Unions call for Qantas debt guarantee: don’t do it

My feeling is that is there is a sort of break in the weather for Tony Abbott when it comes to industrial relations reform.

It must be dawning on many people that government attempts to prop up companies simply generate rents that encourage high rates of unionisation and are mainly snaffled by workers, in the form of relatively high wages and conditions, and by unionists, in terms of control (in relation to contracting, part-time work, etc.) and perks (eg. trade union training leave, compulsory income protection insurance paid by companies paid to funds owned by trade unions).  They do not guarantee the survival of these companies.

So when the ACTU calls on the government to provide a debt guarantee for Qantas, it is pretty obvious what the government’s response should be.

“Tony Abbott can be the Prime Minister he said he would be and stick up for jobs by providing Qantas with a debt guarantee,” Mr Oliver said.

“The alternative is that Tony Abbott can deny Qantas a debt guarantee, throw the national airline into further turmoil and uncertainty and open the gates for Alan Joyce to sack even more workers.

“Australia is in the midst of a jobs crisis and it’s time the Prime Minister put his money where his mouth is and support Australian jobs.

“It is appalling that the Abbott Government has said that their ultimate goal is to change the Qantas Sales Act which they acknowledge will result in jobs going offshore.

“Unions call on the Abbott Government to support these workers by providing Qantas with a debt guarantee subject to a commitment from Qantas to protect workers against job losses and on the airline demonstrating they have a sustainable long term business plan which is not reliant on a spiral of job cuts.”

Here’s my theory of what the government will do (sequencing is everything):

  • Force the politics of changing the Qantas Sale Act, making it clear that Labor and the Greens are standing in the way of giving Qantas a chance at restoring profitability and acceptable returns (which, by the way, is the only way that jobs will be saved);
  • Observe the company ‘get its house in order’ (giving a debt guarantee would simply stall this process and egg on union resistance);
  • Consider other alternatives other than a debt guarantee.  Not that I am very keen on this idea, one option would be for the government offer to invest in a cheap rights issue to allow the company to raise capital, a similar offer that could be made to other airlines (Virgin Australia would presumably not be interested).
  • Yes, I know what you are thinking – isn’t this just part re-nationalisation? But if everyone is going to blather on about co-investment, I would rather the taxpayer actually be given some legal ownership of the company and, all going well, the shares can be divested in due course.
  • This strategy would overcome the issue of having to offer a debt guarantee to all airlines, which all of them would take up, of course.

Any thoughts?  Ideally, the company can really get its house in order so that the rights issue would not be needed, but it is coming from a difficult position.  Many of the EBAs have a way to run and so imposing a wages freeze will be technically difficult in the short term.

(And as for those commentators who point out that, after the lock out, the new EBAs contain 3 per cent per annum pay rises, but with no job security clauses, these were arbitrated outcomes, not negotiated outcomes.  After s423 of the act was used to terminate the industrial action (lockout), then arbitration was triggered.  This was seen as the least worst outcome by the company, rather than continue to bleed with the ongoing guerilla industrial action of the three unions.)

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29 Responses to Unions call for Qantas debt guarantee: don’t do it

  1. Ant

    And what sort of guarantees will Oliver and his union vandals be providing?

    Oh yeah, that’s right. It’s a big fat “UP YOURS” to QANTAS and taxpayers.

  2. Milton Von Smith

    What’s all this nonsense about “getting their house in order”?

    Enough is enough. Let Qantas fail and crush the unions.

  3. steve

    I’m afraid I see this from a very personal point of view. I have a small company, last year we went through a tough time. No one was spending, I had to live off my savings for quite a few months. No one tried to subsidise me, no one gave me four years advanced warning, no one tried to bargain with anyone. The work just stopped. So I ask myself, why these companies entitled to government help? Why are these workers entitled to government help? …….and the only thing that comes to mind is the huge union workforce……..and it doesn’t wash with me. I am now officially in this for myself and so I say with my hand on my heart……screw em all!!

