CBASA – Canberra
Wednesday 27 September 2023
Qatar Airways
Mr Fathi Atti, Senior Vice President, Aeropolitical and Corporate Affairs
Senator BABET: Mr Atti, you have over 35 years of aviation experience and have a wide range of academic qualifications—network planning, commercial management, aviation law. You obviously oversee aeropolitical and corporate affairs for Qatar. In my opinion you’re well placed to provide evidence to this committee today. I thank you for your appearance. Qatar is obviously an important trading partner with Australia. The value of our trade is in the order of $3 billion. Australia is a large purchaser of fertiliser, aluminium and things like that from Qatar. I understand the importance of our trade relations. In your opening statement you said that you were surprised by the government’s decision to block flights into Australia. Does this mean historically we’ve had good bilateral relations between our two countries?
Mr Atti: Thank you, Senator. I can see you have seen my Facebook or LinkedIn. The relationship between countries in the aviation sector is a long-term graph; it’s not a short-memory graph. It normally takes years to build the aviation relation. I believe the aviation relation with Australia started way back in 2003. It started at its infancy until the date that the COVID hit. We need also to be aware that before COVID is something; during COVID it’s something else; and our current situation is something else. During COVID I believe we have fulfilled being good corporate citizens for Australia as well, being there at all times. We established two offices at the time. One is a 24/7 call centre. The other is ‘get you AU home’. We were your citizens at the time. All our mission was to look after the nationals of Australia. We looked at them carefully; we carried them across the world; we carried hundreds and thousands. After that we applied to increase the frequency. During COVID, at the time of need, we asked for an increase. To Sydney we had by bilateral one frequency. During COVID we asked to be three and we got granted three daily. We asked Melbourne to be two daily and we got granted two. We never had flights to Brisbane; we got Brisbane. We also increased into Perth because it was a seriously underconnected market at the time and people need to come to Perth. It was genuine for us. It was smooth and reasonable that we applied and we got a response back. When we applied in August, we were told that the federal budget takes time, to November exceptionally this time. We understood that, but moving to January and February, we assumed that everything was in order. It took longer to make a decision, and it was shocking for us to get the decision through the media. It was more shocking that we received the letter later which does not describe why. This is from where we got surprised.
Senator BABET: My next question would be in regard to unused access. Recently the Deputy Prime Minister and defence minister of our country, Richard Marles, said that Qatar have unused access right now. That is the issue. This is one of the many different excuses that we have now seen from the government for denying your requested expansion of flights into and out of Australia. What does the minister mean by unused access?
Mr Atti: I think Australia has a very unique bilateral traffic rights, which classifies the traffic rights into three categories. The first is gateways, which is Sydney, Melbourne, Brisbane, Perth. Another category is the regional package, in which you can still go through gateways but heading via or beyond the regional secondary market. The third category is called secondary airports, which is very minimal population cities. In the main gateways we have 28, and they are fully utilised. In the regional package, we have seven and they are fully utilised. This is not different than any other airlines that have the three categories. The only difference is we are one of the few airlines, if not the only one, that has actually used all its quota. If we look at our neighbour competitors in the region, they didn’t even use 50 per cent of their capacity.
Senator BABET: Your quota right now is full. You can’t bring in any more flights even if you wanted to.
Mr Atti: Yes. Then there is the last one, which is the secondary airports. These are unrestricted for anybody. But these markets are very small and marginal and you can’t reach them unless you go through gateways.
Senator BABET: Speaking about the secondary airports, I understand that regional airports like Cairns and the Gold Coast have expressed some interest in striking a deal with you. Can you explain to the committee whether this is a feasible solution for your business or not, to fly into these regional airports instead of the bigger airports?
Mr Atti: I think the request we made, 28 additional, is a simple request to add additional second one to offer more connectivity. That’s a very important thing. We need to cement within what we have with other gateways, because we now are seriously disadvantaged compared to any other operators from the Gulf. We have 28 frequency. I think our neighbours have 105 because of the commercial partnership. We look very disadvantaged in that area.
CHAIR: For people at home, who are your competitors that you’re talking about here?
Mr Atti: The market is flat. Our competition within the map is the direction from Australia to the Gulf and Middle East heading to Europe, Middle East and Africa and so on. That is where the market competition is. When I mentioned competitors, in the roots we’re talking about Emirates and Etihad.
