Qantas going the way of Ansett???
Approaching the terminal; Geoffrey Thomas Aviation Editor ; The flying kangaroo's global forays could be numbered
(The West Australian (Perth)) 16/04/2011
April 16, 2011 Saturday
First Edition
When Ansett collapsed under a mountain of debt in September 2001 an air hostess sobbed uncontrollably on Melbourne radio only able to utter the words, I never thought it would happen to us I never thought it would happen to us.
But it did and Qantas, many people now argue, is slowly but surely going the same way.
At the time of Ansett's demise then Qantas chief executive Geoff Dixon warned our future is not guaranteed and drew almost universal mockery.
Now, with the unions circling Qantas demanding job security among a log of claims, some fear that Qantas in its present structure is not equipped to face further global liberalisation just as Ansett, burdened with excess baggage from the Sir Peter Abeles era and inflexible unions, was not positioned to withstand the ill winds of domestic deregulation.
Peter Harbison, executive chairman of the Centre for Asia Pacific Aviation, has warned that Qantas' international operations faced oblivion if unions pressed ahead with their claim for guaranteed job security.
If they (Qantas international) cave in to the demands they will be wiped out and if they have a prolonged strike it will be gutted, Mr Harbison said.
Responding, Qantas chief executive Alan Joyce conceded that some of the demands on security would put us (Qantas international) out of business.
Qantas has strengths, such as the world's best domestic airline, but it also has weaknesses with fleet and union problems combined with being late to market with in-flight innovations.
It also faces the onslaught of low-cost carriers, domestically and internationally, and foreign premium airlines have more access to the market.
On international services Qantas is losing market share, down from 35 per cent in 2003 to 17.5 per cent in January, although some of that loss was because of unprofitable routes being transferred to its low-cost subsidiary Jetstar.
Low-cost airlines now bring more traffic to and from Australia.
During the global financial crisis, only strong profits from Qantas' frequent flyer program and Jetstar kept the airline group in the black.
Competition from overseas carriers is just one problem. Virgin Blue is about to relaunch as a premium airline on domestic routes next month, where Qantas has enjoyed a virtual monopoly on business travel.
And there is nothing to stop Singapore Airlines setting up a domestic operation in Australia.
The unions need to understand that some of their angst with the state of Qantas would be better directed at government, which has set in train the market dynamics that have left the airline under siege.
Qantas' problems are the same that have devastated many airlines around the world a largely regulated workforce, competition from government-subsidised airlines, carriers with lower labour costs, monopoly service providers such as airports and a fully or partially deregulated marketplace.
When appointed in 2008, Mr Joyce's mission was to get the group's businesses better matched to the market but he said at the time that there were very real challenges in all areas, particularly with the staff.
Qantas' industrial relations over the past few years have been more confrontational with devastating effects when engineers took everyday safety issues into the public arena.
When Mr Joyce took over he cut back middle management, eliminating 90 key positions and laying off another 500 middle managers.
Many say that the bureaucracy that he slashed had hindered Qantas by pouring cold water on market innovations such as seatback videos for economy passengers in 1995, premium economy in 1996 or planes such as the 777, the world's most economical and reliable twin-aisle aircraft.
Certainly, the airline has been let down badly by Boeing and Airbus on deliveries of the 787 and A380, which if on time would have enabled the earlier retirement of many older 767s and 747s.
Mr Dixon said in 2008 that nothing can really compensate for the delays. Our business would be totally different if they had been on time.
The problem for Mr Joyce is that as with Ansett, equipment and innovation decisions or lack thereof made in the past two decades are baggage weighing down the airline and not easy to change.
Domestically, there is no doubt that Qantas offers one of the world's best airline services, with its lowest fares often cheaper than low-cost airlines, once those airlines' seemingly endless and irritating add-ons are factored in.
Both the pilots and engineers have lobbied strongly for job security and no one denies the desirability of that goal, but in 1997 Sir Rod Eddington, then chief executive of Ansett, warned that there is no such thing in this industry any more.
There is now virtually no job security in any industry and the airline industry is the most volatile, the one most exposed to global labour markets and wage levels and the tide of liberalisation, which is more like a tsunami.
The conundrum for engineers is that the more they undermine the public's perception of Qantas' safety and maintenance standards, the more market share it loses and thus their job security becomes more and more tenuous.
For the pilots, some of whom earn close to $500,000, a different equation applies and they are in serious danger of pricing themselves out of a job.
The airline industry as it is today simply cannot sustain those salary levels.
Long gone are the days when Qantas could charge a premium for its safety record and now passengers constantly change airlines for $10 or less.
Some elements in the unions need to be more realistic and better appreciate the rapidly changing market dynamics and distortions. Qantas management's focus needs to be about getting on the front foot with innovation.
Following is no longer an option and Qantas must lead and build on what is one of the best reputations for safety.
To paraphrase Build it and he will come, Qantas management ought to Lead, and the staff will follow, as will the passengers and then the shareholders.
Put simply, Qantas needs to find reasons to make things happen, not why they cannot.