Public row over Qantas's flagging fortunes
FORMER Qantas chief economist Tony Webber and chief financial officer Gareth Evans have become embroiled in an increasingly public feud about the airline's flagging fortunes.
Mr Evans hit out in a newspaper column last month at "armchair experts" with theories on how the airline should be run and defended the airline's strategy of maintaining its 65 per cent domestic market share.
He singled out Mr Webber, whom he described as a retrenched former Qantas finance employee, and attacked his comments as coming from "a one-dimensional view of supply and demand that ignores how a multifaceted market actually works".
He said a recommendation by Mr Webber to shrink regional operations so prices and profits would rise ignored the carrier's role in the community and "rolled out the red carpet for our competitors to fill the space".
Mr Webber struck back over the weekend with claims on online blog Plane Talking that Mr Evans's comments demonstrated a weak understanding of aviation strategy and risk management.
He accused the CFO of downplaying his role as chief economist at Qantas and disputed that he had been retrenched.
He pointed to a fall in the Qantas share price from $2.64 to $1.09 and lower profits during Mr Evans's tenure, noting the airline hadn't paid a dividend since the first half of fiscal 2009.
"By most conservative markers, under Evans's watch the group's earnings and shareholder return performance have been a dismal failure," Mr Webber said.
In his defence of the Qantas strategy, Mr Evans noted the airline had reduced unit costs by almost 20 per cent over the past five years, renewed its fleet with 130 new aircraft and used technological innovations to boost customer satisfaction to record levels.
The 65 per cent strategy was about giving customers a market-leading choice of destinations and stepping back from it "would effectively be waving a white flag, not to mention abandoning our role in regional Australia and betraying the loyalty of our frequent flyers. Anyone who advocates this kind of approach does not understand the way the business works," Mr Evans said.
But Mr Webber argued Australia's economic performance, the price of fuel and the Australian dollar had been favourable for the airline and there was little evidence to suggest Qantas could blame extraordinarily high capacity growth for its woes.
He described Mr Evans's commentary on the 65 per cent market share as "completely flawed", arguing that targeting market share led to a loss of control over capacity decisions because the airline doing so had to grow its capacity at the same pace of competitors.
"The problems with the 65 per cent market share is not the 65 per cent per se," he said. "The problem is that market capacity is above that which maximises profit for the market. If both Qantas and Virgin were to reduce capacity by 20 per cent, and so Qantas were to preserve its 65 per cent market share, then they would both be making an extraordinary amount of money."
The former Qantas economist also denied he had recommended a reduction in regional capacity.
He said he had constructed a model that targeted underperforming routes. .
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