PRIME MINISTER
TRANSCRIPT OF A JOINT PRESS CONFERENCE BETWEEN THE PRIME
MINISTER THE HON P J KEATING MP, THE HON RALPH WILLIS MIP,
MINISTER FOR FINANCE, AND SEN THE HON BOB COLLINS MP,
MINISTER FOR TRANSPORT AND COMMUNICATIONS, CANBERRA 2
JUNE 1992
E OE PROOF COPY
PM: My colleagues and I are here to announce a little
bit of history. It's always Labor that makes the
history and it's making it again.
The Government has approved the sale of Australian
Airlines to Qantas. It's also endorsed the sale of
100 per cent of a combined airline subject to
approval by the Australian Labor Party. These
decisions were taken by the Cabinet last night and
agreed to by the Caucus this morning.
The main factors bearing upon the decision are that
the Government believed that selling the two
airlines separately, after we'd moved from
expression of interests to indicative bids, that
there was not substantial recompense to the
Commonwealth in selling Australian Airlines alone or
selling 49 one hundredths of Qantas alone, and that
the benefits to each company of joining them making
Qantas a more complete carrier with a domestic and
international base substantially revalued, up-valued
the value of the merge entity.
So what will happen now a sale agreement will be
signed tomorrow between Qantas and the Government
under which Qantas will pay $ 400 million to the
Government for 100 per cent of Australia Airlines,
and then subject to the processes of the Australian
Labor Party the Government will then propose to sell
100 per cent of Qantas by a trade sale and a public
float, retaining a golden share for the national
safeguards which we think are appropriate for the
dominant national carrier.
As well as that, the Government will be establishing
an independent Tribunal by legislation, which we
will introduce shortly, to allocate routes to the
other domestic carrier Qantas. it would have been
in terms of the ' One Nation' statement to the two
domestic carriers Australian and Ansett, did I say
Qantas I meant Ansett. As now the international
routes associated wi-th Australian will be those of
Qantas. Ansett or any other domestic carrier may
apply to the Tribunal for international routes, and
we would require as part of the legislation of the
Tribunal the task of building a competitive
international market for aviation from Australia.
So that would see a second international carrier
established and based in Melbourne.
In all the Government is breaking down another
micro-economic reform barrier to give Australians
cheaper seats, better service, a better
international airlines system, adequate financial
compensation to the Commonwealth and the important
and substantial recapitalisation of
Qantas/ Australian of a very large sum and should
return to the Budget over $ 1 billion.
Again I make this point to you. Whether it be in
the waterfront, in telecommunications, in road
transport, in rail, in aviation, the only party that
has made the micro-economic changes is the
Australian Labor Party this Government.
The last Government, the Government Dr Hewson
advised, signed the two airline agreement in
indecent haste, three weeks before the 1983
election. We had to rely on this Government to
deregulate that system in the late 1980s to now be
able to put us in a position to produce a mature
airline structure for Australia. So not only did
the Coalition not take the moves to make the airline
system better, it actually positively obstructed it
by signing again, after the writs had been issued
for an election, a two airline agreement. So I put
to you, those of you who tend to write us off every
three weeks because we haven't done hand stands,
triple somersaults with pike, broken down fifteen
other micro-economic barriers which no other
Government did in 50 years, that again only this
Government is changing Australia, only this
Government knows how, and only this Government has
got the courage to do it.
J: Prime Minister, how quickly do you expect the Labor
Party to respond to this fait accompli that you've
presented them with?
PM: It's not a fait accompli, but we are using the due
processes of Caucus Committee, Cabinet, Caucus and
then Party considerations and I'll be taking the
issues up with the National Secretary forthwith.
3: Should there be another special party conference
like there was last year?
PM: Well that's a matter for judgement for us. Can I
just say that any questions you'd like to put to
Ralph who has overseen the assets sales process now
for some time and Bob, who while just now Minister
for Transport and Communications, was Minister for
Aviation for some time and-has been wrestling with
these issues for some time, both of them of course
being entirely material to bringing this matter to a
head.
J: Mr Keating will the funds from this sale be
earmarked in any special way, I think there was a
resolution to that affect, wasn't there, at the 1990
conference?
PM: No, they are not earmarked, but again it would
obviously give the Government more budget
flexibilities than it would otherwise have?
J: Is that billion dollar figure the net figure?
PM: That would be net. Would you chaps like to say
anything?
RW: Just on recapitalisation, the billion dollars plus,
which is referred to in the press statement, is
after recapitalisation of the airlines. So in other
words, that's all to us that the new owners will be
in charge of the recapitalisation of the airlines,
that's all cost to us.
3: Didn't you have a figure written into the forward
estimates already for an estimated sale, price for
the airlines?
RW: No, we had some figures in this year's budget, $ 500
million for assets sales which included the
airlines. That's obviously slipped. Now the amount
that will be in the Budget for next year from asset
sales will obviously be much higher.
J: Isn't this in reality making a virtue of necessity
that the asset sale program can become bogged down,
frozen and this is really a text book case of how
not to privatise. You've been changing policy I
think 4 times now since you started this process.
