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From Schwartz Media, I’m Ange McCormack, this is 7am.

Qantas has had a fortnight that’s gone from bad to worse.

The airline has been forced to ditch expiry dates for unused covid flight credits, allegedly sold tickets for flights that had already been cancelled, and its CEO Alan Joyce faced a grilling over price gouging.

Meanwhile, the government is being accused of unfairly propping up Qantas, and putting their profit making ahead of consumers’ interests.

Today, senior reporter for The Saturday Paper Rick Morton on whether Qantas will have to pay back their taxpayer funded support, and why the government is so cosy with our national carrier.

It’s Monday, September 4.

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Audio excerpt -- Reporter:

“Post-COVID, the flying kangaroo is soaring again. A record profit of two and a half billion dollars, the outgoing Qantas boss engineering a remarkable turnaround for Australia's national carrier. But on the flip side, CEO Alan Joyce still can't escape complaints from customers about service and sky high air fares.”

ANGE:

Rick, Qantas has had a shocking fortnight and at the centre of it all is Alan Joyce, the airline's CEO who's wrapping up soon. Can you tell me about why he and Qantas are under so much scrutiny at the moment?

RICK:

Yeah, it's quite a lot of pressure they're under, and it all really started kicking off when Qantas announced the biggest profit in their entire history - $2.5 billion before tax and in a cost of living crisis, it's not a good look, especially when Qantas has also recently been accused of bad service, cancelling flights, price gouging, you name it. And for customers, it's incredibly grating to see an airline actually do so well while offering poor service and people are getting angry about it. And of course, one of the people at the centre of this story is Alan Joyce, the CEO of Qantas, who's been in that job since 2008.

So essentially 15 years at the helm and has become known really for his kind of brutal corporate strategy. And of course, Alan Joyce is due to step down as CEO in November. But before Alan Joyce actually does step down, he was hauled before the Senate inquiry into cost of living because flight prices are super expensive at the moment. In fact, they're still at pretty unprecedented levels even ahead of inflation.

Audio excerpt -- Speaker:

“Each please state your full name and the capacity in which you appear. We might start with you, Mr. Jones.”

Audio excerpt -- Alan Joyce:

“My name is Alan Joyce and I'm the CEO of the Qantas group.”

RICK:

And so what made that particularly galling, of course, was that Qantas received huge taxpayer funded bailouts during COVID to the tune of about $2 billion, some of which was, you know, the government paid to use their planes to carry freight. But also some of it was just literally a handout, including $900 million in Jobkeeper, basically to keep their staff. And then, of course, Qantas still sacked about 2000 staff and baggage handlers during that time.

Audio excerpt -- Tony Sheldon:

“..and you've reported record profit. So you've destroyed the playing conditions of your workforce, but you haven't invested those savings into reducing prices. In fact, you've done the opposite. You've gouged the travelling public on fares.”

RICK:

And Joyce was grilled about how Qantas could instead of paying it back, post a profit that will benefit Alan Joyce personally and his own kind of long term share structure. And Bridget McKenzie, the Nationals Senator asked him, you know, you deferred your 2020, 2021 and 2022 long-term bonus shares again.

Audio excerpt -- Bridget McKenzie:

“Are you going to do that this month or have you chosen to accept these shares?”

RICK:

And Joyce confirmed that he had.

Audio excerpt -- Alan Joyce:

“I have chosen to accept these shares because the company is now back in profits. And then and as you know, I'm leaving as CEO on the 3rd of November.”

RICK:

Which was pretty interesting because McKenzie picked up on it straight away.

Audio excerpt -- Bridget McKenzie:

“So, Mr. Joyce, you actually set aside your bonuses so you can take them later so Qantas can make a $6.3 billion loss and you at some later date can actually collect, you know, $6 million in bonuses.”

RICK:

She said meanwhile, Australians can't find their bags.

Audio excerpt -- Bridget McKenzie:

“We've got cancellations and delays, particularly in and out of Sydney that are all - I would suggest to you and I will go to this, that seem very premeditated.”

RICK:

And she suggested that Joyce was benefiting from these bumper profits, was benefiting from the fact that airfares were extraordinarily high despite the lack of service.

Audio excerpt -- Bridget McKenzie:

“It's a very cosy arrangement that you've set up for yourself.”

RICK:

Of course, Alan Joyce disagreed with this.

