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Globilisation: Preparing Australian Aviation for a New World, Geoff Dixon, Qantas CEO - Speech to CEDA

Sydney, 22 July 2008

AVIATION IS A FASCINATING INDUSTRY..... BUT IT IS ALSO A CHALLENGING ONE.

FOR ALMOST 90 YEARS QANTAS HAS DEVELOPED A CULTURAL STRENGTH THAT ENABLES US TO COPE WELL WITH CRISES. WE HAVE SHOWN GREAT RESILIENCE THROUGH NUMEROUS MAJOR SHOCKS OVER THE PAST DECADE ALONE.

BUT RIGHT NOW THE GLOBAL AVIATION INDUSTRY FACES, NOT A SHOCK OR A BLIP -NOT EVEN A CRISIS - BUT A PERMANENT TRANSFORMATION. THE DRIVERS OF THIS TRANSFORMATION WILL BE GLOBALISATION, ACCELERATED BY PERMANENTLY HIGH FUEL PRICES. AND THE RESULT WILL BE A NEW AVIATION WORLD ORDER.

TODAY I WANT TO GIVE YOU A SENSE OF HOW THIS NEW ORDER WILL UNFOLD.

AND WHAT IT MEANS FOR QANTAS AND FOR AUSTRALIAN AVIATION.

NOW, I AM AWARE THAT SOME COMMENTATORS REGARD ME AS BEING A GLASS-HALF-EMPTY KIND OF GUY. THE UNKIND HAVE EVEN CALLED ME CHICKEN LITTLE.

BUT THE REASON WE AT QANTAS ARE WELL-POSITIONED RIGHT NOW - WHICH WE ARE - IS PRECISELY BECAUSE WE HAVE NEVER BEEN COMPLACENT ABOUT THE FUTURE.

INSTEAD, WE HAVE HAD OUR HEADS DOWN, WORKING HARD TO ESTABLISH A PLATFORM FOR PROSPERITY.

SOME OF THE KEY DECISIONS WE HAVE TAKEN INCLUDE:

* LARGE ORDERS OF NEW GENERATION AIRCRAFT WHICH SHOULD GIVE US ONE OF THE WORLD'S MOST FUEL EFFICIENT FLEETS OVER THE NEXT DECADE.

* IN 2003, WE SET OURSELVES THE TASK OF GETTING OUR COSTS DOWN AND WE HAVE TAKEN BILLIONS OUT OF OUR LEGACY COST BASE, WITH MORE TO COME. THIS GIVES US THE STRONG BALANCE SHEET WE NEED FOR STRATEGIC SPENDING TO ACHIEVE FURTHER PRODUCTIVITY GAINS. AND IT IS WHY RIGHT NOW WE CAN BE IN THE MIDDLE OF THAT 30 BILLION DOLLAR CAPITAL EXPENDITURE PROGRAM FOR NEW AIRCRAFT.

* AT THE SAME TIME, STARTING ALSO IN 2003, WE HAVE SPENT OVER $2 BILLION ON THE QANTAS INTERNATIONAL AND DOMESTIC PRODUCT AND SERVICE - AN INVESTMENT THAT HAS CONSISTENTLY PLACED QANTAS IN THE TOP-FIVE OF PREMIUM AIRLINES WORLDWIDE.

* IN 2004, WE PUT IN PLACE OUR TWO-BRAND STRATEGY WITH JETSTAR. QANTAS IS STILL THE ONLY LEGACY AIRLINE TO HAVE INTRODUCED A SUCCESSFUL LOW COST CARRIER INTO MARKETS ALONGSIDE ITS PREMIUM BRAND, AND GROWN BOTH BUSINESSES.

* AND WE HAVE SEGMENTED ALL AREAS OF OUR BUSINESS, IN ORDER TO MAXIMISE EACH ONE'S OPERATING EFFICIENCY AND GROWTH POTENTIAL. OUR EMERGENT LOYALTY, HOLIDAYS AND FREIGHT BUSINESSES ARE THE RESULT.

