Qantas joins Virgin in criticism of Rex using government aid to fuel growth

[jakeseven7]

You may recall that VA came out swinging months ago against Rex, attacking them hard for this.
QF stayed surprisingly quiet at the time...

That has now ended!

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QANTAS JOINS VIRGIN, ACCUSES REX OF USING AID TO FUEL GROWTH



Qantas chief executive Alan Joyce has attacked Rex for accepting $60 million in government handouts and then unveiling plans to expand its network to fly between Sydney, Melbourne and Brisbane.

“That doesn’t feel right,” said Joyce. “That doesn’t seem right.”

This week, the regional carrier announced a full-year underlying profit before tax of $250,000 and an increase in revenue, despite the coronavirus crisis.

It marked a remarkable turnaround from March, when Rex warned it would have no choice but to announce the “shutting down of its network” if it didn’t receive financial aid from the government, even threatening to stop transporting COVID-19 testing samples.

Joyce accuses Rex of using $60m aid to fuel growth

Qantas CEO Alan Joyce has attacked Rex for accepting $60 million in handouts and then unveiling plans to fly between Sydney, Melbourne and Brisbane.

australianaviation.com.au

 

[muppet]

You may recall that VA came out swinging months ago against Rex, attacking them hard for this.
QF stayed surprisingly quiet at the time...

That has now ended!

------------------
QANTAS JOINS VIRGIN, ACCUSES REX OF USING AID TO FUEL GROWTH



Qantas chief executive Alan Joyce has attacked Rex for accepting $60 million in government handouts and then unveiling plans to expand its network to fly between Sydney, Melbourne and Brisbane.

“That doesn’t feel right,” said Joyce. “That doesn’t seem right.”

This week, the regional carrier announced a full-year underlying profit before tax of $250,000 and an increase in revenue, despite the coronavirus crisis.

It marked a remarkable turnaround from March, when Rex warned it would have no choice but to announce the “shutting down of its network” if it didn’t receive financial aid from the government, even threatening to stop transporting COVID-19 testing samples.

Joyce accuses Rex of using $60m aid to fuel growth

Qantas CEO Alan Joyce has attacked Rex for accepting $60 million in handouts and then unveiling plans to fly between Sydney, Melbourne and Brisbane.

australianaviation.com.au

Hard to disagree with AJ on this one.

It’s really quite bizarre to hear the government spouting that all airlines in the industry should be treated the same while one get’s a massive proportion of its annual revenue from a government grant and the other two get a tiny proportion.

 

[p--and--t]

Hard to disagree with AJ on this one.

It’s really quite bizarre to hear the government spouting that all airlines in the industry should be treated the same while one get’s a massive proportion of its annual revenue from a government grant and the other two get a tiny proportion.

Just need to look at who is the minister responsible for aviation his connections and interests:

Rex deputy chairman and former Nationals MP John Sharp, left, is politically well connected. Here he is with Deputy Prime Minister and Transport Minister Michael McCormack and Rex executive chairman Lim Kim Hai.

Particularly after Nationals leader and Transport Minister Michael McCormack quite inexplicably threw a $298 million lifeline to regional airlines in March – none of which is repayable, the lion’s share going to Rex – while refusing even to loan money to Virgin. Rex flies in and out of a lot of National Party electorates and its deputy chairman is former Transport Minister (and Nationals MP) John Sharp, who is concurrently a director of the federal National Party's asset manager and fundraising entity John McEwen House Pty Ltd.

On Tuesday, having taken public money from McCormack to “avoid 30 per cent to 40 per cent of our staff from being stood down”, Rex announced it’s pouring $200 million (and no doubt converting its Sydney slots currently used for bush flying) into new flights between capital cities!

 

[jakeseven7]

This was first uncovered (in mainstream media) in the 4 corners investigation into the collapse of VA1 - and the VA CEO, Board came out swinging against Rex...

VA were obviously incensed that they were left to collapse while Rex quite literally is picking up their planes and will be taking their customers!

Now QF has joined VA in the outcry....

