Reaction to Qantas Asian push largely negative
The reaction to Qantas Airways heading down the same path - by setting up new Asian ventures and grabbing a slice of the world's fastest-growing aviation market - has been largely negative.
The reaction to Qantas Airways heading down the same path – by setting up new Asian ventures and grabbing a slice of the world’s fastest-growing aviation market – has been largely negative.
Unions said Qantas was culling the Flying Kangaroo, while politicians shouted down management for sending jobs offshore and damaging an Australian icon.
Dick Smith, a former chairman of the Civil Aviation Authority, says the reaction shows a failure to realise things have changed from the days when Australia had just two airlines and ticket prices were heavily regulated.
He says those running Qantas should be congratulated for at least trying to save the airline’s international arm, given the difficulty of the task due to fierce competition and the lower costs of its rivals.
“The fact it is being attacked is just unbelievable,” Smith says.
“Everyone buys our companies and we hardly have anything overseas, but we do have ANZ Bank, we do have the Lowy family with Westfield, so there is a few.
“So if Qantas is going to do that, fantastic.”
Qantas started off in 1920 as a single airline flying across outback Queensland and the Northern Territory.
It has grown into a collection of operating businesses in Australia, New Zealand, Singapore and Vietnam, which Qantas chief executive Alan Joyce says should be a source of pride for all Australians.
Joyce likens the airline’s plans to BHP Billiton operating mines in South Africa or South America, or ANZ running banks in Asia.
If he has his way, two more dots on the map will be added to what is now called the Qantas Group.
In partnership with Japan Airlines and Mitsubishi Corporation, Qantas will set up a new, low-cost carrier in the Land of the Rising Sun called Jetstar Japan.
It also plans to establish a new premium, full-service airline in Asia, with Singapore or Kuala Lumpur regarded as the two most likely locations.
Joyce says these new businesses are key to the survival of its international arm and will protect Qantas’s Australian-based workforce.
CBA Institutional Equities transport analysts Matt Crowe and Andre Fromyhr say the new premium carrier, which won’t use the Qantas name, is a bold move.
“In effect, Qantas Group is sacrificing its brand for a more competitive cost base,” the pair said in a research note dated August 16.
“We believe a competitive cost base will prove more valuable than the Qantas brand.”
Australian School of Business brand management lecturer Dean Wilkie says part of the negative reaction is the decision not to use the name Qantas.
“That’s probably a sign of current directors not loving the brand as much as what we love what the Qantas brand is,” Wilkie says.
As part of the five-year plan to turnaround Qantas’ loss-making international operations, Joyce also flagged 1,000 jobs in Australia would go from the airline’s pilot, cabin crew, engineering and management ranks.
The redundancies added further fuel to the argument Qantas is “offshoring” jobs, sacking Australian workers and employing Asian-based staff on lower wages and conditions.
Joyce denied the claims, saying the national carrier’s plan to cut flights to London, defer Airbus A380 deliveries and retire old aircraft were behind the job losses.
The Australian Council of Trade Unions described the job loss announcement and restructuring plans as one of Qantas’s darkest days.
However, official figures paint a bleak picture of Qantas’s steady decline in terms of market share.
The national carrier in 1999/00 had 34.4 per cent of the market of passengers heading into and out of Australia, but that had fallen to 19.5 per cent by 2010.
Joyce says Qantas’s share of the Asian international market has “collapsed” to 14 per cent.
More than four out of five passengers, or 82 out of every 100, heading overseas now choose to fly with a Qantas rival, he says.
So is the secret to regaining that share by cutting routes and taking planes out of the sky?
Joyce says there’s little other choice, given Qantas International is tipped to lose $200 million in 2010/11.
He says the airline remains one of a handful of carriers that fly to all continents except Antarctica.
He’s also adamant Qantas still has ambition to fly to as many destinations as possible on its own metal – industry speak for using its own planes rather codeshare with other carriers.
“We still have with our own aircraft, a bigger network that most other airlines around the world do.”
But ceding ground to competitors such as Thai Airways, Cathay Pacific and Virgin Atlantic by pulling out of London-Bangkok and London-Hong Kong has done little to suggest Qantas’s route network will grow any time soon.
One travel agent said this week the airline was just not flying to enough places people wanted to go to, particularly in Europe.
“In the last 10 years they have taken away all the major routes like Rome and Paris and for us as a travel agent we don’t have much option other than to sell Singapore Airlines and Emirates,” the travel agent, “Marie”, told Brisbane radio station 4BC on Thursday.
“Most people don’t want to go via London to get to those other destinations.”
Qantas, which is due to release its financial results on Wednesday, has forecast full year underlying profit before tax of between $AU500 million and $AU550 million for 2010/11.