THESE DECISIONS ENSURE THAT QANTAS IS WELL PLACED AS THE NEW AVIATION ORDER DEVELOPS - AND JUST AS WELL. BECAUSE THE FUTURE IS GOING TO BE VERY CHALLENGING INDEED.

AND HERE I WILL START WITH FUEL, BECAUSE THIS IS WHERE MANY AIRLINES WILL END.

FUEL

OIL, OF COURSE, IS A FINITE NATURAL RESOURCE AND WHETHER OR NOT THE WORLD HAS REACHED "PEAK OIL" IS A MATTER OF DEBATE. BUT THERE IS NO QUESTION THAT THE COST OF FINDING AND EXTRACTING OIL WILL CONTINUE TO CLIMB. TODAY’S FUEL PRICES ALSO DERIVE FROM A LONG PERIOD OF SUSTAINED GLOBAL ECONOMIC GROWTH, NOTABLY IN CHINA, INDIA AND THE MIDDLE EAST. AND THIS, OF COURSE, IS THE RESULT OF GLOBALISATION.

EVERYONE IN THIS ROOM TODAY IS FEELING THE IMPACT OF HIGH FUEL PRICES. AND WHILE WE WELCOME LAST WEEK'S SUDDEN DROP IN PRICES, THERE IS NO GUARANTEE THAT THIS TREND WILL LAST.

RIGHT NOW AIRLINES AROUND THE WORLD ARE CUTTING ROUTES AND CAPACITY, GROUNDING AND RETIRING AIRCRAFT, AND SHEDDING STAFF - IT IS LIKELY THAT 100,000 JOBS WORLDWIDE WILL BE LOST BEFORE THIS CALENDAR YEAR IS OUT. IN THE PAST SIX MONTHS ALONE 24 AIRLINES HAVE CLOSED DOWN COMPLETELY. THE MAJOR US CARRIERS ARE NOW PLANNING TO GROUND 465 AIRCRAFT - THAT IS MORE THAN TWICE THE SIZE OF THE QANTAS FLEET.

ON FRIDAY WE ANNOUNCED THE QANTAS RESPONSE TO THIS NEW ERA, BASED ON SUSPENDING RECRUITMENT, CUTTING JOBS AND REDUCING CAPACITY. IT IS VERY TOUGH, ESPECIALLY WHEN OUR PEOPLE HAVE BEEN SO STEADFAST AND FLEXIBLE THROUGH THESE YEARS OF CONSTANT CHANGE. I WISH IT WERE DIFFERENT, BUT ONCE AGAIN WE HAVE NO CHOICE BUT TO MANAGE ACTIVELY TO PRESERVE A SUSTAINABLE BASE FOR THE GROUP.

THIS FINANCIAL YEAR QANTAS EXPECTS TO PAY AROUND TWO BILLION DOLLARS MORE FOR FUEL THAN LAST YEAR. THIS INCREASE REPRESENTS MORE THAN OUR PROJECTED PROFIT BEFORE TAX FOR 2007/08.

BY FURTHER CUTTING OTHER COSTS AND BY INCREASING OUR FUEL EFFICIENCY WE CAN REDUCE SOMEWHAT THE NEED FOR A RISE IN FARES TO COMPENSATE, BUT WE SIMPLY CANNOT OFFSET THE FULL AMOUNT.

THERE IS ANOTHER POINT. JET FUEL HAS TRADITIONALLY COST MORE THAN THE CRUDE PRICE, BUT NOT BY MUCH. IN US REFINERIES, JET FUEL ONLY MAKES UP ABOUT FOUR PER CENT OF TOTAL OUTPUT – AND THE REFINERIES FIND THEMSELVES IN A GREAT POSITION TO CHARGE A PREMIUM.

JET FUEL IS CURRENTLY AROUND 167 US DOLLARS A BARREL, INCLUDING A REFINING MARGIN OF 33 DOLLARS A BARREL, WHICH IS MORE THAN DOUBLE THE HISTORIC AVERAGE OVER THE PAST THREE YEARS. AND IF WE LOOK OVER PRICES GOING BACK TO 2000, THE REFINING SPREAD HAS AVERAGED 8.38 US DOLLARS A BARREL SO THE MARGIN HAS IN FACT QUADRUPLED.

