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Friday 27 January 2006
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Qantas may dump Australian Airlines
Author: James Hall
Publication: Australian Financial Review (46,Fri 27 Jan 2006)
Edition: First
Section: Companies and Markets
Keywords: Qantas (15),Australian (13),Airlines (13)
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Qantas Airways is expected to announce plans to ditch loss-making international leisure carrier Australian Airlines later this year as it prepares to begin flying low-cost offshoot Jetstar on international routes in early 2007.
It's understood the plans involve keeping Australian Airlines' operations but absorbing them into either Qantas's or Jetstar's international operations and ultimately killing the Australian Airlines brand.
The announcement might come when Qantas reveals the first routes to be flown by Jetstar in May, but it is believed to be waiting for a clearer picture of the impact of the federal government's industrial relations overhaul before making a decision.
The difficulty under existing industrial relations legislation is that workers in one enterprise-bargaining agreement cannot easily be absorbed into a company with another, higher-paying EBA. This is expected to change when the Workplace Relations Amendment (Work Choices) Act comes into force later this year.
Qantas - already courting controversy with plans to move 3000 maintenance jobs offshore, also dependent on the Work Choices changes - is seeking to cut $3 billion in costs by 2008 as it battles intense competition and high fuel prices.
It is understood that flying three international carriers, Qantas, Jetstar and Australian Airlines, is a luxury the flagship carrier cannot afford.
Qantas chief financial officer Peter Gregg said the airline had several options in terms of the future of Australian Airlines.
"The company is continuing to work on those options and considering how Australian Airlines' operations will continue," Mr Gregg said.
Absorbed into Qantas before the airline's 1996 float, Australian Airlines, like Qantas, was formally owned by the government, but was originally a domestic carrier.
Qantas relaunched it in 2002 as a full-service, single-class carrier flying to destinations in the Asia-Pacific region, including Japan, Hong Kong, Phuket in Thailand, Singapore and Bali.
However, it has now been superseded by the lower-cost Jetstar International. It has been losing both money and patronage, and has suspended some routes.
As both Qantas and Jetstar have reported improvements in passenger numbers and revenue measurements, Australian Airlines' performance has declined, making it the worst performing of the six brands in the Qantas group.
For the 2005-06 financial year to date, Australian Airlines' passenger numbers have fallen 3.6 per cent to 347,000 from 360,000 in 2004-05.
Revenue per passenger kilometre has slumped 8.7 per cent to $1.58 million from $1.73 million and the crucial "revenue seat factor" - which gauges how revenue-efficient each seat on a flight is - has fallen 4.8 percentage points from 73.3 per cent to 68.5 per cent.
In financial year 2004-05, Australian Airlines lost $11.6 million before interest and tax, compared with a $1.1 million profit in 2003-04.
Qantas's decision in December to pay $24 million for 65 new Boeing aircraft, the first of which will be used in Jetstar's international expansion, tellingly omitted any orders of new aeroplanes for Australian Airlines.
KEY POINTS
* Qantas is believed to be awaiting industrial relations changes before cutting Australian Airlines loose.
* Qantas is waiting for 65 new Boeing aircraft for itself and Jetstar, but none are earmarked for AA.
Headline: Qantas may dump Australian Airlines
Author: James Hall
Edition: First
Section: Companies and Markets
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