Qantas Airways may be forced to sell its subsidiary Jetstar, reduce services to Australia's secondary cities and cut jobs if a proposed legislation that "constitutes a major threat" to its business is passed, Qantas CEO Alan Joyce has said.
Amendments to the Qantas Sale Act have been proposed by Australian senator Nick Xenophon, who wants the airline's main operation centre to be located in Australia. He has also proposed that most of the group's heavy maintenance, flight operations and training be conducted in the country rather than overseas.
The Qantas Sale Act was passed in 1993 when the airline was privatised and the main aim of the act is to keep the airline "a majority Australian-owned flag carrier".
In his testimony to the Australian Senate's Rural Affairs and Transportation Committee, Joyce said Qantas must "adapt or die" in the current global economic climate. The proposed amendments will "strangle our capacity to run our business", he added.
For example, forcing Jetstar to conduct most of its heavy maintenance in Australia will make the low-cost carrier uncompetitive against airlines with a lower cost base from doing almost none of their heavy maintenance in Australia.
"Those of us running Qantas would have to face a choice: allow Jetstar to fail within the confines of the Qantas Sale Act, or sell it to allow it to succeed outside it," Joyce said.
Foreign carriers have not served many of Australia's regional centres, despite a "liberalised aviation sector with domestic open skies" in the country, he added.
This makes the Qantas Group's network "critical to maintaining and growing those direct services" and "sufficient scale" in the company's regional, national and international networks is necessary to be profitable.
Joyce pointed out that when Qantas's airlines use foreign and Australian crew on "tag flights" − where domestic and international sectors are combined on destinations such as Cairns and Darwin − the Australian crew operated under Australian wages and conditions, while the foreign crew operated under the terms and conditions of the countries where they are based.
An amendment that seeks to treat the international crew just like their Australian colleagues on domestic legs of international flights will result in Qantas being unable to "viably operate those international services" and withdraw services connecting Darwin and Cairns to Asia and Europe, said Joyce.
"The impact on regional tourism and development would be immediate and negative. It would result in loss of employment and investment in regional Australia, with flow-on effects for the rural communities who rely on regional centres," Joyce said.
"Strangling our international business and forcing us to pay uncompetitive wages compared with our foreign airline competition is no way to make us stronger, better or more Australian," Joyce said.
Pushing through the amendments will have negative consequences for both Qantas and Australia, he added.
"Measures targeted at lowering our competitiveness, closing us off from global markets and raising our cost base are not patriotic, nor are they smart. Frankly, they are not workable. Qantas is committed to Australia, to employing Australians and to growing and investing in Australia. We cannot be constrained by misguided legislation that will achieve precisely the opposite of its aims," he said.