This is the sort of the inevitable conclusion of a
lot of confusion.
PM: The Sydney Morning Herald can always put the most
negative connotation on the most positive outcome.
If you didn't fly the flag Tom, ( Burton), of the
sell of professional narks, I'd be disappointed in
you. But could I just make the point that we have
through this sought to see which is the best way we
could get flexibility in policy and at the same time
maximise values. Now we've had these expressions of
interests, you've got to ask people what they think
they'll pay, not what some adviser thinks but what
they'll actually write a cheque for, and then see
what options are available to you. The main thing
is getting the mail through, getting the job done.
This is a substantial and large micro-economic
change. In national political terms it beats the
hell out of frightening old ladies, which is what Dr
Hewson is about with his pamphlets.
3: Prime Minister, it will carry through into-pay
television as well?
PM: We considered that last night, we are going to
consider it again in the Caucus processes over the
next day or so and then take it to the Caucus
probably tomorrow.
J: Are there any changes re some of the other areas
such as foreign ownership, such as local content?
PM: You'll hear about all those at the right moment.
3: What's your assessment of the Caucus' view this
morning Mr Keating, of selling 100 per cent of the
merged entity?
PM: The Labor Party has got a great attachment to the
various Government Business Enterprises it has, but
it also has a mature view about their long run
benefits. Long run benefits for-Australia, and the
long run benefits of them being properly set up.
Qantas has been an undercapitalised business for a
long time it's got 90 per cent debt and 10 per
cent equity. This simple notion that people feel a
warm inner glow about it, but give it no money is
not doing it justice. And if we sit around the
Cabinet table I think Ralph would bear this out
because he and I have sat through all of the Budget
rounds bar one for me over the years but if we
said to any of them look social policy takes second
place to a Qantas recapitalisation, there wouldn't
be one element of the Caucus support it. Now there
may be people fairly dewy-eyed, getting dewy-eyed
about Qantas, everyone who is in that predicament
had there cheque books shut as far as the Government
was concerned, and Qantas they thought could live on
implicit guarantees and debt. And in the end equity
doesn't attract an interest rate and debt does, and
in the lean times you've got to pay the interest
rate.
J: Will the name Qantas be retained?
BC: Yes, by way of the golden share and Tom. Can I just
say this about those policy changes. It's
absolutely true that there have been policy changes
and you would have to acknowledge that every single
one of those policy changes has enhanced the
aviation environment, there is no question about
that, and the tourist industry. And I have to say
I'm personally delighted with Caucus support this
morning for this latest one because it is going to
further enhance the environment for the travelling
public. I mean, these changes have been painful,
there is no question about that. They've been
difficult to make and a lot of people have felt the
pain from it. They haven't been made for the
benefit of the airlines, they've been made for the
benefit of the national economy and the national
good. Now I might also add this stands in very stark
contrast, and I invite you to have a look at it, at
what's been proposed by the Opposition in what has
now become the most important export earner this
country has got that's tourism, $ 7 billion a year.
We've just provided a number of policy changes that
have substantially improved the results that that
industry is going to get. By contrast, " Fightback"
have proposed an outrageous policy, and it is
outrageous, where they are going to provide
extremely valuable rights for a whole mass of
international carriers with no reciprocal rights
being negotiated for Australian carriers under the
guise of this so-called open skies policy. Now this
Is an outrageous aviation policy when you consider
the value of these assets and how every aviation
nation on this earth negotiates in this part of
bilateral arrangements, but on top of that if that's
not enough to kill of f our aviation industry,
they're going to stick a 15 per cent GST tax on the
best export earner the country's currently got, the
only export industry that is not exempt from this
tax. Now that's a great way for encouraging
Australians to take their holidays overseas and
providing a disincentive for people to come here.
J: The view though you've ridden over party's own
policy how do you explain that to traditional
Labor voters?
PM: No, that's not right. This Government doesn't usurp
the prerogatives of the Labor Party. Now if you go
in my case, when I needed to change the policy in
relation to foreign banks I went to a Labor Party
conference. When we needed to change the policy in
relation to telecommunications we went to a Labor
Party conference, to its procedures, to its
Executive, to its forums. This will be the case
now.
J: Given that fact, Prime Minister, when do you expect
to this process to be complete?
PM: Well early enough for the sales process to complete
so as to tabulate and collate the proceeds into the
figuring for the 1992-93 Budget.
RW: So the trade sale which has been in place for some
time will go on to the end of this year, it should
be completed by the end of this year for the 49 per
cent, or some part of that 49 per cent, by the end
of this calendar year, and then there will be a
float in the first half of next year of the 51 per
cent, which is not in the trade sale and any part of
the equity in the trade sale, which isn't sold as
part of the trade sale.
J: The next step, Mr Keating, that you go to the
National Executive and determine whether you can bypass
a special conference or you need a special
conference, is that how you now proceed?
PM: We'll open discussions with the National Secretary
and the National Executive.
J: Will the proceeds from this sale be used to reduce
the Budget deficit Mr Keating, or to fund additional
spending?
