Menu

Should we bail out the airlines?

Apr 1, 2020 • 14m 00s

Australia’s airlines have been hit hard by coronavirus, and they’re asking the government for billions of dollars in financial support. Today, Royce Kurmelovs, on whether it’s time the government nationalised the airline industry.

play

 

Should we bail out the airlines?

194 • Apr 1, 2020

Should we bail out the airlines?

From Schwartz Media, I’m Ruby Jones, this is 7am.

Australia’s airlines have been hit hard by the COVID-19 outbreak, and they’re asking the government for billions of dollars in financial support.

Now there’s a debate over whether the industry should be nationalised.

Today, Royce Kurmelovs, on whether it’s time the government took back control of our airlines.

RUBY:

Royce, almost every sector of the economy has been impacted in some way by COVID-19, but you focused on the airline industry in your story for the Saturday paper. Tell me why.

ROYCE:

So when looking at this story, it began as a global story that became local, when some of the airlines began making it public they were in trouble as COVID-19 spread.

Archival tape -- Newsreader:

All Qantas flights from Sydney, Ballina, Bendigo, Broome... A lot of Jetstar flights are also going in regional areas.

The global pandemic has grounded a recently soaring airline industry, leaving planes idle in a chain of parking lots stretched around the globe

ROYCE:

I mean around the world as countries have been locking down their borders, it means that people can’t travel anymore and the numbers of passengers begin to drop. Airlines are particularly exposed to market forces, this became almost an existential threat.

Archival tape -- Newsreader:

Airlines have cancelled thousands of flights, Etihad Emirates and more than 50 airlines have stopped flying at all.

The global airline industry has been felt by the covered 19 pandemic as international borders close and cities shut down.

ROYCE:

Both of the bigger companies, Qantas and Virgin, were talking to the government and were quietly saying that they were in trouble.

Together, Qantas, the national carrier, employs about 30,000 people. Virgin Australia, its main competitor, employs about 10,000 people.

When it became clear that everything was being locked down and entire economies were being turned off and passengers started falling way, both airlines immediately made moves to stand down that workforce.

Archival tape -- Newsreader:

Qantas stands down. Twenty thousand workers and ground. More than 150 aircraft until May in the wake of the crisis.

ROYCE:

For Qantas, it was somewhere in the region of 20,000 employees. For Virgin, it was 8,000 employees.

RUBY:

That's a huge amount of workers who have lost their incomes across just a couple of businesses. So can you tell me a bit about the government support that's been offered so far?

ROYCE:

So that first package that came at around two weeks ago, the broad strokes of it is $715 million was set aside to assist the airlines.

It was made up of various measures. There was a direct cash payment, which would help basically reduce the cost of operating existing air routes that the companies were running then that were becoming increasingly expensive as the number of passengers fell away.

And then there was a series of other incentives to try and help them out to keep them running through the crisis.

And this was particular contentious because even now there's been no mention about any conditions placed upon their assistance about how the companies may have to treat their workers. And that's kind of become a bit of a sticking issue right now.

RUBY:

And so, Royce, the kind of support that the government has announced. Is it enough?

ROYCE:

The short version is no, it's not enough. The government predictions that this crisis will last up to a period of six months. But the possible lockdown of three weeks or thereabouts if you're losing passenger numbers for that long. I mean, both Virgin and Qantas have reported that they've lost between 80 and 90 percent of the regular passenger numbers today. This leaves these businesses heavily exposed to this crisis.

RUBY:

So will Qantas survive this?

ROYCE:

What it's looking like is that no airline industry in the world will be able to survive it and that in order to keep going, they'll require some kind of direct intervention by the government, either in the form of nationalisation or a pretty significant bailout.

RUBY:

Ok - so what are the airlines themselves saying?

ROYCE:

So Alan Joyce is the current CEO of Qantas. [00:07:43] This conversation around nationalisation began a couple of weeks ago and Joyce immediately leapt on the opportunity to attack his rival, Virgin Australia.

I was leaked audio from someone who recorded Alan Joyce talking to his workforce.

Archival tape -- Alan Joyce:

I’m sure we’ll get through this better than any other airline group.