Senator BABET: Obviously your airline was supportive of Australia during the pandemic, and that’s great. Do you feel like this support has gone unacknowledged by the government—the support that you provided to the country?
Mr Atti: I wouldn’t classify it as acknowledged or unacknowledged. The acknowledgement should have come through the positive response to our bilateral traffic rights to increase, which was increased during the pandemic.
Senator BABET: I believe that your airline just got approved for more flights into the United States. Is that correct?
Mr Atti: We are enjoying a good liberal relationship with the United States, where we have an open sky that was also sealed during COVID. It’s an old air service agreement. But the process in the US is to ratify it, and it was ratified during the COVID period. We fly to 12 destinations in the US with over 120 frequency a week.
Senator BABET: Is Australia being unfair to your airline? Is the government being unfair?
Mr Atti: Our application being unfairly rejected, yes.
Qatar Airways
Mr Matt Raos, Senior Vice President, Global Sales
Senator BABET: We’ve heard evidence that the potential contribution from Qatar having more flights into Australia is in the order of billions of dollars and many thousands of jobs. Do you think that the process is a fair and proper process when a competitor like Qantas is afforded the opportunity to make a submission to the minister on your application and then that submission is kept secret by the government from either of you?
Mr Raos: I think that’s more a question you should direct to the Australian government or to Qantas. Let me say this: when we look at this decision we’re not challenging the reasons for the decision, but we challenge the outcome. The effect of the outcome is to restrain us when our key competitor on this route is not restrained. The benefit of that flows to one of Australia’s airlines but not to both. We feel that our partner, Virgin Australia, is also restrained by this decision. We are challenging the outcome.
Senator BABET: Do you think Qantas has had unfair access to the government in relation to your application?
Mr Raos: We can’t speak to that.
Australian Airports Association
Mr James Goodwin, CEO
Senator BABET: The AAA represents the interests of hundreds of airports in Australia. We know that the aviation sector provides highly valued employment opportunities for skilled workers in regional Australia et cetera. Has the Australian Airports Association ever been consulted by the government or the relevant departments in relation to additional flights into Australia by any airline?
Mr Goodwin: ‘No’ is the simple answer. We were invited to provide a submission last year to the department of infrastructure on the broader bilateral arrangements and frameworks. We provided a submission on that, but not on a particular airline or country.
Senator BABET: Broadly speaking, is it possible that the government’s decision to block additional Qatar flights into Australia could have impacted employment opportunities for Australians living in our regional areas?
Mr Goodwin: More flights means more jobs. It’s as simple as that. Every flight that arrives at a gate at an airport needs about 20 to 25 workers to service that airline and to turn it around. More services means more jobs for Australians.
Senator BABET: The emergence of what’s called the ‘alliance system’ has seen the oneworld and Star Alliance groups capture approximately 77 per cent of the Australian market. This involves codesharing, allowing airlines to sell seats on each other’s flights, pooling common resources and providing common benefits like lounge access, for example. Our airline routes are increasingly concentrated between carriers in these alliances. Is there too little competition in our market? Do we risk seeing sustained higher prices because of lack of competition?
Mr Goodwin: Yes, we do. There’s independent evidence, and our evidence would also suggest that it’s a highly concentrated market both internationally and domestically. The domestic market in particular, with 95 per cent of market share between the two major groups of Qantas and Virgin, is simply a duopoly. More competition would be better for consumers, better for the stakeholders and better for the ecosystem of aviation. That’s going to mean improved service levels, improved schedules, lower airfares and a better quality of service outcome.
Senator BABET: Your submission to the committee notes that there needs to be more international carriers flying into and out of Australia. You state: When multiple carriers can operate the same route, the competitive tension created can also lead to improved service quality and pricing options for passengers. That makes sense. Based on this, do you think the government’s denial of Qatar Airways’ request for extra flights is anticompetitive and not in the interest of Australian consumers?
