Qantas Airline - Bailout Debate - Case Study Example

Qantas Airline - Bailout Debate Name Institution Course Professor Date In Australia, the role that the government played in relation to corporate operations has been the biggest issue that led to the rise of mixed reactions and arguments for a very long time. Due to the need of the Australian government to intervene and bailout the private companies, the debate over the private corporations ownership was reopened for the second time in the year 2014. Qantas Airline made a support request to the government to help the corporation overcome its difficult financial challenges. This prompted a raging debate over whether the government should honour this request or not. It became quite challenging for the Australian government to make a decission because other Airlines especially Virgin Australia made it clear they were against the proposal and that they will also request the same support if the government accepts Qantas Airline request. Some other Arilines proposed that the government would given Qantas debt surety because the corporation was being heavily regulated and that it was facing tight competition from overseas governments. This paper discusses the debate on ‘bailout’ issue of Qantas Airline and argues that the Australian government stance was justified by drawing upon theories of the role of state. 1920 was the year the Qantas Airline was founded as an Australian carrier. According to Lafferty (2012), in 1947 the Airline was nationalised and later on privatised through the Qantas Sale Act 1992. Several provisions were included in the Act in an effort to maintain the status of the enterprise as a national airline. The move also aimed at ensuring Qantas Airline remains a primarily Australian owned, operated and managed corporation (Lafferty 2012). According to Morrel (2013), restriction of overseas proprietorship was capped at 49 %; no overseas airlines can own more than 35 % and overseas personnels are limited to possession of no more than 25 % are part of the provisions of the 1992 Act. Besides, the Qantas 1992 Sale Act necessitate that the 2/3 of the airline executives must be Australian citizens and the presiding executive at any board meeting to be a citizen of Australian. The 1992 Qantas Sale Act also outlaws the integration of Qantas in overseas states apart from Australia. These legal requirements were part of the debate on the Australian government bailout to Qantas Airline. Qantas Airline “bailout” debate is a perfect examble on the role government has in corporate. In most of the advanced democracies such as Australia, the role of the government in business has changed. Stiff competition and globalisation have obliged a prompt reply to successfully deal with issues presented by globalisation. According to Mendoza & Vernis (2008), the welfare state is also undergoing overload on the communal resources. This disagreement was provided to defend the sate not to pledge debt to Qantas Airline. It was argued that airline has to be bailed out for it to remain competitive. It was thought that sponsorships would guarantee that the Qantas airline can compete meritoriously with airlines such as state-backed Virgin Australia. Nevertheless, a business strives efficaciously in the market by building viable advantage (Longenecker & Ariss 2002). By presenting subventions to the airline, Qantas would have been dependent largely on corporate welfare. In this case, the company could not be internationally competitive because an agressive organization deliberately uses available resources for it to compete hence evading financial catastrophes. In evading financial predicaments and major firm disappointments, administrations have opted to debt guarantees (Suarez-Villa, 2015). This is seen as a system of commercial welfare. As a result government debts obligations have increased to an unmanageable level that looms the financial apparatus of the state. Faultfinders point out that by pledging debt to Qantas Airline, it would definitely increase the debts of the government which is already overloaded. Furthermore, large amounts of taxpayers’ money was seen as being at risk because it was not certain if the company would succeed. The bailout fails to encourage businesses to be aggressive as it rewards inadequacy in conducting corporation operations and loss making behaviour (Carney 2006 ). Critics argue that corporations will largely rely on company prosperity in the long run hence responsibility and effectiveness in using resources at hand are compromised. Business well-being has potential of damaging consumers, taxpayers and competitors. bailing out the Qantas Airline, as arugued by the rivals will disadvantage competitors. Corporate well-being hurts opponents says Carney (2006). Business shifts money to companies that areowned by taxpayers and at the same time it shifts power from customers to the state, according to Carney (2006). That’s is the reason why Virgin Australia airline overruled the idea of the state bailing out Qantas Airline because it would strengthened competitors. Instead of assuring debts to company, critics suggested that the state ought to embark on rigorous promotions that would inspire overseas venture by banning the limits that overseas investors can hold at Qantas. The aim of the debate for the Australian state to bailout airline company was to prevent the failure of the airline. The defensive part that the state executes is pointed out in mitigating the necessity for administration to intercede and assure debt to Qantas (Cavusgil et al., 2014). It is often argued that the state protects