Qantas flags loss
Qantas Airways Limited (ASX:QAN) is flagging an underlying loss before tax of up to $300 million in the six months ending December 31 and will axe up to 1000 jobs.PT0M44S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-2ys8u 620 349 December 5, 2013
The Abbott government is holding firm in the face of dire warnings from Qantas that it faces a financial crisis which has already forced it to axe at least 1000 jobs and consider major asset sales.
Despite renewed calls from Qantas for urgent action, federal Transport Minister Warren Truss said it was important to realise that the airline was a strong company with substantial assets and cash.
''It's got lots of advantages in the domestic market and other places. And they need to harvest that goodwill before they could reasonably expect government to intervene on their behalf,'' he said.
Qantas is facing a financial crisis which has already forced it to axe at least 1000 jobs. Photo: Kate Geraghty
In a further rebuff, Mr Truss said the government would not retrospectively change laws which disadvantaged Qantas' rival, Virgin Australia, because that would be ''completely unfair''.
Treasurer Joe Hockey, who is considered the most sympathetic to Qantas' pleas, also indicated that the government was unlikely to rush to the assistance of a public company.
''The previous government gave them a letter of comfort, which they used with their credit agencies as an implied guarantee from the taxpayer,'' he told Ten's The Project. ''The bottom line is that governments should not be in the business of propping up private-sector operations.''
Prime Minister Tony Abbott echoed his ministers' views, telling Melbourne Fairfax Radio 3AW that Qantas was a private company and it was ''incumbent upon all private companies to run themselves effectively and profitably and that’s what Qantas has to do''.
''We don't subsidise Qantas,'' Mr Abbott said adding that Qantas had made no specific proposals for government assistance.
''But the point I make is that if we subsidise Qantas why not subsidise everyone? And if we subsidise everyone that’s just a bottomless pit into which we will descend.''
But he opened the door to possibly increasing the threshold of foreign investment in Qantas.
''The preference always would be to have the company in majority Australian hands but if it's a choice between a greater foreign stake in Qantas and taxpayer subsidy I ask the people of Australia what do you prefer? Do you prefer to be paying through your taxes for Qantas or do you prefer to have it slightly more in foreign hands than it is?''
The hardline position from senior ministers comes just days after the government blocked a foreign takeover bid for Australia's largest wheat exporter, GrainCorp.
Qantas had earlier in the day ratcheted up pressure on the government to extend it financial assistance or remove foreign-ownership constraints, after it chose to axe at least 1000 jobs and raised the prospect of partial sales of assets, including budget offshoot Jetstar and its prized frequent flyer division.
Describing the challenges it faced as immense, Qantas warned that it will slump to a loss of up to $300 million in the first half of this financial year. It will be the first time Qantas has made a first-half loss - a period of the year when it typically makes most of its money - since it was privatised in the 1990s.
Analysts scrambled to revise their forecasts, with some warning that Qantas was on track to lose as much as $868 million this financial year. Credit ratings agencies also warned they may downgrade Qantas' all-important investment grade rating to junk status, which would push up the airline's borrowing costs significantly.
The axing of at least 1000 jobs over the next year will be from across the business, and include Jetstar. Included are 300 roles that Qantas announced last month would be axed following the closure of its heavy maintenance base at Avalon, near Geelong.
Qantas chief executive Alan Joyce said the challenges the airline faced were immense, and he again rounded on Virgin, which he accused of creating an ''unprecedented distortion in the market''.
But he declined to reveal what exactly Qantas wanted from the government, which has been considering a range of options put to it by the airline in recent weeks.
They include a debt guarantee or buying a stake of up to 10 per cent in the airline.
Mr Joyce has already emphasised that Qantas does not have time to wait for Parliament to bring about changes to the Qantas Sale Act, which limits foreign investment to 49 per cent.
He also defended his own position when asked about the significant fall in Qantas' share price since he began as chief executive five years ago.
''The board have been very supportive in all of this. The board understands the dynamics that has been faced in the marketplace,'' he said.
He rejected a call to resign from independent senator Nick Xenophon, who also demanded the board hand in their resignations.
In Parliament on Thursday, Mr Abbott declined to address the specifics raised by Qantas. ''We appreciate that some iconic businesses such as Qantas are under significant competitive pressure,'' he said. ''We appreciate that and obviously we grieve for every worker whose job has been lost.''
The Transport Workers Union, whose members include thousands of Qantas ground workers, blamed poor management for the latest job cuts which take the total number axed from the airline to 9800 since 2009.
TWU national secretary Tony Sheldon said the job cuts were unnecessary and the airline's problem was not a lack of capital but a ''lack of management''.
The pilots' union also expressed ''deep concern'' and was seeking clarification about the jobs to be axed and the likely effect of the wide-ranging review of Qantas's business.