If it wasn't an election year, the recent suggestions that the Federal Government will attach highly restrictive strings to the acquisition of Qantas would seem ludicrous.
The downsides of these strings are obvious: they will undermine sustainable jobs and services and all at the expense of consumers.
But when it comes to Qantas, it seems good public policy loses every time.
There are two proposals under consideration beginning with a requirement for the consortium to commit to existing regional services.
Deputy Prime Minister Mark Vaile, who is also Transport Minister, has all but admitted that the Government will require commitments to regional services. As Nationals leader, the politics leave him with little room to move.
Such a proposal will do nothing to assist delivery of regional services.
Regional airline services should be provided on the basis of demand. If there is not the demand for these services, Qantas should not be obliged to provide them.
However, if this demand exists and if Qantas has not filled it, then there is no reason existing smaller airlines with lower overheads cannot move in and fill the market gap.
Small, independent airlines are flourishing in deregulated airline markets around the world to fill exactly these sorts of niche demands.
If Qantas is regulated to provide services they do not find economical, it will pass the costs on to consumers -- perhaps directly to regional consumers or even by raising ticket prices across all routes. In neither case do consumers benefit. The other string the Government is considering attaching is the requirement for jobs to be kept in Australia.
When the Macquarie-led bid was first proposed, Prime Minister John Howard made it clear -- you cannot preach the virtues of the free market and introduce laws to inhibit it every time it does something you don't like.
The decision to approve the takeover will ultimately be the Treasurer's on advice from the Foreign Investment Review Board. Peter Costello should be listening to the Prime Minister.
The entire approval process through the FIRB is a relic of days when foreign direct investment was treated with suspicion. More enlightened attitudes about foreigners investing in Australian companies have since developed but the FIRB remains an anachronism, particularly for a country that has always been dependent on importing capital.
Were it not for Qantas' size and transport deemed a "sensitive sector", the United States Free Trade Agreement would have done away with the need for approval.
To a certain extent, Qantas is in no position to complain. It already enjoys unnecessary protection as Australia's national carrier with preference for government flights and a near monopoly in trans-Pacific flights. It was only recently that Virgin Blue has been granted limited access on these routes. Companies that enjoy the benefits of government protection also have to wear it when that government turns on them.
Yet the Government is vulnerable on industrial relations because of the introduction of its WorkChoices package. Regardless, the Howard Government should know better than protecting existing jobs if it wants to promote long-term job sustainability and to create new jobs in the industry. Job protection will make Qantas less nimble in a competitive market. The more it is inhibited from reducing delivery costs, the more ticket prices will need to rise. This will make other, foreign-owned airlines more competitive taking ticket sales and the jobs attached to them. It is clearly not a recipe for keeping Australian jobs and profits in the country.
Unions are supportive of the proposal. Their view is short-sighted. The job of a union is to protect the interests of its members and the people who pay the wages of union officials. Their job is not to represent the interests of working Australians, our national interest or the millions of Australians who fly with Qantas each year.
The best way to promote the interests of existing workers and create new jobs is to allow the industry to grow and develop by responding to consumer demand. This will ensure ticket prices are low and more people fly. Trying to rig the outcome will decrease the flying population. It also will ensure Qantas is sensitive to external shocks that have plagued the industry for the past five years.
Consumers already suffer because of Qantas entitlements on trans-Pacific routes. There is limited competition direct to the United States. If consumers want a cheaper price or do not want to fly with Qantas they have to fly via Asia or New Zealand.
Additional requirements to protect jobs will make Qantas uncompetitive.
If management decides to cut jobs to save costs and are blocked from doing so they will use other avenues.
It could include selling off or restructuring its Frequent Flyer program. It could also involve restructuring the company.
In that scenario jobs will not be lost to other countries, they will just be lost.
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