  4. Squirrel

    A rights issue, or something of that sort, would surely be preferable to an open-ended debt guarantee, but with reports of Qantas having a cash stash of some $2bn, is funding really the problem? As discussed in Henry Ergas’ article in The Australian today, it seems to be about costs and a dogged fight for market share with a foreign government backed competitor.

    Unless Qantas can do truly miraculous things to its costs and/or get a foreign backer which thinks the Australian market is worth fighting for, much of what is currently being talked about is window dressing and delaying the inevitable.

  5. yackman

    Seems to me you have the sequence right Judith.
    You get the behaviours you reward, so the debt guarantee would reward the past IR and management culture and help perpetuate it.

  6. the sting

    You are right Steve.Now we have a great opportunity to put Australia back on course.It should be pointed out that all this money unions are calling for from the government is BORROWED .Australia has to face up to the truth ,that we cannot divorce ourselves from international competition and now is a great time with a huge government debt to say NO to all these rent seekers.I believe Australians can be just as innovative as anyone else but first we must get governments of all persuasions out of the way.The billions we have wasted on the car industry,carbon tax,renewable energy targets ,NBN etc.etc. just borders on criminal behaviour.Where would we be as a nation if we had not wasted all this money?

  7. Baldrick

    If Labor and the unions are calling for a debt guarantee then you know it must be in their own best interests.

    When has Labor or the unions done anything for Qantas to ensure its prosperity?

  8. To own shares in a business you expect that management will do all that is possible to look after your investment, Qantas management need to do just that, get rid of the 5000 jobs, starting with the most militant, services that are unprofitable should be cut back or scrapped, assets that aren’t core business should be sold, lobby the government to have the Qantas Act removed and the Carbon Tax removed, replace Qantas services with Jetstar services with their more favourable E.B.A’S, senior 9 to 5 staff over 60 yrs of age with their huge Super entitlements should be encouraged to retire or go back to handling baggage on a baggage handlers wages and the wonders of weekend work. The staff who agreed to the current E.B.A’S should also be put out to pasture.
    Investors need managers to manage
    If a company can’t manage

  9. Bruce

    Not one of those five suggestions will induce even one extra paying passenger to fly QANTAS and just like Holden,unless they can sell their product,they must eventually fail,no matter how many millions of taxpayers dollars are wasted. Joyce would do better to put the cleaners through the arrogant,rude and overpaid cabin crew and they see if he can head-hunt some of Virgin’s excellent staff. Why would anyone want to pay over the odds to be ignored,insulted or just plain crapped on by a sad bunch of old boilers and precious poofs.

  10. Jock

    The problem for the Government is that anything it does for Qantas may be seen by management as taking the pressure off. Both the owners and the workers can save the company but only tough love will work.

    Frankly I am not emotionally drawn to “national carriers”. The US used to have TWA and Pan Am. Both now gone. Given the liquidity in the airline/aeroplane markets there is no reason for the Government to regard Qantas as an essential service. As we found when Ansett hit the wall. Other airlines or services will quickly spring up to fill the void.

    As to ideas for Qantas. I agree with the Government; NO DEBT GUARANTEE. It may be OK to contract more Govt seats on airlines. The Contracts should only be with Companies that are more than 50% privately owned.

    An anti SOE clause is possible. I can see Qantas point here. There are many instances where govt assets are sold and the bids are won by SOE or quasi SOE, where their return criteria is far lower than a reasonably rated Australian company. I do think it is reasonable for the Government to ramp up vetting of SOE purchases of assets in Australia.

  11. Paul

    If the Union movement is so exercised about saving jobs, it should establish a support fund, funded solely by contributions from unionists, to buy decrepit businesses and manage them on a commercial basis. If the business is a good bet, I’m sure they could get support finance from the banking sector. It could be called ‘The Bourkes Fund’, which works on a couple of levels.

