Knocked on the head

What he didn’t comment upon was whether a merged Qantas-BA would have been worthwhile as far as cost and revenue benefits were concerned, and whether the complex ‘dual listing’ company structure – where the enlarged entity would have been listed on both the Australian and London stock exchanges to help get around government ownership restrictions – was really workable.

But in his recent interview with AA (see p26), Joyce’s counterpart at Cathay Pacific, Tony Tyler, described the deal as “fiendishly complicated”, and said he couldn’t see where any cost and revenue benefits would have come from.

It may well be that that was Joyce’s assessment as well, but out of respect to his predecessor he hasn’t wanted to say so publicly.

But where we know the Qantas and Cathay bosses are definitely in public agreement is their recognition that while mergers and consolidation is a desirable aim for the industry, it as unachievable in the short term while current government airline ownership restrictions and bilateral air traffic right negotiation structures remain in place.

Which is a pity, because while such restrictions remain in place, and airlines are government owned or supported, the competitive airline environment is distorted – indeed Tyler, who is also the current chairman of IATA, told AA the airline industry is “fundamentally dysfunctional”. That dysfunction exacerbates the pain felt by the industry when it encounters tough economic times, such as today, because bad airlines are propped up and good airlines are restricted from where they can fly. The system entrenches inefficiencies, which worsens the effects of downturns, so that airlines resort to crazy fare cutting to generate revenue, profits become losses, employees are retrenched and shareholder value is destroyed, and the airline industry’s often destructive boom and bust cycle is continued and amplified.

But wholesale liberalisation of the international airline industry seems years away at best, which means that well managed airlines like Cathay and Qantas will have to play by the rules of the game as they find them, not as how they would like them to be. And anyhow, almost no airline today has the luxury of the time to spend on the “distracting” (as Joyce put it) goal of consolidation – not while in Cathay’s case revenue has collapsed by nearly a third, not while in Qantas’s case where its competitors have increased capacity by over 10 per cent, including on its prime trans-Pacific services which are being swamped by new competitors and when Tiger Airways is going for the jugular in launching Sydney-Melbourne flights.

At least both Joyce and Tyler strike as extremely competent CEOs, which they need to be in the current climate.