THESE REALITIES ARE CHANGING THE UNDERLYING ECONOMICS OF AVIATION, PERMANENTLY.

NOW LET ME ADDRESS GLOBALISATION MORE BROADLY. IN 2008 IT WILL SEEM INCREDIBLE TO MOST OF YOU TO HEAR ME TALK ABOUT THE GLOBALISATION OF THE AVIATION INDUSTRY AS AN "EMERGING TREND". IT IS A BIT LIKE DESCRIBING THE TELEPHONE AS AN EXCITING NEW COMMUNICATION TOOL.

IN OTHER INDUSTRIES - MOTOR VEHICLE MANUFACTURING, MINING, RETAIL - GLOBALISATION HAS BEEN ACHIEVED IN A RELATIVELY RATIONAL WAY, WITH THE RESULT BEING GLOBAL SCALE, STRONG BRANDS, AND GLOBAL SOURCING OF CAPITAL, INPUTS AND CUSTOMERS.

BUT AVIATION IS DIFFERENT - WHICH IS IRONIC GIVEN THAT AVIATION HAS ITSELF BEEN A MAJOR DRIVER OF GLOBALISATION. YET IT REMAINS A HEAVILY REGULATED SYSTEM WITH ACCESS TO INDIVIDUAL ROUTES STILL BASED ON OVER 3,500 BILATERAL TREATIES BETWEEN GOVERNMENTS. AIRLINES ARE STILL ASKED TO MEET CRITERIA THAT REQUIRE THEM TO BE "SUBSTANTIALLY OWNED AND EFFECTIVELY CONTROLLED" BY NATIONALS OF THE COUNTRY WHERE THEY ARE BASED.

THIS CREATES MAJOR DISTORTIONS THAT INHIBIT GLOBALISATION:

AIRLINES ARE FORCED TO OBTAIN THE MAJORITY OF EQUITY CAPITAL IN THEIR HOME MARKETS, EVEN WHEN IT MAY NOT BE THE MOST COST-EFFECTIVE SOURCE.

* IF AN AIRLINE SPOTS AN ATTRACTIVE OPPORTUNITY IN AN OVERSEAS MARKET, IT CANNOT SIMPLY ESTABLISH AN OPERATION THERE.

* NOR CAN IT ACQUIRE A PARTNER IN AN OVERSEAS MARKET THAT OFFERS NETWORK BENEFITS AND SCALE EFFICIENCIES BECAUSE THE PARTNER WOULD THEN NO LONGER QUALIFY FOR THE VERY ENTITLEMENTS THAT WOULD MAKE THE PARTNERSHIP WORTHWHILE.

IT IS ALL VERY CATCH 22.

THE UPSHOT IS THAT GOVERNMENTS OF NECESSITY REMAIN HEAVILY INVOLVED IN AVIATION - IT IS ONE REASON WHY AIRLINE BRANDS ARE STILL SO CLOSELY ASSOCIATED WITH NATIONAL FLAGS. AND IT IS ALSO WHY SO MANY GOVERNMENTS IRRATIONALLY TEND TO PROP UP THEIR FAILING AIRLINES.

THIS HAS RESULTED IN A LONG TERM OVER-SUPPLY OF CAPACITY; GOOD TIMES FOR CUSTOMERS; AND A REAL TEST OF PATIENCE FOR INVESTORS. OVER THE PAST 60 YEARS AIRLINES MADE US$11 TRILLION IN REVENUES BUT NET PROFITS OF ONLY US$32 BILLION, AN AVERAGE PROFIT MARGIN OF JUST 0.3 PER CENT.1

BUT THINGS ARE CHANGING, AND QUICKLY. INDEED, THIS FUEL EMERGENCY MAY BE THE CATALYST FOR AN ACCELERATED PUSH, AT LAST, TOWARDS INDUSTRY GLOBALISATION.