  12. Roger

    I sense that politically the PM needs to tread very carefully here, no matter what makes best sense economically. Btw, is it possible to have too much competition, especially when said competition is foreign government subsidised? What’s happening with QANTAS seems to mirror previous local experiments in globalisation. We opened our clothing, textiles and footwear industry to competition from economies that not only had lower wages and tax incentives but were basically capitalised by the state and consequently had lower cost structures all around and we subsequently lost most of our jobs in that sector. That is not exactly a free market, is it? Sometimes the quest for ideologically pure capitalism seems to ignore the obvious: we are not playing on a level field internationally. That’s why I suggest the PM needs to be careful as to how his government’s actions are perceived in the electorate, where voters are concerned not only about their own jobs, but what sort of jobs their kids will have. Yes, consumers have more choice via globalisation, but is that really worth an economy based on flipping burgers and houses? There needs to be balance, I suggest, and I think that’s what most in the electorate, who after all are not economic purists but pragmatists, are thinking too. Otherwise, we will end up as the poor white trash of Asia (OK, maybe not so white anymore). And yes, there needs to be serious work place reform as well – maybe the PM could use this break in the weather to argue more compellingly for that?

  13. Leigh Lowe

    It may be OK to contract more Govt seats on airlines.


  14. Simon

    Let the market eat them. Let the unionists go out into the real world and earn normal pay whilst driving wages back down for their particular skills. Lets watch the idiots try to get jobs in the viable “sell offs”.
    The readjustment has begun, only 7 years too late.

  15. Leigh Lowe

    Let the unionists go out into the real world and earn normal pay whilst driving wages back down for their particular skills.

    Are you suggesting that $80k (plus penalties) is a tad high to transfer suitcases from a conveyor on to a trailer?

  16. boy on a bike

    Note to Bernie Fraser – don’t you have a few billion in union super funds that could be used to either:

    1. Supply Qantas with oodles of debt
    2. Buy out the existing shareholders
    3. Do both

  17. Leigh Lowe

    Note to Bernie Fraser – don’t you have a few billion in union super funds that could be used …..

    Industry Funds under Bernie’s watch are noticeably absent from the top end of register.

  18. Empire Strikes Back

    Joyce would do better to put the cleaners through the arrogant,rude and overpaid cabin crew and they see if he can head-hunt some of Virgin’s excellent staff. Why would anyone want to pay over the odds to be ignored,insulted or just plain crapped on by a sad bunch of old boilers and precious poofs.

    Well said Bruce, but you won’t read that in the MSM. The rude, disinterested and arrogant staff are still there because QANTAS is a union shop. Why isn’t this self evident fact hammered home by every MSM journo who reports the story?

    The days of unions as defacto boards of management must come to an end. If the state is to participate in a rights issue, it must be conditional on repeal of the QSA and (even more important) the exclusion of unions from managing the business i.e. all existing EAs are on the table and union interference must be eradicated. Joyce must also accept that the days of 65% domestic load are history.

    A leaner QANTAS with execom fully in control of the enterprise is the only hope for its survival.

  19. Splatacrobat

    Banks and investment funds are Qantas’s largest shareholders. If they think Qantas is such a good place to invest, shouldn’t they back their confidence with a debt guarantee?

  20. Fibro

    Q: Quasi national carrier pretending they are important and special.
    A: Aging fleet, about the be antiquated.
    N: Nearly broke, just give it time.
    T: Too many people, paid too much money
    A: Arrogant pretentious cabin crews with silver spoons up their arse.
    S: Service levels that make Aldi look good.

    In Order:

    Remove the sale act.
    Get rid of Joyce.
    Seperate Domestic, International and Jetstar into 3 seperate companies.
    Float International and Jetstar to whoever wants them. If no-one, all the better.
    Keep domestic with 3 configurations and let all the staff re-apply under the new company EBA. Half will retire as they should, and the ‘engineers’ can move to whoever buys the rest.

    BTY, when did a guy who turns a wrench with a manual in front of him become an engineer. He is a freaking grease monkey!

  21. candy

    It’s a very troubling situation for Tony Abbott as the unions and the ALP/Greens will blame him for the 5000 job losses every day for the next 2.5 years. (or sooner if that’s the case).