its citizens from harm caused by financial disaster or crisis by bailing out banks that are failing, according to Petitjean (2013). In the same context, by rescuing Qantas financially, the government will be protecting citizens that have shares at the airline from huge financial losses if the company came under. Nevertheless, this case shows to be challenging in the end. For instance, ventures fail oftenly and everytime failure occcurs someone is affected badly. The question, therefore, remains whether the state should attempt to bail out all the failing businesses or not. the biges challenge is to find a method that the government can use to rescue failing companies because it is really costly to bailout all of them. Businesses failure in most cases is due to various reasons especially misappropriation of funds by the managing directors and inefficiencies. Those individuals not responsible for the failure of the company are the people who suffer major economic losses. This analogy was used in claiming that the government ought to rescue Qantas because those who would suffer in case it fails are the people not responsible for this kind of situation. The liberal opinion sees the role of the state as a supervisor and does not take part itself in supporting companies (Groose 2011). Competitiveness changes when state acts a watchdog by guaranteeing that societies do not practice anti-competitive activities. It guards reasonable competition, encourage social well-being and control price and market entry (Groose, 2011). Additionally, effectiveness change when the government acts as a subsidiser and it is seen to be performing the role of a protector. Rescuing Qantas Airline finanacially is therefore viewed as a ‘rightfull’ responsibility of the government. In a well-organized economy, it is assumed to operate as a self-controlling market. However, the government from time to time interceded to correct dissimilarities and disorganizations by carrying out rulings. In the current economy, the government must encourage the well-being of its citizens (Gilpin 2005). The liberal ideology stresses that the state ought to embark on a positive action in the economy in protecting the interests of the citizens. Nonetheless, the aim’s stress varies from one society to another. Besides, the responsibility that the governement undertakes in a market economy varies in every market economy. It ranges from the commonly laissez-faire, non-interventionist approach in USA to the central responsibility of the government in the whole administration of the economy in Japan (Gilpin, 2005). The wellbeing of customer and market independence is emphasised in a ‘liberal’ society. The responsibility of the state tends to be minimal in such a case. The chief role of the state is to correct market let-downs and provision of public goods (Karagiannis & Madjd-Sadjadi, 2007). In disparity, the role of the state tends to be more domineering and invasive in societies where there is predominant collective or communal purposes. The state position on the Qantas rinancial rescue debate is justified to some extent. The Australian government has mostly played an interventionist role (Bayari 2012). Neo-liberals in Australia have repeatedly targeted elite view and they have succeeded in achieving hegemony over agendas. The liberalism of 19th century, the economy was seen as a self-contained and self-controlling system and the preservation of the status quo was the responsibility of the australian government. The economy is actualized in such a way that is accomplished properly by the government for the benefit of the public. Capital is acknowledged with the public interest and what is good for the capital is also good for the public. In this case, what the australian government does to progress the productivity of the market has undisputable welfares for all according to liberalism (Bayari 2012). This is in arrangement in a single file with both socialism and liberalism political ideologies that promotes for state to endorse economic fairness and opening. The state refused to rescue Qantas because it sees it as a better decision and it would benefit all especially other airline companies who were against the idea of financially rescuing Qantas. Rescuing Qantas Airline financially would have been a counterproductive approach in the long run but a very good political move in the short run. The economy of australia is mixed and its governance has continually arbitrate to guard the wellbeing of the public by fianacially rescuing corporations. Qantas Airline asked the Australian federal government las year (2014) to rescue company by offering a debt surety. The state declined the request and debated that it will be counter-productive at the end. Even though the Australian government rejected Qantas request to bail them out, position of the sate was justified. Financially rescuing corporations inspires corporate well-being which has hostile effects on consumers, competitors, and taxpayers. This is because taxpayers are forced to part with huge amount of money a company that they were not accountable for its situation. Therefore, rescuing such companies financially is not wise because that is misappropriation of public funds. References Ariss, S. S & Longenecker, C. O 2002, “Creating competitive advantage through effective management education”, Journal of Management Development, vol. 21, no. 9, pp. 640-654. Bayari, C 2012, Australian economy and neo-liberalism: Manufacturing, trade and bilateral links with Japan in the post-Keynesian age, Lit, Berlin. Carney, T. 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