THE KEY DEVELOPMENT HAS BEEN THE NEGOTIATION OF AN AVIATION AGREEMENT BETWEEN THE EUROPEAN UNION AND THE UNITED STATES. THE FIRST STAGE OF THIS ACCORD CAME INTO FORCE IN MARCH THIS YEAR.

NOW ANY EUROPEAN AIRLINE CAN FLY TO ANY U.S. AIRPORT, AND VICE VERSA. BRITISH AIRWAYS CAN FLY DIRECT FROM CONTINENTAL EUROPE TO THE U.S., AND HAS ESTABLISHED "OPEN SKIES", A NON-PATRIOTICALLY NAMED SUBSIDIARY, TO TAP THESE NEW ROUTES. FOR THE FIRST TIME, AIRLINES OPERATING BETWEEN THESE TWO LARGE MARKETS CAN MAKE PURE BUSINESS DECISIONS ABOUT WHERE THEY FLY AND HOW OFTEN.

NEGOTIATIONS TOWARDS THE SECOND STAGE OF THE EU-US AGREEMENT STARTED IN MAY. THESE WILL COVER A RANGE OF AREAS, BUT IT IS THE PROGRESS ON INVESTMENT LIBERALISATION THAT EVERYONE IS WATCHING.

UNTIL NOW, MERGER ACTIVITY HAS NECESSARILY BEEN LIMITED TO SINGLE MARKETS, SUCH AS AIR FRANCE-KLM AND LUFTHANSA-SWISS IN EUROPE, US AIRWAYS AND AMERICA WEST, AND AIR INDIA AND INDIAN AIRLINES.

THE EU'S PUSH FOR THE ABOLITION OF FOREIGN INVESTMENT RESTRICTIONS HAS SO FAR BEEN RESISTED BY THE US, WHICH LIMITS FOREIGN OWNERSHIP OF ITS AIRLINES TO 25 PER CENT OF TOTAL VOTING STOCK. BUT THERE ARE SIGNS THAT THE US MAY BE AT LAST BE PREPARED TO ACCEPT AIRLINES FROM EUROPE - AND POTENTIALLY OTHER COUNTRIES – BASED ON THEIR "PRINCIPAL PLACE OF BUSINESS" RATHER THAN THEIR OWNERSHIP.

THIS WOULD BE A GROUNDBREAKING DEVELOPMENT. IT WOULD OPEN THE WAY FOR AIRLINES TO ENGAGE IN MEANINGFUL CROSS-BORDER INVESTMENT. AND SOONER OR LATER, IT WILL HAPPEN.

OVER TIME, CONSOLIDATION WILL TRANSFORM AVIATION. IT WILL PRODUCE A FEW, VERY LARGE AND EXTREMELY EFFICIENT GLOBAL AIRLINES WITH A PORTFOLIO OF INTERESTS AND BRANDS – LIKE AIR FRANCE AND KLM. THESE PLAYERS WILL HAVE ENORMOUS POWER IN MARKETING, IN FUEL BUYING AND HEDGING, IN AIRCRAFT PURCHASING, AND IN REACH.

THERE WILL STILL BE NICHE AIRLINES WITH SPECIALIST OFFERINGS - WHETHER FOR BUSINESS OR LEISURE TRAVELLERS - BUT THESE WILL NEED TO BE RUN VERY SKILFULLY, AND ANY WEAKNESS WILL LEAD TO A QUICK DEATH.

AND THERE WILL ALSO REMAIN THOSE POWERFUL, GOVERNMENT-BACKED AIRLINES, PARTICULARLY FROM THE OIL RICH STATES. THESE GOVERNMENTS WILL CONTINUE TO USE AVIATION SERVICES AS INSTRUMENTS OF NATIONAL ECONOMIC DEVELOPMENT.