 

[dajop]

Particularly after Nationals leader and Transport Minister Michael McCormack quite inexplicably threw a $298 million lifeline to regional airlines in March – none of which is repayable, the lion’s share going to Rex – while refusing even to loan money to Virgin.

Not saying there was undue influence, some money also went to VARA and QF Link, in proportion to their flying. IIRC Rex received ~$60m and QF received ~$ 35m. We have discussed this before, and someone even went to the trouble of posting the link to grant records, although I haven't looked for that old thread yet.

And please let's not paint QF as devoid of political clout. Of course the government refused to loan money to Virgin, QF was quite clear that no airlines should receive assistance, and the government complied (except Jobkeeper).

 

[p--and--t]

Not saying there was undue influence, some money also went to VARA and QF Link, in proportion to their flying. IIRC Rex received ~$60m and QF received ~$ 35m. We have discussed this before, and someone even went to the trouble of posting the link to grant records, although I haven't looked for that old thread yet.

And please let's not paint QF as devoid of political clout. Of course the government refused to loan money to Virgin, QF was quite clear that no airlines should receive assistance, and the government complied (except Jobkeeper).

Qantas certainly does have clout generally, but not so much with that particular minister. Not being in the board room or industry any conclusion of mine is pure conjecture, but seems the Q strategy was "don't ask for help and try and influence no help to anyone else and we are the ones most likely to survive". But things aren't that simple.

The government didn't exactly "comply" - REX certainly has benefited more than anyone else (admittedly their routes, target market and fiscal position going into the pandemic assisted that greatly)

 

[Mattg]

Well Rex predictably sent out an angry press release late last night to "correct misinformation stated by Qantas":

REX CORRECTS MISINFORMATION STATED BY QANTAS
Regional Express (Rex) states that Qantas CEO, Alan Joyce, had been misinformed by his advisors when he wrongly asserted at the CAPA Australia Pacific Aviation Summit on 2 September 2020, that Rex was using Commonwealth grants to finance its new domestic jet operations starting March 2021.

As Qantas managers know very well, having received over $800 million in government grants in the past five months of which about $500m are specific aviation grants, the Commonwealth Grants for aviation are being strictly audited against the Grant guidelines by the auditing firm Ernst & Young. To suggest that the audit firm is professionally negligent is nothing but mischievous.

Rex has publicly stated several times that its proposed domestic jet operations will proceed only with new funds being made available by external parties. These funds will be ring- fenced solely for the new domestic services. Rex is yet to complete negotiations to secure funding.

Using Qantas’ own logic, Qantas is guilty of misusing Commonwealth grant money to fund predatory anti-competitive actions that are loss making. In effect, Qantas commenced new operations on the Sydney-Orange route for the first time on 20 July 2020, at a time when Rex’s load factor on the route was, and still is, below 30%.

Apart from the complimentary promotional tickets given out at the commencement of Qantas services to Orange in the first two weeks, there are only four to five passengers on each Qantas flight on average even seven weeks after launch, giving a dismal load factor in the low teens. Given this heavily loss-making initiative, one cannot but conclude that some managers in Qantas thought it fit to conduct a predatory strike to destabilise Rex at the expense of the taxpayers.

What is even more tragic is that the more additional losses Qantas incurs, the more staff it will have to retrench on top of the 8,500 already announced.

 

[TomVexille]

Very rich that the government is happy to subsise one Singaporean owned airline but not another...

 

[MEL_Traveller]

Seems qantas got their wires crossed, but even if they didn’t... what’s the difference between qantas making profits off government funding and rex doing the same thing?

 

[odysseus]

Qantas / AJ should have supported Virgin back when they brought the matter up; it may have gotten more attention. However, QF viewed it as beneficial to not give any support to their primary competitor in the hope it would weaken them.

Speaking up now is absolutely pointless given the funds have already been granted and moved on; nothing will be achieved at this point.

