Mr Somerville - Qantas is a strategic national asset and not just another company. The evidence for that of course is that it has its own act of parliament, the Qantas Sale Act, and is the national flag carrier, from which it derives a major element of its marketing strategy. Any real threat to the viability of the national flag carrier would see the federal government step in—you only have to look at the New Zealand example to see that—and it is why we are here and talking about the future of Qantas.

The Treasurer, in our view, was quite wrong when he said that if the consortium ran into problems they would be on their own. Firstly, if they did run into problems there would also be problems for the employees of Qantas and their families. Secondly, I assume that no Australian government would let the national flag carrier and a company like Qantas go down without a significant effort.

The bill currently before the committee is an important means of safeguarding the sale of Qantas. APA’s stated intentions are set out in the deed of undertaking, at clause 2.3. Those intentions have been repeated elsewhere, notably in the bidder’s statement and in the presentation APA made to government members on 13 February 2007. The difficulty is that intentions can and do change. The disclaimer in the bidder’s statement is headed ‘4 Airline Partners Australia’s intentions’. On page 18 of the bundle, there is a heading ‘4.8 Basis of intentions,’ which is in reality a disclaimer. The second-last paragraph says:

As such, statements set out in this section 4—

that is, the intentions of APA—

are statements of current intention only which may change as new information becomes available or circumstances change.

Mr Somerville—What Captain Woods has done in his capacity as a shareholder of Qantas is apply for declarations of the Federal Court to clarify this issue in regard to subsidiaries—how in regard to part of the Qantas Sale Act dealing with the need for Qantas to operate scheduled international passenger services they must do so under the name of Qantas or a name including the word ‘Qantas’. So in circumstances where the government has publicly said that subsidiaries do not attract the Qantas Sale Act, then Captain Woods has asked the Federal Court for declarations with regard to that.

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Senator JOYCE—So they cannot try to open up ‘China budget airfares’ or something like that, which would be operated by Qantas but outside the scope of the act.

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Mr Somerville—Yes, and certainly Qantas have made that clear. One of the key elements, though—and it has certainly come through in Mr Walker’s advice, which I have given you in that bundle of documents—is whether Qantas are conducting the subsidiary. It may be, for example, a partly owned Qantas subsidiary. I think it has often been mentioned about Jetstar Asia. In terms of the Qantas Sale Act, Jetstar may not be conducting that subsidiary, but the three directors of Jetstar are Geoff Dixon, Peter Gregg and Mr Johnson, the general counsel. The Qantas board make announcements and decisions about aircraft purchases. They have made it clear they do not cannibalise each other’s routes. It is clear to us that Qantas are relevantly conducting this subsidiary and are caught by the Qantas Sale Act.

Senator JOYCE—I want to follow up on Senator Bernardi’s now-and-later scenario. He is saying—which is a reasonable point to put—that if it is not a problem now, why should it be a problem later? You stated that it will be a problem later because of debt. Do you believe that there is a control issue that is associated with the person who provides the credit—that they have an aspect of control over a company? Do you think that is a reasonable proposition to put?

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CHAIR—Unless someone tells me that I am entirely wrong, I do not see the relevance of that question to this bill.

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Senator JOYCE—The question is that the situation of them shelling the company out through a subsidiary could be brought into play by the force not so much of a nominal shareholding but by those who have lent the company billions of dollars wanting to make sure they secure their terms.

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CHAIR—The impact of debt is purely hypothetical.

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Senator JOYCE—It will not be after this goes through. It will be far more than hypothetical; it will be very real.

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CHAIR—It is just not relevant.

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Senator BERNARDI—This bill does not propose to the level of debt.

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CHAIR—This is not relevant. Other questions please.

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Senator JOYCE—I think it is relevant because there has to be the issues that actually force the agenda of exacting the company to follow the plan of trying to cut costs by shelling the company out to a subsidiary and there has to be some impetus to do it.

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CHAIR—I have ruled that it is not relevant. I am happy to have a private meeting about it if you want to, but I do not think it is relevant.

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Senator FIELDING—The issue to hand is that we have made it quite clear that Qantas is covered by the Qantas Sale Act, Jetstar is not. Are there pressures with this high debt level to force more jobs through Jetstar leaving a bigger loophole in place where there are not conditions placed on Jetstar to keep jobs and services in Australia? This is an important issue.

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Senator BERNARDI—If we accept Senator Fielding’s point then his bill should address the maximum level of debt that the company can incur. It is completely irrelevant to this discussion.

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Senator FIELDING—With respect, Senator Bernardi, if you want to add additional items to the bill I am more than happy to look at those issues if you support the bill as you are saying—

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Senator JOYCE—I will go to another issue.

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CHAIR—The matter is resolved, thank you.

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Senator JOYCE—We often hear that there is nothing to be concerned about with respect to them doing this because they have done it before with Ryanair and Continental and they have great expertise in the management of Ryanair and Continental. Do you think that the group has great expertise in the operation of other airlines such as Ryanair and Continental?

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Mr Somerville—That is the subject of a complaint that AIPA has made to the takeover panel which goes to the history of the bidding consortium and in particular TPG and the statements about patient capital. On our advice, we do not believe that TPG in particular does have that experience. They sold into and out of America West in 18 months.

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CHAIR—Again we are getting off into other areas that are unrelated to this bill. They might be terrific in the public domain to talk about and they might be matters that could be discussed elsewhere but not in this context. We have our friends from the unions here who are anxious to get on and there are other questions so let’s keep it relevant to the bill.

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Senator JOYCE—I will go to one of the documents you have tabled, the deed of undertaking, and page 11 point 5.5(f). What is your understanding in this document, which you have tabled, of the point:

The Qantas Group will support regional capacity growth and regional network improvement in line with market need