Is Qantas’ Asian dream over?
Alan Joyce’s dream of Qantasia has received a rude awakening after talks with Malaysia Airlines for a joint venture broke down.
Qantas has put on hold its ambitious plans to set up a new ultra-premium airline in Asia – the centrepiece of efforts by the chief executive Alan Joyce to revive its international operations.
The plans for a new airline – which was to be based in Kuala Lumpur – targeting Asia’s fast-growing corporate market, were a key plank of Qantas management’s aim to turn around its international operations, which suffered more than $200 million in losses last financial year.
Mr Joyce saw the Asia-based carrier as the panacea for Qantas’ loss making international business but, in the face of growing competition by other successful airline alliances – especially the Virgin-Singapore Airlines tie up – pressure on the Qantas boss to find a solution has greatly intensified.
Qantas said talks with Malaysia Airlines, that had lost $780 million last year and described by its chairman as a company in crisis, had faltered because they could not agree on the commercial terms for a new premium airline.
Qantas will not revisit earlier plans to set up an ultra-premium airline in Singapore because that would require a significantly larger investment of up to $500 million.
Despite the setback, Mr Joyce said Asia remained a priority for the airline and it ”continued to explore opportunities in the region, including joint ventures and alliances”. But he again emphasised that any investment in Asia would be on the basis that Qantas would allocate ”minimal capital to such ventures”.
Senior sources within the airline confirmed that Qantas did not have an alternative to MAS and it was no longer pursuing the offshore premium carrier option. While they did not rule out a similar deal in the longer term, they said it was off the table for now.
Transport Workers Union secretary Tony Sheldon said the failure was proof of poor decision making in Qantas management.
Unions and politicians have opposed the plan, saying the intent was just to shift jobs overseas and sidestep a law to keep Qantas Australian.
“It (Qantas) needs a management which is prepared to build on the strengths instead of consuming energy pursuing half-baked, adventurist plans in Asia,” Richard Woodward, vice president of the Australian and International Pilots’ Association, said in a statement.
“Qantas has two core brand strengths: unique Australian identity and an unparalleled safety reputation built on the highest Australian standards. Focus on these if you want to strengthen the airline.”
Setting up an airline in Asia would let Qantas hire pilots, crew and maintenance staff at much lower costs than in Australia and offer a larger choice of connecting flights.
Personnel costs at Qantas stand at about 25% of revenue, compared with about 15% for its Asian competitors.
Last month, the airline said it would axe 500 jobs, cut capital spending by $700 million over two years, review and simplify its maintenance operations, withdraw from unprofitable routes and retire early older aircraft to protect profitability.
Alan Joyce
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