ANGE:

And Rick, you've been speaking to federal politicians all of last week about this. How have they taken Alan Joyce's defence of Qantas?

RICK:

One former senior government minister I'm pretty sure was having flashbacks when I spoke to him, told me that the airline's management were fucking terrorists and he said they will do whatever it takes in their own interests and only in their own interests. I also spoke to Barnaby Joyce, different Joyce not related and he told me that the $2 billion in government assistance really should have been treated as a loan by Qantas. And he said, you know, I think as a former transport minister, Alan, the money that supported Qantas was not my money nor the Treasury's money, it was the Australian taxpayers money. And to be quite frank, it was borrowed from the Australian taxpayer and will have to be repaid back to the Australian taxpayer.

ANGE:

Yeah, right. And that's very strong language and quite a strong assessment of Qantas as an operator. So I want to go through a bit of that. First of all, this money Qantas got from the Government, what's the case for them paying that back and is that even possible?

RICK:

It's definitely possible to pay this money back because other firms have done it. Harvey Norman, Citigroup, Seek, Nick Scali furniture, you might remember from the ads, they all paid Jobkeeper back, sometimes under great duress and public pressure because there was no requirement for this. But Alan Joyce doesn't want to go there. And as Joyce said in an interview with Sarah Ferguson on 7:30 a couple of weeks ago, you know, why would we pay that money back?

Audio excerpt -- Alan Joyce:

“Should our people who got the money for Jobkeeper pay that back? And you'd say no, because that's asking them to pay back in a difficult period of time. So what money do we pay back exactly? Because all of that money, when…”

RICK:

He implied that they'd have to pay that money back themselves as opposed to Qantas, the airline. And of course, that's just not how any of these things worked. Qantas could not have maintained its position without those workers. And so I've discovered in the course of reporting this story that that is something that had been very recently under active consideration by the Qantas Board.

They discussed whether it was possible to stabilise the freefall reputation of Qantas at the moment by paying some or all of that Jobkeeper money back. And it was something that the board thought might be seen as a gesture of goodwill and maybe a distraction from their other woes. But of course no decision has been made on that. But Ange, the government support is really only one of the problems that Qantas has right now. It's just one crisis that Qantas is dealing with in a list of many crises that go to the very core of its image and reputation and that are causing it significant damage.

ANGE:

Coming up – Did Qantas sell flights to customers that it knew would never fly?

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ANGE:

Rick, we've been talking about Qantas and it's actually facing several different scandals all at once. Could you tell me a bit more about this allegation that Qantas has gotten preferential treatment from the Government?

RICK:

Yeah, this is an interesting one because it goes back a few months to July this year and it was revealed the federal government rejected a bid by Qatar Airways to add 21 extra flights per week into Sydney, Melbourne and Brisbane, and that's in addition to the 28 weekly flights that it currently offers. The Federal Government Transport Minister Catherine King blocked it, did so apparently without it going to Cabinet. Now, of course, Qantas admitted to lobbying for that decision. Joyce defended that decision by saying that, it would have distorted the market. Of course, the complicating factors here for the Albanese government more broadly, which is that, why was this decision made by Catherine King? Albanese's washed his hands of it, got nothing to do with me. So these are all very interesting things. And then, of course, you get the spanner in the works by the name of Assistant Treasurer Stephen Jones, who gives an interview to the Australian Financial Review that gives the game away essentially.

ANGE:

What did Stephen Jones say?

RICK:

Firstly, he said Qantas profits are a good news story. And then he said it was in the national interest to keep Qantas profitable.

Audio excerpt -- Stephen Jones:

“We can drive prices down, but if we drive them down to a level where it's actually unsustainable to run an airline...”

RICK:

He said that if you allowed more access to Qatar, it might drive down international fare prices.

Audio excerpt -- Stephen Jones:

“Instead of having two carriers, we'll design our markets in a way which will make it unsustainable for the existing Australian based carriers.”

RICK:

By which he means Qantas. And of course, Catherine King then, the Transport Minister was then, of course she was asked about this and she was caught sort of off guard by Stephen’s comments and said, “Well, I wouldn't have used the words that Stephen did”, but she couldn't quite define what was in the national interest about this whole affair because that was the reason they rejected the Qatar bid. It was in the national interest to reject it.

