Qantas needs to rethink government assistance

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August 23, 2020
qantas

There is probably a no more difficult job in Australian business today than running the country’s iconic and much-loved airline, Qantas.

In fact, airline network planning is virtually impossible yet the demands to support and rejuvenate the Australian economy and the tourism industry are relentless from both politicians and embattle businesses.

This week’s plea from Mr. Joyce for some clarity on opening Australian State borders so he can give more life to his airline is understandable but right now there is no clarity on anything, particularly when the actions of one or two send the state of Victoria into a multibillion-dollar coma with hundreds of deaths.

And that outbreak has spread north to New South Wales and now Queensland due to slow border closures.

And as much as Australians want to travel most are shuddering at the disaster that has unfolded in Victoria and further north.

READ: Qantas hits $2.70 billion of turbulence 

While Mr. Joyce rightly touts that 95 percent of Qantas’ 11 million frequent flyers want to travel, almost 90 percent of West Australians, where state’s Premier Mark McGowan’s hard border stance is the way to go.

This vexing dilemma underscores the need for more Federal support to preserve and support Qantas.

It would be a tragedy if more highly experienced staff were shown the departure lounge.

To June 30 Qantas had received A$515 million from the Government in various handouts and in the next financial year that amount will likely increase to about A$1.2 billion with JobKeeper (Federal wage assistance) extended to March.

By comparison, Germany’s Lufthansa is getting a massive €9 billion (A$14.8 billion) from the government which will become a 20 percent shareholder.

And that type of bailout is typical across the globe.

While Mr. Joyce says the airline can ride the ill winds of COVID-19 the question is how well will it be positioned compared to its international competitors at the end of next year as it’s currently burning through A$40 million a week.

 

Qantas
International flights will not re-commence till July 2021 says CEO Alan Joyce. Credit Richard Kreider

Will it be able to offer attractive fares to stimulate tourism and will it have the balance sheet strength to order much-needed new ultra-long-range A350s for the Sydney to London non-stop route and replace its aging 75-strong 737 fleet?

A sobering insight onto the challenges ahead is the airline’s recent A$500m share purchase plan which fell A$428m short due to the border shutdowns.

Another challenge will be a rejuvenated and potent Virgin Australia and the possibility that REX will acquire some 737s to operate on the golden triangle between Brisbane, Sydney, and Melbourne.

And with international borders closed Qantas says it will be July 2021 before it resumes overseas flights and US flights only after a vaccine is available.

While pride may temper Qantas’ desire to bring out its government begging bowl it’s time to rethink what help is needed if it is to preserve as much of Australia’s greatest company and its loyal staff as possible.