Report from CAPA:
"Qantas faces two main challenges to its future: (1) its classic legacy model is extinct, notably internationally; and (2) domestically it is overweight and ill-equipped to deal with the competition that Virgin Australia has generated since its metamorphosis from LCC to full service airline.”
“There is literally no place in the international aviation future for an end of the line legacy carrier like Qantas – in its current form.”
“But here is where the silly stuff begins. Qantas is at the centre of a bizarre debate over preserving anachronistic ownership provisions in the 22 year-old legislation that provided for the airline’s privatisation.”
“It is genuinely difficult to discern the logic in arguments supporting the status quo concerning the Act. Although inertia is a most powerful force, denial of world aviation changes – well beyond the power of the Australian government or Qantas to influence – can only lead to very uncomfortable collisions with reality.”
“If truth is the first casualty in war, there is certainly no shortage of misrepresentation from those who want to cling on to the archaic 70-year old “ownership and control” rules of the airline industry. And, in this case to the fast-ageing Qantas Sale Act legislation.”
“In short, as protectionist barriers are removed around the world, there is no place for rear-view mirror strategies. Adaptation is possible still in 2014, but soon the limited range of options will disappear entirely.
Amending the Qantas Sale Act will alone by no means save Qantas. There is much more to be done. But not amending it will do a lot to ensure its demise”
“In a labour intensive industry with substantial input costs outside management control (fuel alone accounts for over a third of costs), there are few levers for management to pull when looking to slim down. The obvious one is labour costs – and improved productivity. Hence Qantas will be making even deeper staff cuts than its long running cost reduction programme has required.”
“Cutting routes is another, and there will be some announcements surely on 27-Feb-2014 – but there is always the danger in this case of reducing costs while undermining revenues. Looking further, if the short term fix is to be anything more than that, some form of restructuring is going to be necessary too.”
“Qantas does have advantages: In operating terms, it has made a big step to being able to access new international markets “virtually” over Dubai with its major partner, Emirates. Its low-cost subsidiary Jetstar has been a saving grace, protecting it from a ravaging Virgin Blue in the domestic market in the early part of the last decade and then later in the international forum, as Qantas’ high cost base ruled it out of most Asian long-haul routes. It also has one of the best and most profitable Frequent Flyer Programmes in the world. The domestic regional operations too are still profitable, despite Virgin’s inroads"
Full Report is here:
Is loving Qantas to death in Australia?s national interest? Airline ownership dogma defeats logic | CAPA - Centre for Aviation