What is the national interest? It’s not defined anywhere so it’s kind of whatever you want it to be–it’s like a Rorschach test. And then of course you've got Qantas which has a bigger domestic share, 60% of the aviation domestic market than Coles and Woolies have of the entire grocery market in Australia. It is an enormous market concentration and here it looks like we're running a protection racket for that exact carrier, for a greedy little airline that is costing Australians a small fortune in fares, offering incredibly poor service and kind of distorting the market by its very existence and by its very anti-competitive behaviour.

ANGE:

And that's not actually the end of controversies for Qantas, right? We learned last week that they're under investigation for anti-competitive behaviour over the way it sold these ghost flights to customers. Can you tell me a bit more about that?

RICK:

So last week the ACCC launched this legal action in the Federal Court of Australia against Qantas, alleging that they sold 8000 flights after they were cancelled and the ACCC chair, Gina Cass-Gottlieb, said that we allege that Qantas made many of these cancellations for reasons that were within its control and those reasons were like what they call network optimisation or there wasn't enough customer demand on that flight, so they can just like, they can get rid of a flight, but also because they were trying to hoard what they call slots. So all airlines have a certain number of slots at Sydney Airport in particular because there are flight caps every hour and if you don't use them, you lose them. And so Qantas and Virgin, by the sounds of it, will apply for more slots than they actually need and then they'll just cancel flights because it doesn't matter if they cancel a flight on a busy route because there's another flight coming and you put your passengers on that. But it means that no one else can get access to that flight.

If it's found to have broken consumer law, Qantas could be fined 10% of its annual turnover per breach. So we're talking about, you know, theoretically it costs more than the airline is actually worth. Of course, Qantas has always denied that they hoard flights as far as flight cancellation goes, particularly during COVID, Qantas was forced to admit that there was more than half a billion dollars worth of those flight credits that hadn't been refunded yet. When Alan Joyce was hauled before the Senate inquiry, that figure was actually $570 million. And now that they've come out with it and of course they were going to expire at the end of this year and Qantas was going to keep whatever money they couldn't return. But the public pressure clearly got to them because on Thursday they announced that they were actually going to scrap that expiry limit. And people can apply for those refunds or those credits for as long as it takes to get them back.

ANGE:

And Rick, what does all of this tell us about the relationship between Qantas and the Government? Why has Qantas gotten this seemingly special treatment? I think that's the core question here.

RICK:

Look, I mean, Qantas, their worst enemy is government, but also their best friend is government. If you can get government to bend rules in your favour, which because of its status as a national carrier and this kind of spiritual icon in Australia, Qantas has leveraged that marketing capacity as well as its willing to be brutal to get what it wants.

Qantas is willing to go about as corporate-violent as you're possibly able to get.

Now of course this is all, you know, shadows on a wall. You know, you can make yourself look big by projecting a big shadow, which is what Qantas does. But it is also sometimes sound and fury, and I think people in positions of power in Australia over many decades now have shown an unwillingness to peek behind the curtain to see who’s actually put the controls there and maybe stand up to the airline. Y’know as someone else said to me, John Howard sold out Ansett to protect Qantas, and the Scott Morrison sold out Virgin to protect Qantas. It’s always to protect Qantas. They’re not publicly owned anymore, but what we have done is socialise the losses of this airline when it's doing bad, but when it makes a lot of money, well, that's all Qantas. And they get to keep it all. They keep getting special treatment because they're trading on this status and this goodwill for the brand. But it's in the toilet right now. Flying in Australia has been historically so important. And so, you know, it's in everyone's best interest to have not just a competitive airline market, but also one that is well regulated.

ANGE:

Rick, thanks so much for your time today.

RICK:

Thanks Ange, I appreciate it.

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ANGE:

Also in the news today…

UK prime minister Rishi Sunak’s approval rating has dropped after pushing his ‘stop the boats’ strategy over the last month.

The policy, which borrows heavily from rhetoric used in Australia by Tony Abbott and Scott Morrison, has seemingly failed to turn Sunak’s popularity around – with only 24% of Briton’s approving of his performance.

And

Around 60,000 people are trapped at the site of the Burning Man festival in Nevada, after heavy rains caused flooding in the area.

The festival itself has been cancelled, the nearby airfield closed and only emergency vehicles are permitted to drive at the site.

I’m Ange McCormack, this is 7am. We’ll be back again tomorrow.

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