Mr Goodwin: It’s not in the Australian interest to airports or consumers. We should be putting the red carpet out for any carrier that wants to fly into and out of Australia. Australia is a long way away from the rest of the world, and it makes sense to have open skies to get more carriers into and out of Australia. That’s good for Australians wanting to visit family and friends, it’s good for inbound tourism and it’s also good for freight exports as well. Air freight might be small in number but it’s the highest-value freight into and out of Australia, so that’s an important thing to consider. Most freight is carried in the belly of passenger aircraft.
Senator BABET: You describe Australia as being at the remote end of a worldwide hub-and-spoke network, putting our aviation market at a disadvantage compared to others around the world. Was it unexpected, in your personal opinion, that an approach from an international airline was rejected?
Mr Goodwin: It was unexpected, given that we were coming out of a pandemic where we had closed borders and we had lost at least half the number of carriers that had been flying to Australia. It was a surprise that we would be rejecting a carrier that would want to fly into and out of Australia more regularly.
Senator BABET: Thank you.
Bonza
Mr Tim Jordan, CEO
Senator BABET: It’s great to see Bonza in our skies increasing competition in our aviation sector. Following on from the line of questions from the chair, do you believe that the Australian aviation sector is a level playing field, especially for new airlines like yourself?
Mr Jordan: It is certainly not a level playing field. Barriers to entry are significant. As I say, we—as in the founders of Bonza—have spent 12 years. Our investors are a Miami based private investment firm called 777 Partners, who could see the opportunity here in Australia from afar, as could many people domestically, but they were not sufficiently, if you like, concerned by the ongoing market domination. They could see the big picture upside of investing in this opportunity. To their credit, they stepped forward and did so.
Senator BABET: Since Bonza launched in the Australian market, have you been able to put any downward pressure on ticket prices for the routes that you fly on?
Mr Jordan: Absolutely. If you look at the Melbourne base, which has been running nearly six months now, of the nine routes that we operate, seven are unique markets, such as Melbourne to Bundaberg, Melbourne to Mackay, Melbourne to Tamworth and Melbourne to Port Macquarie. In those markets if we compare the average fares we have seen in the first six months and the lowest available fares this time last year, our average fares are more than $200 one-way lower for a connecting product. So it’s a much better product—flying non-stop—and more than $200 lower because Bonza has entered the market.
Senator BABET: So competition is a good thing for the Australian consumer. Have you received any assistance from the state or federal governments to get your airline off the ground in Australia?
Mr Jordan: No, we have not. We have gone through the normal process and we have worked with local councils in terms of some of the new routes. On a state or federal level, no, we haven’t had at all—
Senator BABET: Zero dollars.
Mr Jordan: Zero, indeed.
Senator BABET: The Australian taxpayer has supported Qantas with large sums of money, especially during the industry shutdown, presumably because there’s a long history there and affection towards the brand by Australians. Do you think there is some bias in the aviation market at the moment and, if you think there is bias, does that bias make it more challenging for your company to gain a foothold?
Mr Jordan: I think in any industry where there are such dominant players and where there is a duopoly, yes, it certainly raises barriers to entry. Aviation is a very difficult industry to make work here in Australia. Part of the reason why it has been hard for predecessors to Bonza is the dominance and concentration in the aviation sector.
Senator BABET: Does your airline have access to enough slots on busy routes? Mr Jordan: Absolutely not at this point. We would like to access Sydney.
CHAIR: Have you applied for slots, Mr Jordan?
Mr Jordan: We haven’t, but we have had conversations with Sydney Airport. Basically we were told, ‘You will not get the necessary slots for you to base aircraft.’ Hence, to apply through the process when you know the outcome isn’t necessarily worthwhile.
Senator BABET: For those playing at home could you quickly explain in simple language what a slot is?
Mr Jordan: Yes. It’s specific timing to arrive or depart from an airport and to make sure that you have necessary space not only from a landing perspective but also in terms of parking at the airport itself.
Senator BABET: Thank you. That’s it from me, Chair.
Professor Allan Fels AO
University of Melbourne
Senator BABET: Professor Fels, you’ve been quoted over the years as saying that Australia needs to open its skies to foreign airlines. In simple terms, for those watching at home, why should we open our skies to foreign airlines?
