As I warned was likely, Labor is now outbidding the Government on economic populism around QANTAS:
Mr Bowen said on Sunday Qantas was “too big to fail” and he would not back amending the laws opening the opportunity for international shareholders to take bigger stakes in the airline.
Mr Bowen said that the government buying a stake in Qantas would be “one of the options we would look at”.
“A small stake would send a signal to debt markets around the world and to financiers that this was a body in which the government had a keen interest,” Mr Bowen told Sky News.
Too big to fail? Come on. QANTAS is not a bank. It doesn’t have enormous and irresolvable debts. It does have a virtual domestic monopoly at 64% of market share and is too big to collapse but not to fail. The situation is best avoided and some kind of US Chapter 11 equivalent bankruptcy process would be needed to keep the airline flying. Any new management would need to continue to invest and employ locally so it’s manageable and wouldn’t cause taxpayers enormous pain if handled right.
The no-conditions guarantee is the worst solution. It is the one that has the least accountability and the most moral hazard. It would embed a corporate culture that turns to government the moment jobs are at risk, but it kicks the can and so:
…it is understood Treasurer Joe Hockey is more sympathetic towards the situation.
Qantas unambiguously wants a debt guarantee from the government, not a buyback. The government is wary of providing one because of the precedent it would set, but it is considered more effective and less politically hazardous than providing an implicit guarantee with a small buyback.
Qantas themselves have said publicly and privately to me that they themselves don’t see that as a solution; certainly not in the short to medium term.”
Of course they’d say that. They want their cake and to eat it too. Why is collecting an appropriate return for a tax-payer guarantee less politically hazardous? If you’re going to save the shareholders then take an appropriately discounted equity stake so that tax-payers make a profit. You should also get a board seat and fire the management. That’s what Kerry Packer would do. That’s what government should do.
Lifting the foreign ownership restrictions is easier and smoother. As the FT argues, we should get over it:
Tim Tams, the chocolate biscuit treasured by many outside Australia as well as in, became technically American when its maker Arnott’s was bought by Campbell’s Soup in the 1990s. Kraft Foods has been making Vegemite since the 1930s. VB succumbed in 2011 when Fosters went to SABMiller. All three are still certifiably Australian. Yet foreigners cannot own more than 49 per cent of Qantas and foreign airlines cannot go beyond 35 per cent. Virgin Australia, meanwhile, is majority owned by Virgin, Etihad, Air NZ and Singapore Air . The speed of Standard & Poor’s downgrade underlines the depth of Qantas’s problems even more than this week’s warning of a big first-half loss. S&P dropped the airline from triple-B minus with a stable outlook to double-B plus with a negative outlook. Direct downgrades from stable outlooks are rare. Call it the rating equivalent of not passing go and going directly to jail.
…Australians are not alone in protectiveness – Britons were upset about Kraft buying Cadbury, the chocolate-maker. But perceptions of Cadbury and Vegemite are no less British and Aussie now than they were before Kraft. Any foreign owner of Qantas would, to use the local lingo, have a couple of ’roos loose in their top paddock if they thought that making the airline feel less like the spirit of Australia would be good for business. Time to free this flying ’roo so it can fight back before it stops being a treasure altogether.
But if not, and the pollies can’t see past too popular to fail, then at least treat your shareholders, the tax-paying public, with some respect.
