JETSTAR is set to become Australia’s main international carrier as Qantas looks to wind back its worst performing arm.
Chief financial officer Gareth Evans has confirmed about half of the group’s $2 billion in cuts will come from Qantas International, which lost $262 million in the last six-months of 2013.
As a result, the Flying Kangaroo could be reduced to just a handful of “protected” international routes between Australia and the US and New Zealand.
BOXED UP: Qantas meals get Maccas-style makeover
That would allow the airline to reduce costs by transferring more of its operations to Jetstar which is based on a budget model, with cheaper staffing and running costs.
Qantas former chief economist Tony Webber said it was fairly clear the airline was working towards Jetstar taking on the bulk of its international work.
WARNING: Qantas urged not to sell out frequent flyers
He pointed to the establishment of Jetstar Asia and the announcement 14 new Dreamliner aircraft purchased by the group would go to the budget carrier rather than Qantas.
“They really feel that Jetstar is the saviour of the company, and have grown Jetstar at a much faster pace,” said Mr Webber.
“Even though Jetstar Asia is doing really poorly, they’ve invested too much time and effort to just give it away.”
CUTBACKS: Qantas mulls frequent flyer options
He said it made more sense for Qantas International to withdraw from routes where it faced fierce competition from other carriers including Jetstar.
“What I think they should do, is almost what Virgin’s doing — keep some relatively short sector international flying, some of the US routes that are protected and more or less outsource the other routes,” Mr Webber said.
“That’s probably the future of Qantas.”
Aviation consultant Bill Meeke said the iconic carrier had been “painted into a corner” whereby it had to get out of its high-cost, legacy airline activities and transfer them to the low-cost options of QantasLink, Jetstar domestic and Jetstar international.
“The problem is the unions will frustrate any and all efforts to get things restructured on to a low cost footing,” said Mr Meeke.
Bulking up Jetstar operations at the expense of Qantas International would save on employee costs. Picture: Nikki Short
Australian Licensed Aircraft Engineers Association secretary Steve Purvinas said Qantas was deliberately running down its international arm to prop up Jetstar.
“We see first hand the bills for maintenance carried out on Jetstar aircraft going onto the Qantas International books,” said Mr Purvinas.
“The international business has very healthy loads on the flights but customers are being lost across the group because people would prefer to fly Qantas instead of Jetstar.”
Deputy Prime Minister and Minister for Regional Development and Infrastructure Warren Truss said he was confident Qantas was “dealing with its financial situation”.
“I have no expectation that the (financial) announcements next week are likely to be so grave they would require any sort of government intervention,” said Mr Truss.
“Qantas knows they need to operate profitably. Other airlines are expected to do that and stand on their own two feet.”