Prof. Fels: You’ll get better prices, better service and better competition. Wednesday, 27 September 2023 Senate Page 30 COMMONWEALTH BILATERAL AIR SERVICE AGREEMENTS
Senator BABET: Well put. Some have argued that we should protect our ‘national airline’ in Qantas, when, as you would know, it was privatised roughly 30 years ago. I think it was around the time that you were the inaugural chairman of the ACCC. In your opinion, is Qantas still perceived by those out there as the national airline? If so, do you think that’s why it seems to receive special treatment?
Prof. Fels: Well, yes—linked with quite good lobbying skills. I do agree with what you’re driving at. The fact that it’s privately owned greatly weakens the status of the argument that it’s a national airline that we all should support. Why single that out from other businesses? I would draw your attention to the skill of Qantas in projecting itself as a national carrier that has a special status. All the advertising and sponsorship, in a subtle way, is aimed at continuing to promote the idea that it’s an Australian treasure that should be looked after and valued highly. I’m sure that that idea does help governments make decisions that favour Qantas.
Senator BABET: In your opinion, how do we put an end to this? When does that status end? When do cheaper airfares and lower costs for consumers become the national priority instead? How do we make that happen?
Prof. Fels: There is the immediate opportunity with the Qatar situation. That would very quickly bring price falls. Possibly you could ask witnesses after me about that. With the international air services agreements, I think the target should be to end that system as soon as possible. I think I started saying that recently—in 1990! There has been some progress. I think we should phase it out as quickly as possible. Now, that has been happening on a significant scale, but I think not fast enough. That was said, as I said, in 1998, with the big PC review. I think it can still be said today, but it’s going too slowly for modern times. Also it brings us to the old argument: why should we unilaterally abandon a bilateral agreements approach when we generally, arguably, get some benefit from doing a tit-for-tat trade? There are counterarguments to that. Where we have done it, and moved to semi-open-skies arrangements, they’ve not done us any harm. I don’t think they’ve led to us being blocked in access which we wouldn’t otherwise get. It’s not such a bargaining chip. But the second point, as everyone knows, is that, in the field of international trade—tariff reductions, removal of import quotas and all of that—Australia benefited hugely from unilateral reductions in tariffs not linked to deals with other countries. So this idea that you have bilateral agreements which are going to work in our interest is a very old one, totally discredited by our experience with general import liberalisation, but it has hung around in this area of policy without any real justification.
Senator BABET: Thank you.
Virgin Australia
Ms Jayne Hrdlicka, Chief Executive Officer
Mr Christian Bennett, Chief Corporate Affairs & Sustainability Officer
Senator BABET: I want to follow on from the questions asked about credits. My office has been contacted by an Australian couple who suffered immensely because of your airline’s policy around flight credits, and they’re probably not alone. Their international flight to the United Kingdom to see a sick relative who was quite unwell was cancelled by Virgin due to the ending of a codeshare agreement with Singapore Airlines, forcing them to rebook directly with Singapore Airlines for an increased amount. Your company offered these clients a domestic flight credit but no cash refund, so it’s basically worthless to them, unfortunately. I understand that the pandemic response by our governments created a lot of unintended consequences for airlines and agreements et cetera. Does this highlight issues that can occur under codesharing agreements? If so, has Virgin done anything to ensure that things like this don’t happen in the future?
Ms Hrdlicka: It’s hard to understand the specifics, which is essential in being able to figure out exactly what happened. Do you know if this happened before or after Virgin Australia went into administration?
Senator BABET: I don’t have that information. I just need a general comment.
Ms Hrdlicka: I’d suggest that if you can have the couple impacted reach out to me directly via LinkedIn or [email protected], I will have somebody look at their specific case and get back to them with any options that we can find to help them out.
Senator BABET: That sounds good. I will have them contact you. With regard to some evidence we’ve heard on this committee, potentially multiple billions of dollars in income have been lost from tourism and business travel with the denial of Qatar’s expansion in the Australian market. It appears to me that potentially we’re returning to the good old days where our government protects our national carrier—which is Qantas—at the expense of competition and the Australian people. Do you believe that the government is picking sides or picking winners or at least showing some bias towards Qantas in this situation?
