It is clear that the script to deliver 'de-unionise' the workforce via industrial leverage has had limited success. The problem now faced by the board is that the business cycle has moved on. No longer is there a large yield premium in aviation. Indeed demand remains very elastic. To that end the "leisure market" is the most elastic and delivers very little yield. It relies on volume, something that is flat at present.
When one looks at the path DJ have embarked on, it is the exact opposite to the direction Qantas continue to take. This path directed by Oldmeadow and BCG is delivering nothing of value to the shareholder. It does however richly rewards the executives and the consultants...A classic agency problem.
Where to from here? It will take a big board to change direction, however the poor performanc eof J* is clear cause for concern. THe ASK growth now highlights just how poorly it performs, particular interntionally. Poor little Allan is a a method actor with limited scope. He merely follows the script delivered by the industrial barons including Dixon and Clifford.
Unfortunately in the end it will cost him his job. Buchanan will turn very quickly on his little emperor, but ultimately he only knows the same script. The conundrum is that Clifford nearly killed Rio Tinto before parachuting out 18 months earlier, leaving the mess for his successor to clean up. Time will tell, however the investors are asking questions because ultimately the creatively accounted J* only will remain opaque for so long..
Interestingly enough the talk of mergers and acquistions from most analysts has to date focused on premium or so called legacy airlines..It would appear that a spun off J* would fit nicely into the plans of a Tiger or even an Air Asia. Given the incredible profit result Cathay is likely to deliver, it would appear that the premium airline is better suited to return it's cost of capital than an underperforming leisure carrier with dubious stand alone viability..