ iconic status means people, in particular legislators and
regulators in Canberra, have a genuine interest in the leadership and future of the
“This genuine interest should not be overshadowed by the noise from the self-interested
and ill-informed,” he said.
Mr Dixon said it was important to put some facts on record about the misleading
speculation on the following issues:
Qantas Remaining Australian
“Airline Partners Australia’s proposal would see Qantas continuing to be Australia-based,
majority owned and effectively controlled by Australians,” Mr Dixon said.
“It will continue to be Australia’s national carrier and one of the primary ambassadors for
the country overseas. It is completely wrong to suggest that would change.”
Open Skies
Mr Dixon said the call for Open Skies by Brisbane and Melbourne Airports and certain
government owned and supported competitors was breathtaking in its hypocrisy. It
ignored the realities of the situation, namely:
  The most protected and privileged positions in Australian aviation are held by the
unregulated monopoly airports that have increased charges by between 50 per cent
and 228 per cent over the past six years.
  As revealed in the Productivity Commission’s recent review of price regulation of airport
services, charges in Brisbane in 2005 exceeded those of airports such as Bangkok,
Singapore, Hong Kong, Kuala Lumpur and Dubai where Qantas’ major international
hub-based competitors reside.
  Since 2000, the Qantas Group has increased international seats departing from
Brisbane by 73 per cent and from Melbourne by 24 per cent.
  The aviation policy settings that the Australian Government announced in February this
year, including the decision to not allow Singapore Airlines access to the trans-Pacific
route, weighed the interests of consumers, exporters, tourism stakeholders and foreign
airlines and the economic and strategic benefits flowing from an Australia-based
aviation industry.

  Australia is already one of the most liberalised aviation markets in the world, with 43
international carriers flying in and out each week.
  All United States airlines can seek to operate on the trans-Pacific route. Four airlines
are expected to be providing direct services between Australia and the US within two
years and four more already providing one-stop services—hardly the protected route
that some people like to suggest.
  Open Skies is a distant goal in an industry that continues to operate under a bilateral
air rights system, and Australia cannot unilaterally establish global open skies.
  Qantas is not allowed to fly on many routes including Shanghai-London and New York-
London. It is capacity constrained on many more routes, including Singapore-Paris,
and Hong Kong-London.
“Rather than blaming Qantas for the shortcomings of their airports, Brisbane and
Melbourne Airports would be better placed to attract customers by offering more attractive
prices and improving their current service standards,” Mr Dixon said.
Sydney Airport
Mr Dixon said the suggestion that Qantas might get favourable treatment from Sydney
Airport due to the less than 15 per cent equity stake Macquarie Bank would hold in Qantas
under APA’s proposal was wrong.
“From our experience the owners of Sydney Airport, including various Macquarie
infrastructure funds, are solely interested in the performance of the Airport and not its
major client, Qantas. This will not change due to Macquarie Bank’s limited interest in
Qantas,” he said.
“This position is very different to that of our hub-based competitors in Singapore, Dubai,
Bangkok and Kuala Lumpur where the Government owns both the Airport and the Airline.
“Our approach to dealing with the unregulated monopoly airports, including Sydney
Airport, will not change as a result of the proposed transaction. Sydney Airport is currently
seeking special leave to appeal to the High Court to overturn the declaration of domestic
aeronautical services under Part iiiA of the Trade Practices Act. Qantas will again
vigorously argue that Sydney Airport should be declared at the High Court.”
Mr Dixon said Qantas could not stand still as competitors around the globe aggressively
restructured their businesses.
“United States legacy carriers are transforming their cost structures under Chapter 11
bankruptcy protection, consolidation is also occurring at pace in the United States, Europe
and parts of Asia, and many hub airlines enjoy the benefits of direct and indirect
government support, including common ownership of airlines and airports,” he said.
“We do not have some of the structural advantages that our competitors do, so we must
continually reinvigorate our business within our regulatory and policy framework to ensure
we remain competitive.

“Change has always been—and will continue to be—critical to Qantas’ success.
“Our track record of outstanding customer service, investment and growth speaks for
Frequent Flyer Program
“The Frequent Flyer Program is a strong, viable program prized by our most valuable
customers and a critical contributor to the company’s success,” Mr Dixon said.
“Some people are trying to draw a parallel between a change of ownership of Qantas and
Ansett’s collapse. That is wrong—we are not broke and we will not go broke.
“We will not take people’s points away from them. It is in our interests to make sure the
Program is as strong as it can be.
“Like any area of our business, we will continue to review the program to make sure it is
providing benefits that our customers want and operating well for us—that is no different to
what we have done for many years.”
Full Service
“Our full service operations, under the Qantas brand, are a key driver of the Group’s
profitability, with excellent positions in the domestic market and in key international
markets,” Mr Dixon said.
“As we have stated repeatedly, our two-brand strategy is about ensuring a strong future for
our full service brand, while adding a value-based airline that is better suited to some
“Qantas is one of the world’s leading premium carriers, ranked number two globally for
customer service for the past two years in the benchmark Skytrax customer survey. We
have achieved this because we have continued to invest in the business through one of
the more turbulent periods in aviation history.”
Regional Services
“Our extensive regional network, operated by QantasLink, provides an important
competitive advantage for the Group,” Mr Dixon said.
“QantasLink has invested in new, larger aircraft, providing a 17.5 per cent increase in
capacity last year with further growth this year.
“We are committed to regional Australia.”
“Jetstar is the only value-based model established by a full service airline to have reported
profits for two straight years since start-up. Last month, it became the first long haul
international value-based airline,” Mr Dixon said.

“We are aggressively expanding Jetstar to provide profitable growth in markets that are not
economic with the Qantas product and cost structure.”
“We have undertaken an extensive review of our engineering operations over the past
year, with the aim of achieving globally competitive costs and efficiency,” Mr Dixon said.
“Rather than take the easy option of moving large parts of our maintenance activities
offshore, we are well advanced on strategies to restructure our wide-body and narrowbody
heavy maintenance operations within Australia and have already moved closer to
world best practice efficiency.
“This maintains a skilled jobs in Australia.
“If we get this right, we will have the opportunity to bring maintenance of aircraft that are
now offshore back onshore.”
Qantas’ commitment to ongoing cooperation and support (when requested) to the
Australian Defence Forces is total, ongoing, and always will be.


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