Ms Hrdlicka: We’ve worked really hard to try to understand the logic behind this decision. Really, the only party that’s benefiting as a consequence of denying the increase to the rights for Qatar Airways is the Qantas Group and their partner, Emirates. Collectively, Qantas and Emirates hold 43 per cent market share to Europe. Today, with Qatar and Etihad together, and Singapore Airlines, we hold 23 per cent. The addition of the Qatar rights would take us from 23 to 25 per cent, and it is very difficult to understand why that’s not accepted. We understand why Qantas and Emirates would want to hold that back—because it helps them in a constrained capacity environment to keep prices high. It doesn’t fix the problem but it helps the problem, and it would alleviate some of the cost-of-living pressure that Australians are feeling and would alleviate the pain that the tourism sector is continuing to feel with the lack of inbound tourism. It cannot be restored to the levels that we enjoyed in FY 2019 until we get the capacity back. Exporters, ag sector—there’s a long list of elements of the community that are hungry to see capacity increased to try to rebuild parts of the economy that are still not back to normal post-COVID.
Senator BABET: You described in your submission to the committee the unfair strengthening of an already strong Qantas and Emirates partnership at the expense, obviously, of billions of dollars to the Australian economy. The government has said that this was a national interest decision. In your mind, do you think that stacks up in the national interest of Australia to deny Qatar more flights into the country? Is that a plausible—
Ms Hrdlicka: We think the Qatar increase in rights would assist Australians. It would assist the consumer; it assist small businesses; it assists the tourism economy; it assists costs of living pressure. It is hard to understand how it could be in the national interest to constraint nearly a billion dollars of economic activity that feeds everybody’s improve circumstance.
Mr Bennett: Could I add to that. We understand there are these other explanations, but at the same time Qatar is being encouraged to fly to other ports in Australia. So it’s difficult to reconcile that argument with the notion of not being able to fly into the four major ports and hence the concern about that’s more about protecting the Qantas Emirates partnership.
Professor Rod Sims AO
The Australian National University
Senator BABET: One question, Professor. You’ve recently been critical of the government’s decisions to deny Qatar’s expansion of international flights into Australia. You were quoted saying, ‘If there was ever a time to allow new entrants, this is it’—or words to that effect. Can you expand on what you said and why you believe that?
Prof. Sims: Two points. One is, consistent with what I just said, that we need to be making our aviation agreement decisions on the basis of what’s good for the economy and good for tourism. What I said when I said there’s never been a better time was that aviation is just coming back slowly. Airfares are 50 per cent higher than they are normally. Getting extra services on the route would have an immediate effect on lowering prices. I think the benefits of having a more open set of aviation arrangements are there anyway, but right now I think they’re huge.
Senator BABET: You mentioned slots before. It’s all about the slots. What solution would you propose, in your opinion, the government should be looking at to improve access to slots? What should happen?
Prof. Sims: There are two issues. There are the slots and how we allocate undertake our bilateral air service agreements. We need to make changes to both. With bilateral air service agreements we need to move much more to an open skies type arrangement, and look at the benefit to the economy and travellers rather than the benefit to the airlines. With slots, we need to do what we did with allocating Telstra’s spectrum. We need an independent body to do it. They need proper competition advice to make sure that there’s not hoarding of slots, and to make sure that when you get a new entrant they can actually fly. If you can’t get slots at Sydney airport you cannot enter the industry, yet the benefit of having Bonza and Rex entering in a more substantive way would be enormous for the travelling public.
Senator BABET: Thank you
Qantas
Mr Richard Goyder, Chair
Ms Vanessa Hudson, Chief Executive Officer
Senator BABET: My question is for Mr Goyder. First of all, thank you for appearing today. Qantas has been wrapped up in some scandals recently; let’s be honest. We’ve seen the ACCC’s legal action over ghost flights. We’ve seen a High Court ruling over illegally sacked workers and the multimillion dollar payout to your former CEO Mr Alan Joyce. The damage to the reputation of the brand is significant. The Australian Shareholders Association has called for your resignation as chairman. Do you believe your position as the chairman is tenable?
Mr Goyder: I’ll answer that question but again repeat that the board and I understand that we have some work to do to regain the trust of all of our stakeholders. Having said that, I met with major shareholders the week before last, after Alan’s retirement and after the ACCC information came out, and the feedback I got from our major shareholders was that they want the continuity of leadership of me, as chair of the board, particularly with a new CEO. So the board and I take our roles very seriously. That’s primarily to look after the interests of Qantas, and that’s what we will do. None of us put our personal interests ahead of that. While I retain the confidence of our shareholders and the board, I will continue to serve because I think we’ve got some very significant challenges in front of us and issues to deal with, and I think that’s the best outcome for Qantas. If that confidence isn’t maintained then clearly I’ll review that decision.
