Qantas split could be a prelude to cutting and running
Ben Sandilands
The strategic potential for the Qantas restructure to precede the unlocking of assets by the board and sale of part or parts of the group appears to be very real in this analysis from an inside source in Qantas.
At the very least, it means a big increase in management costs, and an inevitable expansion of new positions and reporting lines to conform to the very serious and arguably sometimes overlooked business of being a safe and compliant airline group.
Some thoughts on Joyce’s latest shuffling of the deckchairs on the Titanic, which was a good ship badly piloted.
Alan Joyce may not realise it now but his latest shuffling of the deckchairs has the potential to double its management costs. In previous years under past CEO Geoff Dixon about 2002 the Qantas business was split into airline, frequent flyer, Jetstar, Line Engineering, Heavy engineering, Stores and Logistics etc, each with the imprimatur for management to run their own business. The effect of that was that each business entity started to build their own little empire putting in place more levels of management and increasing salary costs. Then in 2008 Dixon brought in consultants to prune down the organisations management that had grown exponentially. The one factor overlooked by Dixon and Joyce was the Civil Aviation Act and its regs which require certain statutory management structures for the airline and the maintenance organisation. CASA came in and did an audit which triggered further management restructuring to ensure compliance with the Act. Joyce arrived and proceeded to undo the ‘separate business mentality’ and now in a strange twist of managerial prerogative has reinstigated the same type of structure Dixon put in place, albeit more fragmented by separating the airline in two, International and Domestic.
But the Civil Aviation Act and the new CASRs (regulations) imposes its own structure and accountabilities forcing a mandatory management structure. If you add the two together, that is Joyce’s new organisation structure and the structure required by the regulator then Joyce may have just effectively doubled his management costs for the future. CASA requires the aircraft operator to have a CASR 121 organisation with a dedicated CEO who controls the pursestrings to ensure aircraft operate safely and the organisation complies with certain safety requirements and provides the resources to do so. The CEO of the CASR121 organisation has to be a competent person and can be prosecuted for breaches. In addition CASA requires the CASR 121 organisation to use a CASR145 maintenance organisation which is required to have a dedicated CEO who controls the pursestrings to ensure aircraft are maintained correctly and safely and the organisation complies with certain safety requirements and provides the resources to do so. The interface between the two organisations is a CASR42 quality assurance organisation which has its own management structure that is required to be put in place by the CASR121 organisation. Currently Qantas mainline and Jetstar are setting up duplicate structures based on the premise they are two separate legal entities and aircraft operators. What this does though is duplicate positions in Qantas Group management which would not happen if the Qantas Group was under one CASR 121 organisation. But now throw in the latest Joyce reorganisation where not only is Qantas Group having Jetstar under a separate CASR121 organisation, they split the Domestic part of the airline and International part of the airline under two separate management structures and CEOS controlling the pursestrings separately for each new empire, coupled with the fact they have to have the CASR121 organisation in place as well. What Joyce has done cannot work unless each CEO Domestic and International are appointed as CASR121 or another level of management is put in i.e. a CASR 121 CEO who the Domestic and International have to obey and be resourced by which is effectively back where we were before the Joyce restructure and therefore it was pointless and impractical.
The prospect then is that this restructure is just the first step to having two separate legal entities for the International and Domestic airlines and two separate CASR121 organisations to enable one or the other entities to be sold off, or not covered by the Qantas sale Act 1992 as Qantas currently maintains Jetstar is not covered by the Qantas Sale Act.
What makes the whole exercise even more distasteful for the employees who are about to be sacrificed to the cost saving God is that Joyce is now creating duplicate structures which will only grow in management numbers as they strive to have bigger empires.