Qantas Overhaul To Stimulate Overseas Business 

 - August 22, 2011, 8:20 AM
Qantas Airways plans to defer delivery of six Airbus A380-800s for up to six years and to cut jobs and services under a five-year restructuring plan aimed at stimulating the Australian carrier's overseas operations. (Photo: Airbus)

A five-year Qantas Airways plan to reduce dependence on domestic flights and business services and establish two Asian joint-venture partnerships aims to help the Australian carrier to stimulate overseas business. It will lay off 1,000 employees, defer deliveries of six Airbus A380s (and possibly some Boeing 787s), retire four Boeing 747-400s and replace two London services with British Airways code-shares beyond Bangkok and Hong Kong. Plans include a full-service operation with an unidentified Asian carrier and a low-cost carrier (LCC) partnership among its Jetstar subsidiary, Japan Airlines (JAL) and Mitsubishi.

Qantas International has lost money and market share through increased competition and high costs “with no improvement in sight,” according to CEO Alan Joyce. Rescue plans include establishing regional “gateways” through the Oneworld alliance and partnership with South African Airways. (South American services will switch from Buenos Aires to Santiago, Chile.)

The Japanese joint venture will launch domestic services in late 2012 and international operations in 2013. The new Asian airline partnership will feature “a new name, a new brand, [and] new aircraft.” To support the restructured operations Qantas will order at least 100 A320-series narrowbodies (including 78 A320neos) and acquire purchase rights and options covering almost 200 more.  

Initially, Qantas must overcome kneejerk reaction from employees: it faced industrial action from engineers this week amid union charges that the joint ventures come at the expense of shrinking domestic operations (although opportunistic Virgin Australia moved immediately to offer work for redundant Qantas employees). Pilots also this week might elevate a previously low-profile campaign to retain job security in current wage talks with Qantas.

According to Peter Harbison, executive chairman of Singapore-based analyst Center for Asia Pacific Aviation, fares on Australia-Europe routes have averaged among the world’s lowest per mile for two decades because, as he put it, when “you stop en route, another airline can compete ‘over’ its home hub.” Since Qantas serves only two European destinations it cannot compete against the “dozen” one-stop points that Singapore Airlines serves from Australia.

“Emirates serves twice as many, all one-stop,” said Harbison, who expects Qantas to expand its European reach, particularly to Amsterdam, Istanbul and Rome, through prospective Oneworld partner Malaysia Airlines. Harbison concludes that a new Qantas joint venture flying from, probably, Kuala Lumpur or Singapore could readily connect into many points in China and India now served by just seven and three Qantas services a week, respectively.