ROYCE:

Essentially, he begins by telling them that he expects Qantas to get through this crisis in a good state, that it will be fine thanks to its billion dollar cash cushion.

Archival tape -- Alan Joyce:

We think everybody is entitled to a fair go and if the government is helping, it should help an industry, not a particular company.

ROYCE:

But then he then departs on a bit of a Segway where he starts talking specifically about Virgin.

Archival tape -- Alan Joyce:
iIn the press this morning there were comments in The Australian about the potential for Virgin to be nationalised and getting government support.

ROYCE:

He says that the company is foreign owned. He says that it doesn't deserve to be bailed out. And if it does, that it would be manifestly unfair for the government about Virgin not Qantas.

Archival tape -- Alan Joyce:

Government is definitely not there to support a company that’s been badly managed for 10 years. The Government is definitely not there to support a company that is owned by Singaporeans, Chinese, and Abu Dhabi and British billionaires.

ROYCE:

But then he goes on to implore his employees, many of whom had or had already been laid off and encourages them to write to their local federal members and even to Scott Morrison himself and to basically put the company's case forward and insists that if there is some kind of industry assistance or a bailout that it includes Qantas, too.

Archival tape -- Alan Joyce:

It would be outrageous if Virgin or competitors are supported and Qantas isn’t. It would be unfair to you, it being fair to the country and it be unfair to a national carrier. So I'd ask you as a call of action to make your position very clear to every politician in this country.

RUBY:

We’ll be back after this.

[ADVERTISEMENT]

RUBY:

Royce, how does Australia’s airline industry compare to others around the world?

ROYCE:

So historically, Australia has privatised its airlines and which leaves its companies uniquely exposed to, essentially, recessions and external shocks. Now, that's not the only model around the world. You have countries like Singapore, the United Arab Emirates and even Air New Zealand that are owned by their respective governments. And this allows them to keep functioning in times of crisis. It allows them to ensure that they will have that logistical operation. And for Australia, that kind of really makes sense because it's an incredibly vast landscape. You need to get to move people from one place to the other, from one isolated city to the next. It also has potential for the workforce, for people who are looking for stable, good quality jobs into the future.

A lot of the decisions have been made in the past around flexible labor, around the casualisation of the workforce has meant people have seen their pay and conditions suffer.

And so if this was to be nationalised, if the airlines were to be consolidated into one or nationalised individually, it would be a chance to ensure that certain conditions are placed on these companies to treat their workers with respect.

RUBY:

So protecting jobs and conditions is one benefit of nationalisation. What are the other arguments?

ROYCE:

So in terms of the arguments in favour of nationalisation, I spoke to economist John Quiggin from the university of Queensland. And his response was pretty direct. It was essentially that if the projections are true and this will last six months, all major airlines are going to be bankrupt. And he doesn't.

The critical point John Quiggin said it was that any ideological objection to this is now gone. This crisis has shredded any kind of sense of normalcy or the way the world used to operate. Instead, what's going to happen is because airlines are so important to Australia that the government will have to step in. In the past, the argument against this was that, well, there simply isn't enough money for that. Now, the $180 billion bailout package is kind of testament that in a crunch, the government can imagine this money out of anywhere. So it makes sense to do this now.

RUBY:

What is the Transport Workers Union, who represent Qantas staff, saying about this?

You know, you have the unions talking about this and seeing in it an opportunity to reorganise and reconstruct Qantas and some of these airlines in a way that essentially rebuilds the country's airline industry for the better.

I spoke to Michael Caine, who was the union secretary for the transport of the Transport Workers Union. And for Michael Kaine in particular. This is a good way to tackle the casualisation of the workforce.

The consequences of which we've seen play out in real time currently with something like 3 million casual workers, all that go in a sudden crisis.

Archival Tape -- Michael Kaine:

We shouldn't allow aviation to just reset to the old model. But it should be, in a sense, a reboot, a reset with a different character, with governments taking some ownership and making sure that the appropriate management system and style is in place so that the Australian public can always be confident that their aviation sector is strong and it has workers and consumers is the focus.