Senator BABET: Ms Hudson, Mr Joyce recently departed the helm of Qantas. We all know that. Will this provide sufficient change to correct the course of your company? If not, what other actions will you take to regain the trust of your shareholders—not all of them agree with what you just said, My Goyder—and the Australian people?
Ms Hudson: My focus, from the outset, as soon as I stepped into the role has been to connect with our customers, to connect with our people. Through that, I’ve spent a lot of time listening to that feedback, and my focus is absolutely to be determined to fix the issues that we have. I outlined a lot of that on Friday. Apart from apologising to customers, I have also outlined an $80 million incremental spend, on top of $150 million in customer investment, over the next 12 months, from improving our redemptions to fixing pain points in call centres to helping our people and backing our people up to be able to recover when things don’t go to plan. One other thing in the time I have been CEO is listening to our people. Our people are the absolute asset of the organisation. They are committed, they are passionate and they are going to be a part of how we win back the trust of our customers. My job is to back them up. I have also spent a lot of time reaching out to stakeholders, including reaching out to many of our union representatives, both in terms of a conversation and in terms of a follow-up meeting, because I think that a new CEO is a time to reset—reset our relationship with our customers and our people but also reset that relationship with stakeholders. What I’m focused on is growing, investing in the new aircraft and providing promotional opportunities. With the new aircraft coming, that’s actually good for the Australian economy and also good for the customers and the communities that we serve.
Senator BABET: Thank you, Ms Hudson. Mr Joyce, who’s obviously absent today, stated in a previous Senate committee hearing into the cost of living recently that Qantas ‘made representations’ to the government following Qatar’s request for additional flights. He said that it would ’cause distortion’ in the market. Can you please explain what he means by ‘distortion’ in the market and what representations were made? Can you give us some insight? Ms Hudson: I can’t talk on behalf of Mr Joyce, but what I understand—
Senator BABET: Surely you would be privy to that information, being the CEO of Qantas and his offsider, so to speak.
Ms Hudson: I can’t talk on behalf of Alan Joyce, but what I understand in terms of the submission that we made with regard to Qatar is that, in October 2022, the international market had not yet recovered from COVID, and our submission pointed out that, awarding a 200 per cent increase in traffic rights to Qatar when the market hadn’t even returned to 100 per cent, we felt that it was important that the market returned to 100 per cent before we structurally changed—
Senator BABET: So you thought it was important to protect your bottom line?
Ms Hudson: No, not at all. We actually could see that the market was coming back, that that was an important part and that there are many competitors now back in the market—52 competitors are back in the market now. The market will be at 100 per cent by early next year. Airfares are coming down, as we thought they would be coming down, and capacity is being announced and coming into the market every day. We have many trading partners who we have open sky arrangements with, and we think it’s been incredibly important to let the market recover from the impacts of COVID.
Senator BABET: Would you have an open skies-type of arrangement for the Australian market?
Ms Hudson: We welcome competition. I think that’s actually a really important part of Australia. We have one of the most open and competitive markets across the globe. We think it’s important, though, that you strike the right balance between growth and growth in tourism but also maintaining a healthy Australian aviation market at the same time.
Senator BABET: Ms Hudson, in the last sitting period of federal parliament, the government said on multiple occasions that the decision to block Qatar Airways access to more flights into Australia was made in the ‘national interest’—that is what the minister said, and she used that as justification for her decision-making. Do you think protecting Qantas by reducing competition, which would obviously drive down prices for consumers and for freight, is in the national interest or is it just in your company’s interest?
Ms Hudson: I think that the government’s decisions on traffic rights is a matter for the government, and I think that those questions should be posed to them.
Senator BABET: According to some Roy Morgan Research I’ve seen recently, Qantas has fallen from the ninth to the 40th most trusted consumer brand. Can you give us some brief comments as to why that is and, really quickly, exactly what your airline is going to do about it for those listening at home?