NOW TO QANTAS AND THE AUSTRALIAN AVIATION INDUSTRY MORE BROADLY. WE ARE AT THE END OF THE WORLD. THE BEST END, NO DOUBT, BUT STILL THE END. WE HAVE NO HUB ADVANTAGE SO WE CANNOT CONNECT MANY POINT-TO-POINT ROUTES TO EASILY BUILD NETWORKS. OUR HOME POPULATION IS COMPARATIVELY SMALL. AND, OUR AIRLINES ARE PRIVATE AND COMMERCIALLY RUN BUT COMPETE MOSTLY AGAINST GOVERNMENT OWNED AND SUPPORTED AIRLINES.

THAT'S NOT TO SAY THAT QANTAS CANNOT BE SUCCESSFUL AS THE NEW WORLD ORDER UNFOLDS. IN FACT, I BELIEVE THE POTENTIAL OF QANTAS IS UNLIMITED, PROVIDED WE CONTINUE TO CHANGE, IMPROVE, INNOVATE AND STREAMLINE OUR BUSINESS.

THE CHALLENGES UNFOLD IN FOUR AREAS:

1. ACHIEVING GLOBAL STANDARDS OF EFFICIENCY
2. BUILDING THE MOST INTERNATIONALLY EFFECTIVE COMMERCIAL ARRANGEMENTS
3. SUSTAINING STRONG BRANDS
4. HAVING APPROPRIATE POLICY SETTINGS WHICH ENABLE US TO SURVIVE AND SUCCEED AS THE NEW ERA UNFOLDS.

LET ME START WITH EFFICIENCY.

THE QANTAS FLEET TODAY CONSISTS OF 228 PASSENGER AIRCRAFT. SOON WE WILL TAKE DELIVERY OF THE FIRST OF OUR 20 A380S. THEY ARE WONDERFUL AIRCRAFT, TEN PERCENT MORE FUEL EFFICIENT PER PASSENGER THAN OUR B747S.

BUT IT IS THE BOEING 787S THAT REALLY MATTER.

WE HAVE THE BIGGEST ORDER INTO BOEING FOR THE B787S OF ANY AIRLINE IN THE WORLD, WITH 65 FIRM ORDERS AND PURCHASE RIGHTS FOR ANOTHER 50. A POSSIBLE TOTAL OF 115.

EACH BOEING 787 IS EXPECTED TO USE ABOUT AS MUCH FUEL PER PASSENGER AS A HYBRID CAR. THESE WILL BE THE CORNERSTONE OF THE 21ST CENTURY QANTAS FLEET. IN AN AVIATION ERA BASED ON PERMANENTLY HIGH FUEL PRICES, QANTAS HAS POSITIONED ITSELF TO OPERATE A VERY FUEL-EFFICIENT FLEET OF AIRCRAFT.

AND OF COURSE WE ARE ALREADY UNDERTAKING A WHOLE RANGE OF RELATED FUEL AND ENVIRONMENTAL INITIATIVES WHICH WILL HELP US LOWER FUEL COSTS AND MINIMISE OUR IMPACT ON THE ENVIRONMENT.

SOME YEARS AGO, WE COMMITTED OURSELVES TO BEING MUCH MORE EFFICIENT.

BY NEXT YEAR WE EXPECT THE QANTAS GROUP’S COSTS - THAT IS A COMBINATION OF QANTAS, QANTASLINK AND JETSTAR - TO BE LOWER THAN VIRGIN'S - WHICH STARTED AS A BRAND NEW OPERATOR LESS THAN EIGHT YEARS AGO.

A KEY ASPECT OF GETTING OURSELVES GLOBALLY COMPETITIVE IS HAVING THE RIGHT COMMERCIAL ARRANGEMENTS. SO WE HAVE OUR FLYING BUSINESSES IN QANTAS AND JETSTAR. BUT WE ALSO HAVE A FREIGHT BUSINESS, A HOLIDAYS COMPANY, A FREQUENT FLYER PROGRAM, AND A FLIGHT TRAINING SCHOOL. AND EACH ONE OF THESE NOW HAS A MANDATE TO FOCUS ON ITS OWN COMMERCIAL OPPORTUNITIES, INCLUDING ORGANIC GROWTH, PARTNERSHIPS, ACQUISITIONS, STRIVING FOR GLOBAL COST-COMPETITIVENESS AND ATTRACTING CUSTOMERS OUTSIDE THE QANTAS GROUP.

