Hard line on Holden a grim reality check for Joyce and Qantas
Qantas chief executive Alan Joyce has every reason to be deeply worried about the Holden decision. If the Abbott government is willing to let the car maker call time, what chance does Qantas have of gaining more than a tweaking of its foreign ownership constraints?
Having built the first ‘‘Australian car’’, Holden is as much Brand Australia as the Flying Kangaroo.
Treasurer Joe Hockey is Qantas’ last hope for some form of government assistance, but this is the same minister who on Tuesday told Holden that ‘‘either you’re here or you’re not’’.
For Qantas, the end of the road for Holden dramatically reduces its chances of a loan guarantee, purchase of a cornerstone stake, a so-called ‘‘letter of comfort’’ or any other form of financial assistance.
It leaves a softening of the Qantas Sale Act as about the only thing that will not be seen as a government propping up a company at the same time as it is allowing an entire industry to irreversibly shrink beyond recognition.
The laws put in place when the national flag carrier was privatised in the 1990s cap foreign investment at 49 per cent, total ownership by foreign airlines at 35 per cent, and a single foreign investor to 25 per cent.
But even Joyce has admitted that any changes to these wouldn’t come soon enough for Qantas.
The blocking of the GrainCorp takeover aside, the government is signalling that it wants to stand for minimal interference and the freeing up of markets. Survive or get out.
A big helping hand for Qantas would be the antithesis of every free trade agreement that Trade Minister Andrew Robb is working feverishly to get across the line.
Treasury also appears to be stamping its authority: the country needs to take up the restructuring of the Hawke-Keating governments in order to re-energise the economy. This will not be done by propping up inefficient industries or companies.
Qantas will have to put an almighty good case to make the government think for a second that it is not asking for a subsidy or some other form of helping hand.
Joyce has thrown everything at a campaign that has reached almost hysterical levels. But the once phenomenal respect for the Qantas brand is fading, which means that it has lost a fair portion of its political muscle in Canberra.
The government also knows that the biggest beneficiaries of having a viable competitor in Virgin are the flying public. Those voters are revelling in cheap fares as the country’s two big airline groups go at each other.
The rapidly fading chances of government extending a helping hand means that Joyce is left with a narrowing number of levers to pull to right his quickly descending airline.
His short-term fix is to flog assets. But this does not fix the large structural problems his airline faces, such as a much higher cost base than its competitors.
Besides, questions remain over whether investors, given access to the data room for Qantas’ crown jewels – the Frequent Flyer loyalty program and Jetstar – will walk out valuing them as highly as some are at present.
Asset sales are often the last resort for companies.
Adding salt to the wounds will be that Joyce’s demands for the government to step in to halt his No.1 enemy in its tracks have fallen on deaf ears. On Thursday Virgin completed its $350 million capital raising, which has cemented the grip of its big-three airline shareholders on its share register.
In recent days, Joyce has been at pains to point out that Qantas is not a Holden.
While that may be true, it doesn’t mean that the government is now about to treat Qantas any differently to the once-great Australian manufacturer.