Here’s the Qantas Catch 22: it can’t afford to spend $8 billion upgrading with 35 Boeing 787s, but how will it be able to compete in a few years’ time without them?
The reason given for cancelling the much-delayed 787s was ‘‘lower growth requirements in this uncertain global context’’. Yet total Australian and regional aviation is growing very nicely – it’s just that Qantas apparently has given up expectations of getting much of it.
And here’s another mystery: chief executive Alan Joyce has been telling everyone that key ingredients in his bottom line loss were high jet fuel prices and the high Australian dollar – but the stronger Australian dollar is something of a natural hedge for high jet fuel prices.
If the Aussie had been weak, then Qantas really would have had a problem paying the fuel bill, as Tony Webber explains (Webber is being modest by not including himself as part of the risk management team that is no longer with the Flying Roo.)
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Something isn’t quite adding up in the Qantas story as it’s being officially told – unless the CEO and board are quietly pursuing a strategy of cleaning the business for potential sale with dismemberment either before or after the event.
Yes, there are major obstacles in the form of legislated ownership restrictions, but they can be circumvented, as demonstrated by the Allco/TPG/Macquarie bid in 2006. (Remember that that would-have-been disaster was only stopped by one hedge fund manager’s greedy miscalculation.)
There is no doubting the difficult position Qantas has found itself in - a position the board and CEOs past and present must take responsibility for, for their actions or lack of actions, over the past decade.
Having survived the rise of its old Asian rivals, Singapore and Cathay, by lifting its own game to meet the competition, Qantas now looks set to surrender all but a token presence in Europe in the face of attacking Middle Eastern carriers.
Meanwhile the promise of an explosion in Chinese travel is being met with the launch of another Jetstar brand, this time out of Hong Kong in partnership with one of China’s major airlines. A story about a gingerbread man comes to mind.
One thing’s for sure – Qantas’s institutional shareholders wouldn’t think twice about accepting an offer, any offer.
Michael Pascoe is a BusinessDay contributing editor.
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Qantas 787 Catch 22