WE ALSO BENCHMARK WORLDWIDE OUR ENGINEERING, INFORMATION TECHNOLOGY AND CATERING COMPANIES TO UNDERSTAND HOW THEY CAN BE MADE MORE EFFICIENT. AND WE ARE MAKING THE SERIOUS DECISIONS AND INVESTMENTS REQUIRED TO ENSURE THEY ARE.

FRANKLY, BEFORE TOO LONG, I EXPECT MOST LARGE AND COMPLEX AIRLINES WILL BE SEGMENTED IN THIS WAY. NO AIRLINE WILL BE ABLE TO PROP UP ITS INEFFICIENT CATERING COMPANY, OR FREIGHT BUSINESS, OR ENGINEERING FUNCTION. COMPETITION WILL BE TOO TOUGH, AND THE ALTERNATIVES WILL BE TOO ATTRACTIVE.

FOR FULL SERVICE CARRIERS, GLOBALLY COMPETITIVE NETWORKS WILL BE AS IMPORTANT TO SUCCESS AS COMPETITIVE PRODUCT. TODAY, WE ARE A CORE PART OF THE ONEWORLD ALLIANCE. QANTAS OFFERS CONNECTING SERVICES ON 125 ROUTES OPERATED BY PARTNER AIRLINES – THAT IS OVER 55 PERCENT MORE THAN FIVE YEARS AGO. IT IS A FORM OF VIRTUAL CONSOLIDATION IF YOU LIKE.

AS I HAVE SAID, THE NEW AVIATION WORLD ORDER WILL BE BASED ON STRONG GLOBAL AIRLINE BRANDS.

WELL WE HAVE TWO EXCEPTIONAL BRANDS IN QANTAS AND JETSTAR. THEY HAVE GIVEN US THE FLEXIBILITY TO MEET THE NEEDS OF A WIDE RANGE OF CUSTOMERS WHILE BETTER ALIGNING COSTS, REVENUES AND PRODUCT OFFERINGS IN INDIVIDUAL MARKETS.

JETSTAR IS NOW WELL ON THE WAY TO BECOMING A TRUE PAN-ASIAN BRAND. THIS IS A HUGE OPPORTUNITY, BECAUSE INTRA-ASIAN PASSENGER AND FREIGHT GROWTH RATES ARE LIKELY TO BE HIGHER THAN IN ANY OTHER REGION.

AND THEN THERE IS THE QANTAS BRAND. THE GROUP ANTICIPATES ANNOUNCING A STRONG PROFIT RESULT FOR 2007/08 AND THE KEY CONTRIBUTOR TO THIS OUTCOME WILL BE THE SUPERB PERFORMANCE OF QANTAS MAINLINE.

AS BRANDS BECOME MORE IMPORTANT THAN FLAGS TO AIRLINE SUCCESS, THE COMPETITION AMONG PREMIUM AIRLINES IS ONLY GOING TO GET FIERCER AND THE CYCLES OF INNOVATION WILL TURN MORE RAPIDLY.

AND FLOWING INTO SERVICE PROGRESSIVELY OVER THE NEXT TWO YEARS OUR CUSTOMERS ARE GOING TO SEE THE RESULTS OF OUR VERY SIGNIFICANT INVESTMENT. FANTASTIC NEW AIRCRAFT, OF COURSE, A COMPLETE DESIGN PHILOSOPHY ORCHESTRATED BY MARC NEWSON, PORTS AND FACILITIES UPGRADED, A SEAMLESS EXPERIENCE FROM THE GROUND INTO THE AIR, WONDERFUL NEW LOUNGES, A NEW LEVEL OF SERVICE EXCELLENCE - TAKING THE QANTAS STANDARD OF PREMIUM FLYING TO A WHOLE NEW LEVEL.

