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By Root 328 0

Blue’s chief executive, Brett Godfrey, accused Qantas of ‘blatant capacity dumping’ after Qantas added another plane to Virgin’s new Brisbane to Adelaide route in January 2001.3 Virgin had just put two planes on the route, adding to the Qantas and Ansett flights already servicing it daily. Virgin’s flights had already increased capacity by 90 per cent. More importantly for customers, Virgin was offering fares that, at $118 one way, were half the price of a Qantas fare. Godfrey felt it was ‘very cynical’ of Qantas to then put on another plane, increasing seating capacity yet further, and offer a new $117.70 fare that undercut Virgin by 30 cents. He complained to the Australian Competition and Consumer Commission.

Meanwhile, of course, passengers were delighted. Their joy at Australia’s domestic market finally becoming affordable was echoed by Commission chairman Allan Fels, who said: ‘The process of getting more competition in the airline industry is of great importance.’4

But inside the boardroom of Qantas the problem of how to deal with Virgin, which was based in Brisbane and armed with a war chest from the Queensland government, was vexing the men and women in grey suits. Qantas had already seen off the threat of Impulse Airlines, which had been targeting its business travel market. Qantas had solved the Impulse problem by agreeing to ‘wet lease’ – hiring the plane, crew, maintenance and insurance to fly under the Qantas flag for a short, fixed term – Impulse’s aircraft and crew in return for a cash injection and an option to buy the airline if it wanted. By November 2001 Qantas had taken the option and absorbed the Impulse planes and crew into its QantasLink fleet. Virgin’s Brett Godfrey vowed to keep fighting. ‘Virgin Blue does not want to go the same way. They do not want to be absorbed into another carrier or disappear from the face of the earth. We came here, we now see ourselves as the only low-fare carrier in this country and we are the ones going to keep the buggers honest.’5

However, Qantas’s reputation was tarnished by the Impulse deal, not through any wrongdoing but simply by association. Impulse boss Gerry McGowan told flamboyant Sydney stockbroker Rene Rivkin about the impending merger. Rivkin bought 50,000 Qantas shares based on the information and made a trivial $346 profit. He was investigated for insider trading by the Australian Securities and Investments Commission (ASIC) and in May 2003 was sentenced by the New South Wales Supreme Court to nine months of weekend detention and fined $30,000. Media reports frequently mentioned the words ‘Qantas’ and ‘insider trading’ in the same breath, which cast an unfair shadow on the airline.

Rivkin also helped drag another Qantas name through the mud. Order of Australia recipient Trevor Kennedy was forced to resign from the Qantas board after it was revealed that he, Rivkin and Labor king-maker Graham Richardson had shareholdings in a printing company called Offset Alpine, which they had hidden offshore in a secret Swiss bank account. The printing plant of Offset Alpine had burned down in 1993 and the insurance premium had paid $53 million on assets valued at just $3 million. Five days after ASIC investigators raided Kennedy’s home in November 2003, he resigned his Qantas directorship plus those of several other companies. ‘I am resigning my directorships of all public companies forthwith. This is not a result of pressure from any of the fine companies and wonderful colleagues I am associated with. It is quite the contrary. I do not believe that I have broken any laws, nor that I have done anything dishonest at all, but the speculation in relation to the allegations against me leads me to the view that these companies will suffer,’ he said in a statement.6

Qantas came under fire for failing to boot him out. Opposition Finance Spokesman Stephen Conroy told the ABC: ‘Well, I was disappointed last week by the reaction of some of the companies he’s involved in, particularly Qantas, who said that it’s none of their business to ask any questions or seek any information