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Still a big question on selling off Qantas

By Lindsay Tanner - posted Thursday, 29 March 2007

The tragic plane crash in Jogjakarta is a stark reminder of the critical importance of aviation safety.

We don't know the cause of it, but we do know there are many countries where safety standards aren't as strict as ours. And we know that Qantas has the best safety record in world aviation.

Safe flying is vital for Australia. We're a huge country with a scattered population. Most tourists arrive in planes. An unsafe aviation sector would be a disaster for our economy.


That's why the debate about a proposed takeover of Qantas is so important.

For me, one issue stands out. How can we ensure nothing undermines our aviation safety standards?

The private equity bid for Qantas involves much higher debt levels.

They will still be only around the average for major airlines, but many of other airlines are hardly beacons of financial prudence and safe flying. Aviation is much riskier than most businesses. Carrying excessive debt is asking for trouble. Opinion is divided on whether the Qantas bid involves too much debt.

We might not like a bunch of Texan cowboys buying Qantas but they don't appear to want to carve the place up. At least, not right now. My biggest fear is that increased financial pressure will make Qantas cut corners. There is a fine line between pursuing workplace efficiencies and eroding safety standards. And even minor things can have tragic consequences.

Australian regulators might be pretty strict, but they can't see everything. There are clear signs of Qantas wanting to shift more if its maintenance work overseas. Qantas engineers claim a lot of overseas work is inferior, and they often pick up defects foreign engineers have missed. The company says this just shows the system works.


Some of this work will be done overseas for all sorts of reasons. But the suggestion that it has to be double-checked by Australian engineers makes me nervous. If there's pressure on the company to slash costs to help meet debt payments, how long will it be before double-checking gets cut back?

The Civil Aviation Safety Authority should keep a close eye on this. If public confidence in Qantas falls, so will its share price. That's a powerful incentive for keeping safety standards.

Qantas is one of the world's healthiest, strongest airlines. It is vital to Australia's economy. The existing management team's involvement gives some comfort, but we need more.

Peter Costello has imposed conditions on the takeover, but there is real doubt over whether they're enforceable. And if the company ends up in financial strife and breaches its undertakings, punishing it would just make things worse.

Companies shouldn't be immune from takeover. Governments shouldn't determine corporate debt levels.

The financial engineering in the takeover must not be allowed to undermine safety. That's something for which the Government has direct responsibility.

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First published in the Herald-Sun on March 20, 2007.

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About the Author

Lindsay Tanner is Shadow Minister for Communications and Shadow Minister for Community Relationships and the Labor Member for Melbourne.

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