 

[eastwest101]

Qantas's position is quite clear, in 2006 Singapore Airlines should be prohibited from flying the Pacific because it would cost australians their jobs but that didn't stop the airline from many redundancies since, in 2011 the position was that the airline couldn't give pay rises to pilots while the CEO enjoyed massive gains to remuneration in shares, Qantas are opposed to foreign airlines competing with them until they signed a deal with Emirates, in 2014 it was unfair for foreign airlines to invest in Virgin Australia to increase capacity and frequency, but the Qantas domestic business was proudly announced to be profitable due to its capacity and frequency, so apparently only Qantas is allowed to have economy of scale.

In 2015 Qantas's position is that it wanted a debt guarantee and government assistance but in early in 2020 when Virgin asked for industry wide assistance to cope with the Covid-19 international and domestic restrictions the Qantas spinners misrepresented the request with a xenophobic campaign aimed at Virgins' foreign shareholders and then accepted the industry wide assistance offered by the Federal Government of landing fee waivers and accepting subsidies to maintain a minimum network plus jobkeeper payments. Qantas stands up for tolerance and enjoys campaigning for various social justice issues using social media but when a rugby player is asked about his religious beliefs the airline gets a player sacked while being partners with middle eastern airlines that have dubious track records on the treatment of women and homosexual people. The airline said in 2019 that " refugee policy is not in its realm" when criticised by asylum seeker advocates, but weighs in on nearly every other social issue.

Qantas complains about Richard Bransons "publicity stunts" and then flies an empty 787 from Sydney to London and New York. Qantas benchmarks the wages of its its cabin crew, call centre operators, engineers and other staff to wages in the SE Asia and the USA, but the benchmark for executive remuneration is London and New York.

All clear now?

 

[jakeseven7]

All clear now?

Feel better now?

All is fair in business and war....

I could compile a similar list of corporate tactics for Rex, VA, JQ, NZ and also add to yours about QF but it’s way off topic so won’t

 

[antycbr]

So now we know there will definitely be a VA2, what is QFs next move? The international division isn’t going anywhere for the next 9 months, and Domestic is broken by the border closures. VA get to restructure their debt whereas QF don’t.

Will QF be asking for a bailout?

 

[jakeseven7]

At the rate I suspect we are going see both QF and VA2 will requiring bailouts to survive with the state border wars and state elections steering their rise and fall.

 

[Gracem]

Wow all that just gave me a headache!!!

 

[AIRwin]

Wow all that just gave me a headache!!!

Hope it's just a headache and nothing else...

 

[travelislife]

I don’t agree with lobbying and the result being different for different carriers, but blame the government not the airlines! As per any private business it is their prerogative to maximise return. It is just smart business if the government gets seduced in to paying out when they cry poor. It would be a disservice to their shareholders if they weren’t asking when opportunity is on the table.

 

[jakeseven7]

I don’t agree with lobbying and the result being different for different carriers, but blame the government not the airlines! As per any private business it is their prerogative to maximise return. It is just smart business if the government gets seduced in to paying out when they cry poor. It would be a disservice to their shareholders if they weren’t asking when opportunity is on the table.

Well yes you can look at it that way and applaud Rex for their strategic lobbying, rinsing the government to buy up some of the wreckage of VA1 to stick the knife into VA2!

 

[travelislife]

Well yes you can look at it that way and applaud Rex for their strategic lobbying, rinsing the government to buy up some of the wreckage of VA1 to stick the knife into VA2!

I don't applaud them for it (no vested financial interest in any of the airlines!), and actually as a taxpayer I generally don't applaud it at all from any of the airlines! But, I acknowledge they have played the game well!

 

[blackandwhite]

I read the the bailout money was for regional services & the $200m Rex is getting is from mortgaging or providing security, in form of much of their fleet of 50 or more Saab 340s.

So bailout money is not connected to funds to take on Virgin/Qantas. Hope Rex does well on golden triangle. It should with much lower costs.

Some Qantas fares are insane in peak hour. eg. SYD/MEL/SYD same day booked less than a week out often costs $1000 or more. Can fly to USA in January school holidays on a better airline for $800 & even less for kids.