Ms Hudson: I outlined on Friday and recognised the fact that we have not delivered on what they expected and that that has created frustration and many have lost trust in us, and that is actually being demonstrated in terms of those kinds of metrics. What I’ve said to the Australian public is that I am determined to fix that. I’m determined to fix that by not what I say but what we do and how we behave. And we are focusing on pain points, including call centres. We’re investing in call centres. We’re investing in redemption seats. We are also focused on making sure that we recover better than anyone else when things don’t go to plan and supporting and backing our people to do that.
Senator BABET: Ms Hudson, it has been alleged that Qantas has lobbied the Labor government to deny Qatar from increasing its flights into Australia. Is there any substance at all to these allegations?
Ms Hudson: I can confirm that I have not had any conversations with the government whatsoever on Qatar. When I came into this role as the CEO, I made inquiry to the head of our government affairs team with regard to the representations that we had made to the government on Qatar and on other matters. He confirmed that he has not or his team have not spoken to the transport minister or the Prime Minister—
Senator BABET: Ms Hudson, Qantas works with a lobbying firm called SEC Newgate. Is that correct?
Ms Hudson: I need to take that on notice, but I have informed myself before coming to this committee that we are not working with any lobbyists at the moment.
Senator BABET: So at the moment you don’t work with SEC Newgate at all?
Senator DAVID POCOCK: It’s on the website.
Senator BABET: It’s on SEC’s website? So, as far as I know, SEC Newgate employs 17 former employees of the parliament—former ministerial staffers et cetera. You can take it on notice if you’d like, but I’d like to know if they’ve been in the government’s ear, to convince them to deny Qatar Airways.
Ms Hudson: I will take that on notice, but, as I said, coming to this committee, I did ask that question, and that was confirmed—that we are not working with any lobbyists at the moment. Senator BABET: Qantas is openly supporting the ‘yes’ vote in the upcoming referendum. Can you categorically say that your airline’s support for the ‘yes’ campaign was not a factor in your airline’s lobbying of the government against the extension of Qatar Airways’ services into Australia? Was that a factor in it?
Ms Hudson: They are completely different and unrelated positions. We have many conversations with the government across a spectrum of issues, including the Voice, including submissions on air services agreements, industrial relations and also sustainable aviation fuel. Our commitment to the Voice is, as I was saying, over a decade of support for Indigenous reconciliation. We started that formally in 2014. We were supporters of the Uluru statement, and this also, then, formally, as part of our support for the Voice.
Senator BABET: How do your employees who intend to vote ‘no’ to the Voice feel about your public support of the ‘yes’ campaign?
Ms Hudson: We have a large community of Indigenous employees who are very supportive of the company position that we have taken. We have also said, in many forums—and I have, as well, in town halls: we have recognised that this is an independent decision of employees and the general public, in terms of how they’re going to vote. We do not position ourselves to disrespect anyone who’s got any different opinion.
Senator BABET: Is it in the best interests of your shareholders to be involved in such a divisive campaign such as the Voice?
Ms Hudson: We have taken social positions on things in the past, and we think, as a corporate, it’s important that we speak out, particularly on things that we have supported for over a decade.
Senator BABET: Thank you, Chair. I’ve no more questions.
Rex Group
The Hon. John Sharp AM, Deputy chairman and Independent Director
Senator BABET: Yes, I’ve got a couple of quick questions. Mr Sharp, obviously you’ve been talking about the major carriers and the Qantas group poaching your pilots. How many pilots have they poached? What’s the percentage?
Mr Sharp: It’s 37 per cent. In the last year or so, 37 per cent of our pilots have gone from the regional fleet, and the sad part about that is that the majority of those are captains. As we train cadets through our flying academies in Wagga Wagga and Ballarat, they come out as first officers, but it takes four to five years to train them up to be a captain. So, when you lose a captain, you’ve got a long lag factor before you can replace them from within your own resources. It’s a significant problem for us, and I don’t think it’s fair or reasonable that the one and only airline in Australia that actually does the right thing—trains its own pilots and invests in its own future—suffers because other airlines don’t bother to invest in their future and don’t train their own pilots.
Senator BABET: You’ve accused Qantas of acting like a bully towards the smaller players in the aviation business. Can you just elaborate on what you mean by that?
