Transport Minister Warren Truss has singled out Qantas' high costs and wages as a key factor weighing the airline down and says the government will monitor markets' reaction to the airline's reported $252 million underlying loss on Thursday before moving to respond.
In an exclusive interview with Fairfax Media, Mr Truss said the Coalition was ''not in the business of propping up businesses'', but acknowledged the key strategic role Qantas played in servicing cities across Australia.
Mr Truss also warned the airline that the government expected it to dip into its own cash reserves before seeking federal support.
He predicted Qantas would never be able to compete with newer Middle Eastern airlines such as Eithad and Emirates, as well as emerging giants such as China Southern.
''The Qantas wage and cost structure places them at a significant disadvantage to the people they are flying alongside. Many of them are Asian carriers these days, they are Middle Eastern carriers where the wage structures are very much lower,'' he said.
''Everyone has noticed the rise of Emirates and Etihad but we have to start watching the rise of China Southern and the major Chinese airlines. In my view, these major airlines in China will be dominating world aviation alongside Emirates and Etihad within literally three or four years.
''Their cost structure is very, very much lower than Qantas' could ever be, so they will face continuing challenges in the international routes.''
Mr Truss said that while domestic routes and regional Qantaslink services remained profitable, the airline was struggling to compete on international routes.
''I think Qantas should be conscious of the need for its routes to operate with a profit,'' he said.
''We'll monitor what happens over the next few days, how the market responds and the perception of what the impact of these announcements today will be on the operation of airservices in Australia.
''The government doesn't see itself having a role propping up businesses, or airlines, but we do think it is essential to maintain air services around the country.''
Qantas needs to get its financial affairs 'in order': Truss
Asked about government moves to provide the airline with a debt guarantee to access cheaper finance and mooted changes to the Qantas Sale Act, Mr Truss said the airline had substantial cash reserves and assets.
''It's a globally iconic brand, it has a reputation for being safe and reliable, all those sorts of things are important assets to the company. So the company would naturally be expected to use its own resources before it could expect taxpayers to contribute,'' he said.
''It is essential that Qantas as a large listed business needs to get its financial affairs in order, it cannot continue to operate with losses.''
Mr Truss dismissed calls by independent MP Nick Xenophon for an inquiry into the airline. Senator Xenophon said Qantas and its derivative business Jetstar had been badly run.
Asked in question time by Labor leader Bill Shorten what his government would do to help Qantas workers, Mr Abbott said he was in regular contact with the company.
He said the difficulty was what the government does for one business it has to do for others.
''There are a number of things that Qantas would like and this government is to do what it can for Qantas, consistent with responsible economic management,'' Mr Abbott said.
''That essentially means that we should insure that Qantas can compete on a level playing field, we want to insure that Qantas is not competing against its rivals with a ball and chain around its leg.''
'Worst day in aviation in Australia since Ansett collapse'
Earlier Mr Shoten said Qantas’ decision to cut 5000 jobs was the worst day for aviation in Australia since the collapse of Ansett.
Mr Shorten also accused the government of inaction as the airline had signalled a need for support back in December and Labor would continue to support the airline being majority Australian-owned, as well keeping its head office and board Australian-based.
He said that it was time the federal government made clear whether it would offer a debt guarantee to the airline, rather than playing games and focusing on changes to the Sale Act.
''They have been sending messages if Qantas makes what the Abbott government calls the hard decisions, they would come in behind them, they have been saying they would consider a debt guarantee,'' he said.
''[If] it is the case Qantas has made the very hard decisions, will the Abbott government back up what they have been hinting and promising the market, consumers, the aviation public or will they play political games and focus solely on the Sale Act?''
Mr Shorten said the airline had taken a series of tough decisions including cutting 5000 jobs, cancelling new planes and changing routes.
''The government has run out of excuses. It is now time for Tony Abbott and Joe Hockey to make a decision – do they want to save Qantas or do they just want to play politics?
''The rest of the world has government intervention in their airlines. We would be the bunnies if we just waved goodbye to an Australian icon. If we believe there is a level playing field and somehow the rest of the world isn't investing in their airline, that would be a mistake.''
Greens deputy leader Adam Bandt said that the government should seek guarantees from Qantas management that jobs would not be sent offshore before moving to offer support to the airline.
''Alan Joyce and Qantas are a flight risk. Money and jobs could be on the next 747 flight to Singapore or Kuala Lumpur, if foreign ownership rules are relaxed and no conditions are put on government support,'' he said.
''It's incredibly disappointing to see Labor today suggesting that they are open to increasing foreign ownership in Qantas. The Greens have been firm in our commitment to government support of Qantas, but only with a guarantee to protect local jobs.''
The story High costs and wages key to Qantas' problems, says Deputy PM Warren Truss first appeared on The Sydney Morning Herald.