Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

This evening, I would like to use this opportunity to discuss the issue of Qantas. Last week, we had the shocking result of a record $2.8 billion loss for Qantas, including some $2.2 billion in asset write-downs, much worse than the market expected—but, inexplicably, the share price has gone up. I want to look at a whole range of issues as to what has gone wrong with our great national carrier, Qantas, one of the world's great airlines—'Brand Australia' in many respects. And I want to make it clear that my complaint is not of the 30,000 men and women who work for Qantas. Indeed, I find them outstanding to deal with as a customer and passenger of Qantas. It is the management and board, led by CEO Alan Joyce and Chairman Leigh Clifford, that I find should be subject to appropriate scrutiny.

To set the scene, there was a terrific opinion piece just a few days ago in the Fairfax media, by Nicholas Stuart, headed, 'Qantas woes down to a complete failure of leadership'. He says that Alan Joyce really has no idea:

He doesn't … have a clue what's true and what's not. He may indeed be spinning a different story every day—but he does so with the sort of earnestness that just can't be faked. Joyce believes his own yarns and this is Qantas's biggest problem.

He goes on to make reference to Leigh Clifford, Mr Joyce's 'supine chairman', who:

… doesn't have a clue either. Management theory suggests organisational processes are the key to success. Theoretically, Clifford's time as CEO of Rio Tinto should, therefore, have equipped him with the skills to run an airline. Unfortunately, it's rubbish. Each business is different. It's like suggesting a retailer can run a media group. Clifford and Joyce both took up their positions in 2008.

Parenthetically, in fact it was 2007 for Mr Clifford and 2008 for Mr Joyce. Mr Stuart goes on to say:

Nearly six years on it's obvious they're stumbling blindly in the dark. It's like watching two drunks attempting to open a door. One stands spellbound as the other continues finding new, shiny baubles and continues thrusting them into the lock. It's never going to open, but they're too intent on the task to listen to advice.

On 8 July, I wrote to Mr Greg Medcraft, the chairman of ASIC, in respect of Qantas Airways Ltd and related entities, and I raised a number of concerns that have been put to me, in particular whether Qantas has complied with the continuous disclosure requirements of section 674 of the Corporations Act and the good-faith provisions in respect of section 184 of the Corporations Act. I raised these concerns as a result of a close look at Qantas's books, decisions made by Qantas management and statements that have been made. Of course, these are matters for ASIC to investigate, and I hope that there will be a thorough investigation of these matters in the context of these concerns. I give two specific examples. In February 2011, Mr Joyce made a number of statements in respect of Qantas's future and they were very positive statements. On 17 February, Mr Joyce said:

Qantas achieved an Underlying EBIT of $165 million for the half-year. The result is 175 per cent above the prior corresponding period, driven by a $411 million, or 8 per cent, increase in total revenue.

Qantas improved yield by 9 per cent, and increased capacity by 3.3 per cent demonstrating a strong revenue recovery across both international and domestic business.

Yet, just four months later, on 22 June 2011, Mr Joyce said:

In FY11, Qantas International is forecast to generate a loss before interest and tax of approximately $200 million, on invested capital of over $5 billion, with a weaker result expected next year. Qantas International is the Group’s weakest business — it has achieved required returns only three times in the past 15 years. Clearly the situation is not sustainable.

These are two completely contrasting statements.

The issue I have with that is that in the intervening period between February and June Qantas shares drop ped by some 25 - 27 per cent. If you are a mum-and-dad investor—and I use that term broadly and advisedly—or a small investor, and Qantas has something like over 100,000 who have 10,000 shares or less, you could have made an investment with your retirement savings or you could have made an investment for your financial future based on those statements in February 2011. Yet, there was nothing said between then and the statement of June 2011 that would have indicated something otherwise. We now know that Qantas, in answers to the Senate committee process into the Qantas Sale Act, has actually had confidential briefings—commercial-in-confidence briefings—with institutional investors. I think that is wrong.

If we believe in an efficient marketplace and if we believe in a stock market that is robust and well-functioning, then every investor—whether they are a multibillion dollar hedge fund, a multibillion dollar investment house or a mum-and-dad investor with $10,000-$20,000 to invest—should get the same information at the same time. You cannot go to your mates and provide them more information—if that is what is happening—than mum-and-dad investors.

Qantas says that it has complied with the act. I think we need to look at reform of the legislation because the information should be given equally. I think it is interesting that Mr Medcraft, as the chairman of ASIC, has made some very interesting comments in relation to the issue of disclosure generally about the need to have open information and how the internet can provide a vehicle for providing information to people very quickly and efficiently. This is a big issue, because from October to December last year—from the AGM to just seven weeks later—the Qantas share price also fell 25 per cent between statements that were very positive about Qantas's future to other statements that said that things were looking very bad, that there would have to be significant layoffs, and that a huge loss was being expected. These are issues that need to be dealt with.

I will be writing to ASIC again with further information that I have obtained in relation to these recent developments. I think it is very important that a great airline such as Qantas, that has 30,000 employees and provides a valuable national and international service, that is brand 'Australia' and a great airline that I am very happy to fly on has the management that it deserves. If the market is not operating effectively and if there are confidential briefings, then that is an issue that it is significantly of concern. I do not want the flying kangaroo to become a limping joey. I do not want a great airline to be crippled by bad management decisions. I find it curious that institutional investors have not turned on Mr Joyce, the board and Mr Clifford in particular over the last few years. Is it because of the confidential in-confidence briefings that they have had? I think that is a legitimate question to ask. It is a legitimate question to put out there in the public arena. It is a legitimate issue for ASIC to determine.

These are matters that, I hope, will be investigated. I do not think we have heard the end of this saga yet. I hope that the employees of Qantas get the management they deserve so that we can have a strong and successful national carrier.