Aviation

Qantas and Jetstar headquarters to stay put, but flying kangaroo’s JAL alliance in doubt

Qantas Group has completed a location review of its key facilities across the country, which will see the national carrier continue to have a presence in NSW, Victoria and Queensland.

The group commenced the review of its property footprint in September 2020 after suffering a $2.7 billion statutory loss for FY20 due to international and state travel restrictions.

The review forms part of Qantas Group’s COVID-19 recovery plan in an effort to cut overheads and involved a competitive process between states.

Some initial actions of the review were announced in February, including the relocation of flight simulator training facilities and the consolidation of several rented office spaces.

Qantas’ global headquarters, which employs more than 3,500 people, will remain at Mascot in Sydney, along with its existing customer service training facilities. There are also plans to expand Qantas Loyalty in Mascot.

The airline has confirmed the construction of a new flight training centre with aircraft simulators to be based in NSW from 2023.

Qantas will also work with the NSW government to develop an Indigenous and diversity employment program.

Sydney will be the launch city for the first Project Sunrise flights (non-stop to cities including New York and London) once international travel recovers and this investment goes ahead.

Jetstar’s headquarters, which employs more than 750 people, will remain in Collingwood for now.

However, the low-cost carrier is in discussions with the Victorian government about where specifically in Melbourne the head office is best based in the longer term to support expected growth.

Jetstar’s head office in Collingwood

Qantas Group will expand its line maintenance engineering and Jetstar will expand its heavy maintenance in Melbourne through a new partnership with Melbourne Airport, the Little Group’s Melbourne Jet Base and the Victorian government.

The company said this partnership will create additional direct and indirect jobs as its network grows.

As previously announced, the existing flight training centre in Melbourne will be expanded, with work already well underway.

Qantas’ heavy maintenance facilities will remain in Brisbane and be enhanced through investment, while Jetstar is relocating some heavy maintenance on its Airbus A320 fleet from Singapore to Brisbane as part of a trial in 2021, with the potential for this to be extended.

Discussions are underway with the Queensland government about conducting additional maintenance on Qantas aircraft in Cairns with an existing local supplier.

As previously announced, a new flight training centre is being built at Brisbane Airport, with the first pilots due to commence training there from November 2021.

Qantas will now commence with the Queensland government about basing several Embraer E190 jets in Townsville in partnership with Alliance Airlines.

Discussions during the review included the potential for accelerating the development of the company’s sustainable aviation fuel capacity, which would require it to invest in a new or existing refinery and available feedstock.

Qantas has committed $50 million over the next decade towards creating this new industry in Australia as part of its broader sustainability strategy, and will continue to work with state and federal governments towards this goal.

Once agreements are finalised, Qantas will receive a range of benefits for these commitments, including payroll tax relief, tourism marketing funding, property rebates, training support and direct incentives.

The total value of these incentives will roll out over multiple years, but will remain commercial in confidence.

The assessment process also involved an independent review conducted for Qantas by PwC to validate the offers.

Qantas Group CEO Alan Joyce said: “Aviation has probably taken the biggest hit of any industry from the COVID crisis, and Qantas has seen $11 billion in revenue evaporate because of state and federal travel restrictions.

“Under those circumstances, we had to look seriously at every part of our business, and that’s why reviewing our property footprint became part of our recovery program.

“Some of this has been about cost-saving by rationalising office space, and some is about unlocking the huge amount of future value that the Qantas Group will bring the local economy in the years ahead. We think that value deserves to be recognised.

“Ultimately, our recovery program is about putting us in a position to grow again, which is when the benefits to each state will really flow.

Qantas Group CEO Alan Joyce

Joyce said each state put a lot of effort into their offers.

“We thank them sincerely and we look forward to delivering on what we know Qantas and Jetstar are capable of post-COVID,” he said.

“Moving one or both of our headquarters was always a live option, and there were times in the process where that seemed to be the most likely outcome.

“Ultimately, once the final offers were assessed on a like-for-like basis, the set of decisions we made was the most beneficial to the group overall.”

The Transport Workers’ Union (TWU) is demanding that the NSW government discloses the full amount of public subsidies which have been promised to Qantas to keep its headquarters in Sydney.

TWU national secretary Michael Kaine said taxpayers had a right to know exactly what the deal involves.

“Qantas has been playing an expensive game of chicken, and the Treasury blinked,” he said.

“Qantas gamed the Treasurer into handing them a no-strings-attached, taxpayer-funded handout.

“Qantas has axed the jobs of thousands of workers and given contracts to companies known for low standards and for ripping off their workers. This ultimately hurts our economy and taxpayers will cop it.

“The government should have used their leverage to make Qantas promise to restore the jobs and job security they took away.

“The government should release every detail about this special deal immediately. If taxpayers are paying for it, taxpayers have a right to see it.

“Qantas has been given $2 billion by the federal government and appears to be getting some state governments to write blank cheques for it too. We demand full disclosure on what this involves.”

ACCC to deny Qantas-Japan Airlines alliance

Meanwhile, the Australian Competition & Consumer Commission (ACCC) is proposing to deny authorisation for Qantas and Japan Airlines (JAL) to coordinate flights between Australia and Japan for three years under a proposed five-year joint business agreement.

ACCC chair Rod Sims said an agreement for coordination between two key competitors breaches competition laws, and that the competition watchdog can only authorise these agreements if the public benefits from the coordination outweigh the harm to competition.

“At this stage, we do not consider that Qantas and Japan Airlines’ proposal passes that test,” he said.

Before the COVID-19 pandemic, Qantas and JAL were the only two airlines offering direct flights between Melbourne and Tokyo.

They were also two of only three airlines (the other being All Nippon Airways) offering direct flights between Sydney and Tokyo.

Sims noted that protecting competition in the commercial aviation sector is critical to ensuring recovery the tourism sector’s recovery from the impacts of COVID-19, once international travel restrictions ease.

“This proposed coordination would appear to undermine competition significantly by reducing the prospect of a strong return to competition on the Melbourne-Tokyo and Sydney-Tokyo routes when international travel resumes,” he said.

“Granting this authorisation would seem to eliminate any prospect of Qantas and Japan Airlines competing for passengers travelling between Australia and Japan, as they did before the COVID-19 pandemic.

“This elimination of competition would benefit the airlines at the expense of consumers.”

Sims said the ACCC considers that Qantas and JAL combining their operations would also make it more difficult for another airline to seek to launch flights on these routes.

“We took into account that there may be some short-term benefits from the proposed agreement, such as allowing Qantas and Japan Airlines to more quickly reinstate flights between Australia and Japan,” he said.

“Our current view is that these are outweighed by the severe harm to competition.

“We have been willing to be flexible in granting limited exemptions from competition law during this time of severe economic impact on the travel sector due to COVID-19.

“However, we must ensure that this doesn’t open the door to anticompetitive agreements that significantly harm competition in the medium to long term.”

The ACCC is seeking submissions from interested parties in response to its draft determination on the proposed alliance between Qantas and JAL by Thursday 27 May 2021 before making a final decision in June.

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