A new spirit?

In the popular imagination, still, Qantas is the government owned Australian long haul international airline, a national icon taking Australians to the world, and the world to Australia.

But clearly, especially as proportionally fewer Australians choose to fly Qantas to take them to the world, the business is changing and changing rapidly.

Increasingly, the Qantas of tomorrow is an airline grouping of short haul domestic and regional international operating airlines – Qantas domestic (in effect the old Australian/ TAA operation), Jetstar in all its forms (Jetstar Australia, Jetstar Asia, Jetstar Pacific, Jetstar Japan), the trans-Tasman Jetconnect operation, and now a new, as yet unnamed, “premium” airline to be based somewhere in Asia.

Qantas had already flagged plans to set up a new premium airline based in Asia – giving rise to the derogatory ‘Qantasia’ term – but what was surprising about the confirmation of these plans was that the new airline will launch services with Airbus A320s and A320neos, rather than a long haul widebody type.

This suggests an airline focused on intra-Asian flying, so its scope for replacing existing Qantas services will in fact bequite limited. Singapore and Kuala Lumpur seem to be the most likely locations for the new airline’s home base and hub (Singapore seems a likely option given Qantas and Jetstar are already major operators there, KL meanwhile has an interesting dimension given Qantas’s planned future tie-up with Malaysia Airlines), and an airline based in either city will be able to take full advantage of the looming ASEAN airline market deregulation.

But A320s, even A320neos, don’t really have the economic payload range to reach much of Australia, bar Perth and Darwin, from Singapore and KL. So clearly the new airline, in the short term at least, will be focused on intra-Asia flying, especially as a 3000nm range circle from either city puts all of South East Asia, India, China and even Korea and Japan within reach.

Interestingly, the new airline won’t be called Qantas, or Qantas Asia – possibly to avoid running foul of the Qantas sale act, possibly to avoid further inflaming Qantas’s unions.

But, you can bet your bottom dollar that the new airline will codeshare with Qantas, offering one stop flights to anywhere in Asia from Australia, so you can see why Qantas has so steadfastly refused its pilots’ union’s demands of a ‘Qantas pilot for a Qantas flight’.

For years now Qantas has typecast Asian and Middle Eastern airlines flying into Australia – with their geographical hub location advantages, lower cost bases and quasi government ownership – as barbarians at the gate, but with this new airline Qantas gets to be its own barbarian, in a classic case of ‘if you can’t beat em, join em’.

It is in fact quite a gutsy, visionary business strategy.

Properly executed, the spoils are enormous. You can see why, as a pure business decision, Qantas execs sitting around the boardroom table could make the case that it was better to invest in this new airline than in taking delivery of the last six of the 20 Airbus A380s it has on order for its loss making international operations. Those A380s represent something like $1. 5 billion in capital.

But the risks are big too – political, cultural and financial, and the huge challenge of building an all-new brand in Asia – this is no sure thing.

Another risk that can’t be overstated is that of Qantas management taking its eye off the ball – its core Qantas operations – while it pursues its Asian expansion. As an outsider looking in it is saddening to see the state of relations between Qantas management and its staff – or at least its staff unions. AIPA, ALAEA, the TWU and the ASU have all lined up to stridently criticise Qantas’s plans to cut 1000 jobs and scale back its international operations, a decision which has added considerable fuel to Qantas’s industrial relations fire. The fear is that the farcical situation of the industrial battle between Qantas and its unions – Qantas labelling its most valuable asset, its pilots, kamikazes; bizarre industrial action with engineers not using their right hands and pilots not wearing caps – will turn into tragedy with bitter and intractable arguing and costly strike action.

The unions are clearly cynical, seeing Qantas management as the boy who cried wolf too many times while still posting healthy profits. Management, meanwhile, obviously sees an intractable and inflexible unionised workforce that is an obstacle to reforming change.

Pity, unlike across the ditch at Air New Zealand, there is not the vision to see that they’re all in this together.