ROYCE:

If you were to nationalise these companies, you be able to then place conditions on how those companies then treat their workers and ensure people get good quality jobs down the track, which kind of reverses the fragmentation of the workforce.

RUBY:

So Royce, is nationalisation likely to happen?

ROYCE:

So the very fact that we ever even having the conversation about nationalisation to begin with is very surprising in the Australian landscape because it is something that was just considered unthinkable previously. Suddenly with a crisis, It's become necessary to talk about this. And what you see is a very interesting political dialog playing out.

Archival tape -- Josh Frydenberg:

Look, obviously, the economic situation has got worse and we want Australian companies to get through this.

ROYCE:

The federal treasurer, Josh Frydenberg, appeared on television about two weeks ago saying, look, you know, you would not consider nationalisation right now, but it's something we may have to consider down the track.

Archival tape -- Josh Frydenberg:

Well, when it comes to the aviation sector, you're absolutely right. It is critical to the Australian economy and of course, vital to the Australian community and their ability to move both domestically and internationally.

ROYCE:

So this is what makes this story all the more compelling and I guess symbolic for what happens to Australia will generally be indicated by what happens to Qantas. At some point, nationalisation will have to be talked about seriously and will probably happen in some form.

You cannot run Australia without its airlines. That much is true. This is a utility that is necessary to the continued functioning of Australia. And if you lose this infrastructure as you would if this was simply left to fail, essentially Australia would be in a bad place.

How that nationalisation and the bailout process is handled is critical to ensure that the average person isn't left to bear the cost.

RUBY:

Royce thanks so much for your reporting on this.

ROYCE:

Thank you for having me.

[ADVERTISEMENT]

RUBY:

And the latest in the response to Covid-19:

The federal health minister has announced that the daily growth rate of new Covid-19 cases has fallen from 30% at the beginning of March to an average of 9%. More than 230,000 tests have been carried out across the country, and the current death toll stands at 19.

The Victorian Police Minister yesterday said “the time for leniency had passed” as the government introduced new health orders and severely restricted movement in the state.

Residents face significant fines if they leave their house for “non-essential” reasons. People are still allowed to leave to get food and supplies, medical care, exercise or for work or education.

Most other states have introduced similar health orders, while in NSW, those found to have breached the orders, face up to 6 months in jail.

--

Major bottleshop chains across Australia are putting limits on the amount of liquor customers can buy in one transaction, in a bid to prevent panic buying.

Liquorland, Vintage Cellars, Dan Murphy's, BWS and Aldi signed up to the voluntary code, with the new limits put in place as of yesterday.

Beer, cider and pre-mixed spirits will be limited to two cases, and wine to 12 bottles per customer.

--

And the federal government has intervened to save private hospitals on the brink of collapse by announcing a $1.3 billion of worth of funding to bail them out. In return, the private hospitals will make their 34,000 beds available for Covid-19 patients.

I’m Ruby Jones, this is 7am, see ya tomorrow.

Australia’s airlines have been hit hard by the coronavirus outbreak, and they’re asking the government for billions of dollars in financial support. The crisis has even sparked debate over whether the industry should be nationalised. Today, Royce Kurmelovs, on whether it’s time the government took back control of the skies.

Guest: Freelance journalist Royce Kurmelovs.

Background reading:

Australian airlines in turmoil in The Saturday Paper
The Saturday Paper
The Monthly

Listen and subscribe in your favourite podcast app (it's free).

Apple podcasts Google podcasts Listen on Spotify

Share:

7am is a daily show from The Monthly and The Saturday Paper. It’s produced by Ruby Schwartz, Atticus Bastow, and Michelle Macklem. Elle Marsh is our features and field producer, in a position supported by the Judith Neilson Institute for Journalism and Ideas. Brian Campeau mixes the show. Our editor is Osman Faruqi. Erik Jensen is our editor-in-chief. Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

Tags

auspol covid19 coronavirus covid19australia




Subscribe to hear every episode in your favourite podcast app:
Apple PodcastsGoogle PodcastsSpotify

00:00
14:00
194: Should we bail out the airlines?