What is a free market? And what's happening to Qantas?

[nerdmmb]

Can someone please explain in simple terms what a free market is?

Also, will Qantas be shut down? - What's happening to it?

Thanks

[Professor Polonsky]

A completely free market does not exist, never did and never will. Basically, a "freer" a market is, the less governmental intervention or regulation there is on it.

In relation to Qantas, there are currently rules restricting foreign ownership of it, to ensure that it remains Australia's national carrier and serves Australian interests.

The act currently restricts foreign investment to 49 per cent in total and to 25 per cent for any one foreign entity.

It also requires that most of the airline's heavy maintenance, flight operations and training - and the jobs associated with this work - be located in Australia.

These requirements are obviously not entirely consistent with a "free market" - but of course, no governmental regulation is. While I still maintain that we have gone way too far in deregulation, the government is still quite involved in the market. What makes these requirements a bit different is that they are quite unique to Qantas. There are similar laws worldwide though.

Qantas will not be shut down - at worst, it will be taken over by foreign entities, or might have to be downsized.

[nerdmmb]

A completely free market does not exist, never did and never will. Basically, a "freer" a market is, the less governmental intervention or regulation there is on it.

In relation to Qantas, there are currently rules restricting foreign ownership of it, to ensure that it remains Australia's national carrier and serves Australian interests.These requirements are obviously not entirely consistent with a "free market" - but of course, no governmental regulation is. While I still maintain that we have gone way too far in deregulation, the government is still quite involved in the market. What makes these requirements a bit different is that they are quite unique to Qantas. There are similar laws worldwide though.

Qantas will not be shut down - at worst, it will be taken over by foreign entities, or might have to be downsized.

Thank-you! What is the cause of this though? Falling revenue or..?

[Tasmania Jones]

Qantas is losing money due to many factors:
1. The domestic capacity war with Virgin Australia is putting both carriers in the red. Qantas wants a 65% market share and both carriers are dumping capacity on the market, resulting in cheap fares and losses on both sides.
2. Many of Qantas' international routes are struggling due to competition from other carriers such as Emirates and the Asian carriers, all of which have lower cost bases and therefore can offer cheaper tickets. Some argue that Qantas' decision to buy A380s is contributing to this as A380s are difficult to fill in many markets compared to something smaller like a 777.
3. Unions-a contentious issue but the fact remains that it costs a lot more for Qantas to hire Australian staff to work for it compared to other countries' carriers hiring foreign staff.
That's the main points. Qantas Domestic has long been the cash cow of Qantas Group, and now that it is unprofitable, it is dragging everything down with it.

[slothpomba]

That's actually a pretty profound question, people might have slight differences in opinion. It's usually agreed that it's an idealised thing, an idealised state of events rather than an actual thing. Basically, it is free from any so called "artificial" or "unfree" control on the market, anything that would distort prices or peoples behaviours. Taxes are out because they create a distortion between what the seller is making from the sale and what they're actually charging. Any kind of government regulation or almost any law is out too. Minimum wage laws and other things like that are also out because they force people to do things in a certain way and pay a certain price for labor.

Most people (unless you're like an anarchocapitalist or something) don't really want a totally free market. They just want to move either closer to a free market or closer to a controlled market. In my opinion, a totally free market would be a horrendous thing for society and a humanitarian and social disaster (imagine no minimum wage laws, saftey standards, almost any other laws, etc). Some others think differently.

The following definitions may help:
    

Definition of 'Free Market'

A market economy based on supply and demand with little or no government control. A completely free market is an idealized form of a market economy where buyers and sellers are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation.

In financial markets, free market stocks are securities that are widely traded and whose prices are not affected by availability.

In foreign-exchange markets, it is a market where exchange rates are not pegged (by government) and thus rise and fall freely though supply and demand for currency.

Investopedia explains 'Free Market'

In simple terms, a free market is a summary term for an array of exchanges that take place in society. Each exchange is a voluntary agreement between two parties who trade in the form of goods and services. In reality, this is the extent to which a free market exists since there will always be government intervention in the form of taxes, price controls and restrictions that prevent new competitors from entering a market. Just like supply-side economics, free market is a term used to describe a political or ideological viewpoint on policy and is not a field within economics.

http://www.investopedia.com/terms/f/freemarket.asp

Also see here - http://www.econlib.org/library/Enc/FreeMarket.html .


Qantas is unlikely to be shut down. It seems to be doing OK in a business/accounting sense, it's not totally trash. As polo explains, it currently has to be majority Australian owned. Many other nations subsidise or even totally own an airline (Emirates is owned by the Government of Dubai, for example). It's not as unusual of a requirement or practice as you'd imagine.

I think the standard argument is Qantas will have more money if we allow foreign ownership. It's usually an ideological argument as well. The political beliefs of these people are such that they don't believe that we should have regulations like this (comes back to the free market thing), they think ipso facto (just by their nature or mere existence) that they are a fundamentally bad thing.

I don't know how well Qantas is but i cant think of any sane reason, beyond pure ideological want, that we should alter the current regulations.

[Tasmania Jones]

This may be useful or interesting too...
http://www.theage.com.au/business/aviation/qantas-chief-alan-joyce-cuts-5000-jobs-20140227-33j48.html#post_live_111029