THE ALAN JONES BREAKFAST SHOW
WEDNESDAY, 15 APRIL 2020
SUBJECTS: Support for Australian aviation industry during Covid-19; Virgin Australia.
ALAN JONES: I’ve got Catherine King on the line who is the Federal Shadow Transport Minister. Before I talk to her about this Virgin thing, let me say this:
There’s a lot of talk about Virgin Australia and the words used loosely are a bailout. That is not what Virgin is seeking. Nonetheless, a trading halt has been called. The airline yesterday morning alerted the stock exchange of its decision to suspend trading for the second time in a fortnight.
Let me say this also, I wrote about this in the Telegraph yesterday. In the global financial crisis, the Government underwrote our banks; there was nothing in return for risking taxpayers’ money. As it turns out, thankfully, the guarantee was not needed. There is no reason why the Government can’t assist Virgin – it’s not a bailout. The Government could simply say it seeks first ranking security. That means the Government would go in front of the current banks, the financiers and the shareholders and the money would be paid back. This makes sense, because the shares would be worth nothing if the Government didn’t help. Current bankers and shareholders would take significant pain. So there’s no harm in them taking some pain in return for the Government going to the top of the queue for the money to be paid back.
The Government I’m saying now has to be wary of Qantas and Alan Joyce. They’ve been in the marketplace white-anting Virgin, and saying oh, well if Virgin gets help we should. No, no, not so. Since Qantas posted a record $2.8 billion loss in 2014, Alan Joyce has taken home in pay $62.3 million – 70 percent of it tied to the share price. Then in 2014, Qantas started to buy back its own shares at a rate unseen in the company’s history, and far ahead of ASX and US comparable countries. Qantas, in fact, went on buying 30 percent of its shares, but they cut staff, they slashed pay and they delayed expenditure on an ageing fleet. They’re not in a position to say the Government must help us out. They had money, but they used it to buy back shares. Now until the 80s, that was illegal, the share buyback because it was regarded as stock manipulation, buybacks inflate the share price. So the share inflating activity for Qantas began in the year that Alan Joyce started a new three year share price linked remuneration plan, which culminated in him taking home $24 million in one year. Qantas had a headline loss of 2.8 billion in 2014. Book values were slashed by CEO Joyce. They brought forward future pain to a single year and that allowed the airline to pay no tax for the next four years.
Assisting Virgin with a specific payback provision on the basis that the current bankers and shareholders take significant pain in return. The money won’t be paid back. It’s not a bailout. That is in no way analogous with the situation of Qantas. And the issue is if Virgin is allowed to go there will be no replacement. Where does Virgin’s 30 percent market share go if not to a Qantas monopoly where fares will go through the roof? I wrote this yesterday. If Qantas believe they’re entitled to Government money – the Government should simply ask: where did the money go? If not in an extravagant buyback of Qantas shares, which resulted in an unseemly return for the CEO Alan Joyce. I said yesterday and I said again, we must preserve two airlines.
Catherine King is the Federal Shadow Transport Minister. She’s on the line. Catherine, good morning.
CATHERINE KING, SHADOW MINISTER FOR INFRASTRUCTURE, TRANSPORT AND REGIONAL DEVELOPMENT: Good morning Alan.
JONES: Thank you for your time. What is the position of the Federal Opposition in relation to this?
KING: Well, you and I are singing from the same song sheet on this. The Government needs to ensure that we have two airlines and that we don’t end up with a monopoly. We don’t think it’s in the national interest for that to happen. If we want the tourism sector to recover at the end of this, we want our regions to recover, we need to have two strong airlines.
Frankly, if the Government doesn’t get on with the job now and quickly assist Virgin, I think we’re in a really terrible position where it potentially will fail. We’ll lose 16,000 jobs. But not only that, we’ll lose a strong aviation industry in Australia that is competitive, and means that we’ve got competition on routes, competition on fares, and that we have a tourism sector that’s able to recover after this. So about you and I are pretty much saying the same thing here.
JONES: Catherine, my concern is this. I mean, in normal life in ordinary commercial life, companies go under and you say – well, that’s it, that’s basically the market. Or someone says, oh, that’s capitalism. Hang on. That’s not the case here. The Government, for obvious reasons, they had to address the pandemic. The Government has put the economy into a coma and when you put the economy into a coma, you must be responsible for the life support. And all of this is just life support. It just is a $1.4 billion loan to be paid back. It shouldn’t be too difficult to structure a loan to keep Virgin afloat, such that those providing the loan would have first ranking security.
KING: Exactly, and I think that’s exactly what Virgin is asking for. We’re in pretty extraordinary times, the Government is underwriting private hospitals. We needed to in the national interest to do that. You’ve got a Liberal Government…
JONES: Childcare. Childcare…
KING: …yes, childcare. You’ve got six million Australians essentially now being paid for by the Federal Government, all of those things, really important.
JONES: Catherine, on childcare. Childcare is an interesting point isn’t it, these childcare centres are privately owned. Now, you know, whether it’s a Labor Government or Liberal Government, whenever you increase the childcare subsidy, the childcare fees go up. I mean, here is a childcare private sector outfit saying, oh, hang on the Government will pay 50 percent of the fees. Now, you know, this is analogous.
The Qantas situation, Catherine is entirely different. They had a share buyback scheme, spent billions of dollars on share buyback, unprecedented share buyback. It’s not for them to be lining up and saying we need some money. The money went into providing Alan Joyce with ridiculous remuneration.
KING: Well, you rightly point out they entered this crisis in a very different position to Virgin and that’s what you’ve got to look at. But right at the heart of this is, is it in the national interest to have two strong aviation players in Australia? The answer is yes. If that’s the case, then the Government needs to do everything it can to make sure that that stays. If it doesn’t, the fantasy that we’re going to have some other international player quickly come in and start another domestic airline in Australia is just ridiculous. I don’t know who is advising the Government that that would happen.
JONES: Catherine, if I could just finish with a dumb question, but very political…
KING: …now, I’m nervous, Alan.
JONES: So this like bowling you a full toss. There is a Federal Transport Minister isn’t there by the name of McCormack? Have you cited him? Or has he gone to the missing persons bureau?
KING: Look, I think this is one of the problems when you’ve got a Transport Minister in the Government that is not respected within Cabinet as he should be. I think that’s part of the problem. He needs to be arguing his case loudly and clearly. Unfortunately, what it sounds like is he’s tried to argue the case but the Prime Minister has ignored it. You need a strong Minister.
JONES: After two sentences, he’d be finished. All right, thank you for talking. We’ll keep in touch.
KING: Lovely to talk to you.
JONES: Catherine King, the Shadow Federal Spokesperson for Transport.