Neoliberals assume that private ownership is more efficient than other forms of ownership. By the test of the market, this assumption does not hold in view of Qantas: its board and management have performed poorly compared to other international airlines, many of which are publicly owned and operated. The chickens are now coming home to roost.

We know that domestically, Qantas has been engaged in a fierce battle with Virgin (and Ansett before it) to maintain a dominant market share. Both airlines, and international carriers more broadly, have been amassing more and more aircraft. This has produced a capacity glut, pushing down ticket prices (good for passengers) and margins (bad for shareholders). Qantas and Virgin are bleeding. Virgin would be quietly confident of emerging as the last airline standing in this showdown. It should not come as any surprise that Qantas, having argued vehemently against government assistance for Ansett when the competitor was on its knees, is now asking government for a bailout.

So what is to be done? Should we go for the Liberal party’s favoured option of relaxing foreign ownership restrictions in the Qantas Sales Act? In a word, no.

There are compelling strategic reasons for a geographically isolated and dispersed nation such as Australia to maintain a genuinely national carrier. In 2011, we saw that a significant portion of our means of transport and commerce could be paralysed at the whim of a militant boss. Would we be comfortable with a foreign state-owned entity being able to do the same? The political reality is that most Australians would be unlikely to accept Singapore Airlines, China Southern or Emirates purchasing a substantial shareholding in Qantas.



Moreover, Alan Joyce recently pointed out that Qantas has rescued endangered Australian citizens in Bali and Egypt. There is, then, a clear public good dimension to the service Qantas provides. Indeed a caring nation might even think it worthwhile to expand Qantas’ services to cover medically needy but financially constrained rural citizens who require transport to urban centres, instead of relying on the admirable goodwill of a few.



On the other hand, the Labor party’s proposal to give Qantas a public debt guarantee shouldn’t be touched with a ten foot pole. If we learned anything from the global financial crisis it should have been that throwing good money after bad and assuming private enterprises will behave responsibly with that money is socially inefficient and condones the poor performance discussed above.

Let’s not forget that Qantas’ problems run deep: those in charge of the enterprise have failed to plan for a sustainable and innovative future. Critics point out that the operational practices and management systems of Qantas have not kept pace with international standards. Simply shedding jobs is an insufficient strategy. There are more fundamental organisational inefficiencies which lie squarely at the feet of the board and management.

The optimal solution, therefore, is to re-nationalise Qantas and keep it in public hands. The most feasible re-nationalisation path would be (a) for the government to wait until Qantas’ share price falls to a low enough level, and (b) to purchase an overwhelming equity stake in the enterprise. By this I mean in the range of a 90-100% stake.

With the public as shareholder, the present Qantas management would be replaced with a more competent group of people. Ah, but the government is inefficient, I hear some of you cry. Well, the government hires former treasurer Peter Costello to pick winners in the share market to build the superannuation funds of the public service. He is doing a fine job. The government would likewise call for people with successful backgrounds and experience in the aviation industry to sit on the Qantas board as public servants. Contractual arrangements in which rewards are tied to performance would be imposed.

At the same time, direct democratic control over major decisions in a nationalised Qantas, including the composition of the board, must be implemented. Modern communications technology makes this easy to coordinate. A core reason behind Qantas’ under-performance is that the people directly affected by its operations—passengers, employees, citizens—are excluded from participating in the major decisions of the enterprise. These decisions are made by a private shareholder-appointed board, who have in recent times locked out employees, stranded passengers and sent jobs offshore.

With a democratic vote routinely given to all stakeholders in the community on major Qantas decisions (regarding investment, technology, wages, routes and so on), more socially beneficial outcomes can be expected to be enacted. This is because the people who use and are affected by Qantas services and activities will own the results of their decisions.

A democratically controlled Qantas would need to decide, for example, whether higher or lower ticket prices are more appropriate under given circumstances. In the former case, the Australian public (as shareholders) would be the beneficiaries. In the latter case, the Australian public (as passengers) would be the beneficiaries.

For all its challenges, air transportation remains a booming industry that is projected to grow into the future. Of course, periodic shocks are inevitable and these have hit many airlines over the years. Like it or not, many successful airlines today are backed by governments. In this environment, the present policy settings for Qantas are not viable.

A nationalised flag carrier would give all Australians the opportunity to build a brand of which we could once again be proud.