Qantas’s Great Leap Forward?

The Qantas boss’s National Press Club address could go down as a watermark moment in Qantas’s 90 year history – “Through our history we’ve been a mail service, a public company, and a purely international business. We’ve changed with the times,” Joyce said.

“Now the challenge is to build the Qantas for our times. ” But what the Qantas of our times looks like is the multibillion dollar question, and one that is adding to Qantas staff anxiety.

When Joyce invoked former Ansett boss Rod Eddington’s famous quote about that airline being “a great business but a poor airline”, you knew that significant change is afoot.

We do know that there will still be a significant Qantas International operation after August 24 – Joyce called it a “vital” part of the company. But what it will look like, and what that will mean for Qantas international employees, remains unclear. Our analysis by Ellis Taylor from page 30 this issue discusses in detail where the airline appears to be heading, but the smart money seems to be on a contracted business focused on operating to major hubs, an even bigger focus on alliance arrangements (itself giving John Borghetti’s international strategy at Virgin Australia a big tick), increased flying by Jetstar, and possibly some sort of Asian based operation that would still fly the Qantas colours, but take advantage of Asian cost bases (potentially the Jetconnect strategy writ large).

It’s concerns over the airline’s Asian strategy, and its ongoing focus on growing Jetstar, both in Australia and across Asia, that really lies at the crux of the industrial disputes between Qantas and its international pilots and its maintenance engineers.

Both groups want clauses in their new enterprise agreements aimed at stopping outsourcing and offshoring “Qantas” jobs.

Naturally, the airline says “no”, calling those demands a “veto” on change. But the ALAEA and AIPA unions, clearly having seen the rise and rise of Jetstar and the effectiveness of the Jetconnect trans-Tasman operation, are standing fast on this point, and naturally the airline’s refusal to bend draws suspicion.

How this deadlock gets broken is unclear at this stage.

From the outside looking in there is a real whiff of 1989 in the current dispute between Qantas long haul pilots and Qantas management – the rhetoric, the intransigence on both sides.

But any strike action would be completely different. In 1989 both Australian Airlines and Ansett pilots resigned en masse and effectively shut down the domestic airline system. Any strike by Qantas international pilots would certainly cause the airline great financial stress, but it would only affect about 20 per cent of international passengers flying in and out of Australia. Emirates, Singapore Airlines, AirAsia X et al would be happy to step in and fill the breach.

And that really is the issue.

In this globalised world, Qantas faces some formidable competitors, who invariably have lower cost bases (what is the company tax rate paid by Emirates again?), can offer better networks due to their geographical dispositions, and generally offer a better service level to boot.

In looking at an Asian based full service airline strategy – the so-called ‘Qantasia’ – Qantas seems to be moving down the ‘if you can’t beat them, join them’ path. That is in fact a strategy that has already worked well for the airline in the past – it couldn’t beat Virgin Blue, so it joined them in starting its own low cost carrier in Jetstar.

But as Qantas’s own experiences in Asian airline investments with Jetstar Asia and Jetstar Pacific show, as outsiders, operating in Asia can be fraught with geopolitical and cultural challenges that will make any Asian based ‘Qantasia’ really challenging to execute. Then there would be the issue of Qantas losing its ‘Australianess’, its key point of difference as an airline.

You get the sense that there could be some dislocating change ahead. Clearly, Qantas International needs to be globally competitive. But successfully managing disruptive change in an airline where many of the staff are already disengaged and suspicious will be a mammoth task.

“Ansett collapsed because it failed to respond to changing times,” Joyce said.

“It failed to keep control of its strategy. It failed to keep control of its costs. ” But can Joyce, himself a former Ansett employee, successfully steer Qantas International down a different path?