THIS IS GOING TO FURTHER SET QANTAS UP VERY SIGNIFICANTLY FOR THE FUTURE, NOT JUST AS AUSTRALIA’S FLAGSHIP IN THE WORLD, BUT AS A GREAT GLOBAL BRAND IN ITS OWN RIGHT.

FINALLY ANY COMPANY'S LONG TERM PERFORMANCE IS A RELATIVE MATTER - IT IS ALL ABOUT HOW YOU COMPARE TO YOUR PEERS. IN AVIATION THERE WILL ALWAYS BE A RELIANCE ON THE APPROPRIATE POLICY SETTINGS.

CERTAINLY WE NEED AN INDUSTRIAL RELATIONS ENVIRONMENT THAT ALLOWS US TO BE GLOBALLY COMPETITIVE. WE NOW LOOK FORWARD TO A PERIOD OF RELATIVE CALM AFTER REACHING SOME IMPORTANT AGREEMENTS WITH MAJOR UNIONS.

QANTAS HAS ALSO SUBMITTED A DETAILED CONTRIBUTION TO THE FEDERAL GOVERNMENT’S CURRENT REVIEW OF AVIATION POLICY COVERING EVERYTHING FROM AIRPORTS TO SECURITY TO TAXATION. WITH SOME GOVERNMENTS USING AVIATION AS A TYPE OF NATIONAL LOSS-LEADER, GLOBALISATION WILL NOT AUTOMATICALLY - OR PERHAPS EVER - PRODUCE A TRULY LEVEL PLAYING FIELD, AND WE NEED POLICY SETTINGS THAT UNDERSTAND THESE DISTORTIONS.

WE NEED TO BE ABLE TO SECURE CAPITAL TO SUPPORT INVESTMENT IN NEW AND MORE EFFICIENT AIRCRAFT, TO GENERATE RETURNS TO SHAREHOLDERS, AND TO OPERATE ON A FAIR AND INTERNATIONALLY COMPETITIVE FOOTING.

THE LATEST ISSUE ON THE AGENDA IS OF MAJOR CONCERN TO US. THE GOVERNMENT’S GREEN PAPER ON EMISSIONS TRADING WOULD HAVE AIRLINES PAY FOR 100 PER CENT OF THEIR CARBON PERMIT OBLIGATIONS IMMEDIATELY, UNLIKE MANY OTHER EMISSION INTENSIVE INDUSTRIES. QANTAS WILL BE TAKING THIS UP THROUGH THE CONSULTATION PROCESS BUT IT IS IMPORTANT TO UNDERSTAND THAT AVIATION IS BOTH A NECESSITY AND A BENEFIT FOR THE ISLAND CONTINENT OF AUSTRALIA.

SO LET ME CONCLUDE. THE SIZE OF THE AVIATION INDUSTRY IN THE COMING YEARS WILL BE SIGNIFICANTLY DETERMINED BY THE AMOUNT BY WHICH FUEL PRICES RISE. THE INDUSTRY STRUCTURE WILL BE ON A GLOBAL SCALE, AND FOCUSED ON MAXIMUM COST CONSTRAINT AND EFFICIENCY. OVER THE NEXT TWELVE YEARS MANY MORE AIRLINES WILL VANISH, UNABLE TO COPE WITH HIGH FUEL PRICES, OR THEY WILL BE SWALLOWED UP IN TAKEOVERS OR MERGERS.

THE WORK THAT QANTAS HAS DONE TO DATE MEANS WE WILL AVOID ANY SUCH DARK DESTINY. AND IF WE GET THE COMMERCIAL STRATEGIES AND THE POLICY FRAMEWORK RIGHT, THEN AUSTRALIA HAS A VERY STRONG FUTURE IN THE NEW AVIATION WORLD.

AND MORE THAN THIS, I SEE QANTAS AS HAVING LAID THE GROUNDWORK TO BE A SERIOUS PLAYER IN THE NEW ORDER THAT WILL UNFOLD OVER THE NEXT FIVE TO TWENTY YEARS.

Issued by Qantas Corporate Communication (Qxxxx)
Email: qantasmedia@qantas.com.au