Mr Sharp: I’ve said that a number of times in interviews, and I believe it. One of the other senators—it might have been Senator White—talked about them being tough. I would describe them as being bullies, and they’re bullies because they do things like I’ve just described. They will go into some of these very small regional routes to punish us because we have the temerity to go into the domestic airline market. They did this during the middle of COVID, and I’ve heard it said a number of times today that Qantas do things for commercial reasons only. It’s the only reason they do it—they welcome competition and they do things for commercial reasons. Well, Qantas announced a whole heap of new regional destinations that they would serve, during COVID, and I’ll just go through some of them. They announced they would be flying Adelaide-Mount Gambier. At the time that they decided to do that, we had, in the month they started, 1,286 passengers in that market, and they were going to put a second operator into that. If you go to Melbourne-Mount Gambier, it had 134 passengers. That’s what the whole market was, not just shared between Qantas and Rex. There were 134 passengers for the whole month for Melbourne-Mount Gambier. For Melbourne-Wagga Wagga, there were 152 passengers in that market, and that’s now being serviced by two operators. For Melbourne-Albury, there were 210 passengers in that market. If you were running an airline like Qantas, would you deploy an aircraft that’s worth US$20-odd million, with all those crews and backup services, into a market that had 134, 210 or 417 passengers for the month? That’s not a commercial judgement in my view, but that’s exactly what Qantas did, and they did it into routes that they’d never shown any interest in until we announced that we were going to move into the domestic airline market. That’s what I referred to as bullying. I think it’s very aggressive behaviour. It certainly isn’t commercial, because you can’t make money out of that, and they of course would have lost money on those routes. That’s the sort of behaviour that we’ve been subjected to over the last few years.
Senator BABET: It seems very uncompetitive to me. You’ve made several complaints to the ACCC regarding Qantas, and to me it doesn’t appear like they’ve received appropriate consideration. Can you share with the committee a couple of examples of those complaints?
Mr Sharp: We used the predatory behaviour of dumping excess capacity into these regional routes. We referred that example to the ACCC. To be fair to the ACCC, they took the matter seriously, employed external advisors at considerable cost and spent nearly a year working on it. I heard today from Mr Finch that they didn’t find one single example. Well, I don’t think that’s a fair reflection of what actually happened. I think the problem that the ACCC faced was that they weren’t prepared to take the risk of taking this to court, because they know that, if the ACCC takes Qantas to court, Qantas will throw resources at it with an unlimited budget, whereas the ACCC has a limited budget. They will bring in the best legal people, the biggest legal team, and they will have consultants to assist them, and they will make it very difficult for the ACCC, with a limited budget, to successfully prosecute the case through the courts. So the ACCC have to be more than 100 per cent sure they’re going to win before they take on Qantas because of the resources and the aggressive behaviour that Qantas often takes in these matters. As a result, they didn’t go ahead and take the matter to court.
Senator BABET: It’s very clear that Qantas is potentially abusing its market power, shall we say. What do you think the government can do to curb that?
Mr Sharp: One of the ways you can curb the market power is by doing things like addressing the slot system at Sydney airport. We all understand that Qantas is hoarding slots at Sydney airport. They abuse the 80-20 rule. In their own media statement just recently, the head of international and domestic services, Andrew David, said that Qantas use only 90 per cent of the slots they have at Sydney airport. If you wanted to create more competition and, say, let Bonza have some slots or let Rex have the slots it would like to have, or let some international airline operators into Sydney to create more economic activity, you could take away 10 per cent of Qantas’s slots tomorrow and you wouldn’t affect Qantas’s operations yet you’d free up 10 per cent of the movements at Sydney airport for new competition. That would be a simple way. I would suggest that you take away 20 per cent of Qantas’s slots at Sydney airport as punishment for the way they’ve been hoarding them over the last few years, and you would say to the airport coordination authority that Qantas can’t apply for new slots at Sydney airport for another three years. That would be one way of punishing an airline that’s been hoarding slots and abusing the 80-20 rule. It would also be a way of getting competition into the Australian market. Sydney airport is the biggest airline market in Australia. We’ve just heard today that Qantas welcomes competition. Well, this is a great way of welcoming competition.
Senator BABET: Thank you.