PM: You're asking me is it to be devoted. We couldn't
say now what the Cabinet's spending priorities will
be. Whatever the proceeds are they will diminish
the budget deficit in the final analysis by that
figure. That's not to say though that the proceeds
themselves, if one were to look at the actual block
of funds, would be devoted exclusively to lowering
the budget deficit, they may not.
J: Mr Keating what would you say to members of the
public who think this Government had a $ 2 1/ 2
billion deficit blow-out a few weeks ago? Now we
have got all this sudden urgency to sell-off the
airlines.
PM: Well, I would say that if they had followed the
debate and the process from the last National
Conference of the Labor Party in late 1990, they
would know that this process has been running at
least since then.
3: But why the sudden urgency? You were talking 70 per
cent on Sunday.
PM: Well the sudden urgency is that the expressions of
interest period has ceased, the indicative bids have
been lodged, the Government has now got to make a
decision about moving to the next stage which is a
due diligence on the part of the bidders of the
assets in question, and then for binding bids to be
made. I mean, the urgency is the process which is
now at that point.
J: But why did you have 70 per cent on Sunday?
PM: Well that was an option, 70 or 100.
J: Why didn't you annunciate the 100 on Sunday?
PM: I did. I said 70 or maybe more, 100.
J: What's a golden share, and how does it work?
BC: It's a standard provision that's found around the
world in a whole different number of aviation
environments. It is well understood by the business
community now, I mean Malaysian Airlines, Singapore
Airlines, KLN, a whole range of airlines have been
sold. Fundamentally it is a contractual condition
which is placed on the sale by the Government with
whatever conditions attached to it, the Government
determines appropriate to preserve the national
interest provisions. But at the same time, not so
onerous as to depress the price.
J: On the Paye TV issue, are you prepared to stick to
the 45 per cent proposal
PM: Well we have considered this matter last night and
we will consider it today and tomorrow, and I think
then is the appropriate time for me to speak about
that.
3: Senator Collins won't the State of Qantas' business
value be subsumed by the international interests
within the trade sale?
BC: Well that's not possible because for a start, in
terms of foreign interest, we are constrained not
simply by our own rules, but by the I. C. A. O. rules,
as you know, which means that an absolute maximum of
per cent of the airline can be owned by foreign
interest, otherwise it loses its designation as an
Australian national carrier. And by process of a
trade sale, and a public float, I think that
ultimately the lion's share of the airline, in fact,
is going to rest with the public.
PM: Before you continue, we have got question time on at
so we have only got time for a few more.
3: Won't then Qantas lose some routes?
BC: No, in fact, under the proposals that are ancillary
to this, in terms of the Aviation Tribunal
legislation, which Caucus I might add approved this
morning, and it will be introduced into the Senate
this week. All of Qantas' existing entitlements are
protected, arnd of course they are public assets, arnd
as you know those entitlements are very valuable
assets, as the way it should be. So Qantas doesn't
stand to lose anything by this deal, it in fact
stands to gain considerably.
J: What measures have been put in place to create a
competitive market? You indicated you wanted to try
and grow..
BC: Yes, those matters are layed out very thoroughly and
Tom ( Burton) I am happy to show them to you later,
they are contained in some detail in the
Government's policy statement which is enforceable
under the provisions of legislation. They are the
things that the Tribunal has to have regard to in
making decisions, and it is a pro-competitive set of
criterium that are being used.
J: How can you be sure fares will be cheaper, if you
talk about domestic and international? Can you put
any sort of figure on it?
BC: Well I personally haven't even raised the question
of cheaper airf ares.
3: The Prime Minister has.
BC: Well it will inevitably have the same result, you
can never put a figure on it, that's determined by
the market. And in fact, it was interesting
watching in the early hours of this-morning, the
Chief Executive of American Airlines talking about
the situation that does exist in the deregulated
market where he said that the whole market is
basically hostage to any irresponsible operator. I
mean, these are the down-sides of a deregulated
market, but the up-sides are enormous. And if you
doubt that just have a look at the tourist figures
in what has been a booming market in the face of an
otherwise flat economy. There have been enormous
benefits from domestic deregulation, the same
benefits are going to be delivered by opening up the
international area. But I will just make the
obvious point, that is already a highly competitive
market of course, we are talking about additional
Australian carriers in what is already a very
competitive international market.
J: And the second international carrier will have to be
based in Melbourne?
PM: No, but if it's Ansett it is based in Melbourne, and
Sydney Airport is of only limited size and the
Qantas Jet Base is there, and its headquarters are
there, and it simply couldn't stand physically
another major carrier as a base.
BC: I might also add while this has been going on we
have of course been advancing negotiations with the
New Zealander's. The New Zealand Minister for
Transport was over here last week for a second round
of negotiations. Those discussions are proceeding
very positively and both Governments are confident
we will be making a joint statement in the near
future about that.
J: What's more likely to be the second international
carrier, Ansett or Air New Zealand?
BC: That is why we are establishing a Tribunal, which
will be a publicly accountable process. So that it
won't be the Government picking winners in this
sense, it will be a process which is open and
accountable.
PM: Thank you.