    Alan Joyce should resign for sure. He’s brought a whole lot of trouble down on everyone and most especially 5000 job losses in the blink of an eye. How does he live with himself.

  22. Wozzup

    Like so many Labor policies, this policy is nothing more than an attempt to recreate the past and to protect the position of a privileged unuionised workforce that has grown fat and lazy on the bones off Qantas. A rose coloured (or dare I say it red coloured) view of the world courtesy of labor.

    In the days of Australia’s two airline policy there was effectively no competition. I recall vividly that if I needed to fly to, say, Sydney on business I had the choice of flying Qantas at 7.05 am and Ansett at 7.06 am or visa versa. Much the same for every other domestic flight you could care to name. And the ticket price was always within a few pennies of each other. Competition? Not bloody likely!

    Under those conditions it was possible for an airline to be overstaffed, for those staff to be over renumerated and for them to be under productive. Same for management. Short of the wheels falling off a few Qantas planes, no one was going to ditch them as a carrier and the big Q’s greatest marketing was its reputation as “Australia’s National Carrier”. But when you were only up against a smaller sized clone called Ansett that was not saying much.

    This was much the same as for the whitegoods industry, the car industry and every other domestic industry protected by high tariffs and or restrictive laws. Of course it did not matter as the poor old Australian consumer had no choice but to pay the exorbitant price of those inefficiencies.

    These are the market conditions the unions and Labor want a return too. But of course they never will come back and neither should they. Today’s market is hardly wonderful for any airline – it’s a tough old business and many fail. All the more reason for the Australian government NOT to give a taxpayer funded guarantee. And if that means providing Qantas with access to greater foreign ownership then so be it.

    Unlike Shorten / Labor (with their confected outrage) I understand that the term “national carrier” means diddly-squat in today’s world and I don’t care at all if I am flying on a flying kangaroo or a flying panda as long as the flight is on time, reasonably comfortable, at a competitive price and safe.

    Judging by the choices being made by the market most Australians feel the same. Providing Qantas with a taxpayer funded guarantee is a recipe for disaster – would the unions reform if thais happened. Not likely. They would be out to screw Qantas even harder and then scream blue murder if despite the guarantee it still fell over – which would be all the more likely.

  23. Leigh Lowe

    I don’t care at all if I am flying on a flying kangaroo or a flying panda as long as the flight is on time, reasonably comfortable, at a competitive price and safe.

    You could say I don’t give a flying fuck what flying animal is on the tail of the plane.

  24. Old School Conservative

    Ah, the old economic circular flow! Consumer pays Qantas; Qantas pays union member; union member pays dues to the union; union demands more featherbedding; consumer pays more to fly. And repeat.

  25. Bruce

    That works until the consumers take their business elsewhere.Then it falls over unless the mug taxpayers are prepared to weigh in and that’s exactly where we are now.

  26. davey street

    The unions should be careful what they wish for. The notion that taxpayers should stump up more taxes, both company and personal, to pay for union workers pay rises and/or lower productivity levels is the moment the hip pocket nerve will kick in for millions of voters. Union demands for government support might have been acceptable to enough voters back in the 1970s when 55% or thereabouts of workers were union members. Today that figure including public servants is around 16% and without public servants is around 11%. Shorten would have to be daft to continue his attacks on Abbott for blindingly obvious reasons. Think massive coverage in the media detailing what unionists in individual unionised industries are paid, what o.t. and penalty extras they get, and what hours they work. The outcry from working voters who are paid nothing like unionists could be huge and devastating Add to that the scandals over misuse of union members funds controlled by union bosses and the imminent jailing of two HSU figures, you would think Shorten and his buddies would pull their heads right back in and shut up for a while. A Newspoll asking whether Shorten or Albanese should lead Labor would be very interesting right now.

  27. Max

    What hasn’t been mentioned in all of this is the Qantas Head of Communications and her relationship with AWU head Paul Howes?

    How can Abbott ever hope to negotiate any possible liberal government help to QANTAS when it is at risk of being immediately leaked to the Unions and the Union owned Politicitians???

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