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COMMENT: Qantas cries wolf again

written by australianaviation.com.au | June 22, 2012
Qantas is crying wolf over the Virgin-Etihad tie up. (Seth Jaworski)

I find it amazing that given their recent differences that Qantas and a union have been able to agree on anything, but it seems they have found a common enemy in Etihad Airways, and by their bleating one would think that the sky has fallen in.

According to today’s news, Qantas execs, including Alan Joyce, have been busy knocking on doors in Canberra and telling anyone who will listen that its domestic business would be smothered if Etihad took over Virgin Australia and used it to start a price war in the domestic market.

Sadly, or should I say cunningly, Joyce and co know that among the politicians that Qantas tugs on the heartstrings, and so any attack on what is a listed, public, for-profit company will get a hearing, even if it is complete hogwash.

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The argument seems to be that if taken over by Etihad, Virgin would be used in a giant pissing contest between Etihad and Emirates, something which doesn’t seem likely given that there has been very little pissing between them already.

It’s hard to miss the irony that concerns about capacity dumping are coming from the very company which in recent months announcing major increases in capacity along the eastern seaboard, and deploying more internationally configured 747-400s and A330s onto Perth routes.

But the problem with that idea is that Virgin can afford to compete on price and probably make some money, while Qantas Domestic certainly can’t afford a price war to go on too long with its much higher cost base.

In the past it would attack Virgin using the lower cost Jetstar to offer lower fares, but with Virgin now gaining traction as a more sophisticated operation that would be a dumb move, and so it must attack with Qantas Domestic, which in the long term will just lead to a bloody war which it cannot sustain for long without hitting its bank balance and bottom line.

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But this may be a sign that Qantas is starting to soften up Canberra for a longer term plan of replacing Qantas Domestic’s legacy operations with a leaner, lower cost version. That may be an all-new operation or it may be Jetstar. Either way, Qantas needs to do something to address the high cost base of its existing operations.

Or it may just mean that Qantas is just pressing its case to relax the Qantas Sale Act to allow for it to separate its operations completely as Virgin has, possibly allowing a larger investor to come in and take over Qantas Domestic.

Could that be Emirates? Maybe, but as Tim Clark has said before, mergers and acquisitions are not their style. The only time they have tried that was with SriLankan Airlines and in the end they got burned, and instead have found that it is much easier (and cheaper) to establish good bilateral codeshare relationships with a variety of carriers rather than buying into one or two.

Etihad has much more form on M&A. The carrier is practically taking over Air Seychelles, and has also been quickly integrating its European operations with airberlin, in which it holds a 30 per cent stake. Ironically, airberlin is also a Qantas partner via the oneworld alliance, and maybe that is what scares Qantas so much.

But lets face it – if Etihad wanted to get into the Australian domestic market, they could have long ago by themselves. Instead, I think that the Abu Dhabi carrier is content to work together with John Borghetti’s team to maximize its investment, rather than engage in an ego match. If in doing that Qantas loses market share and sees a fall in its profitability, then that is its issue to respond to.

At the end of the day though, the scaremongering that Qantas now appears to be playing is little more than crying wolf. It does make me wonder if, as the story goes, Canberra, investors and the general public will listen when a genuine wolf comes along.

Ellis Taylor

 

 

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27 Comments

  • Air Observer

    says:

    I think that the Qantas Executive and the Government share a common problem. A disconnect with the people. It’s not the decisions they make, it’s the way they communicate. Aggressive, defensive, arrogant. Many of us were angry when Qantas was floated and one would think that they would go to great lengths to live up to the promises they made to the staff and Australians as a whole that our airline and the people who made it the world’s best airline would be looked after. They come across as greedy, ethically bankrupt vultures. Shame.

  • Cooper

    says:

    Thankyou!! Qantas has been bullying Virgin for years and now that it looks threatened it is crying foul! Amazing isn’t it. And as you mentioned they are dumping capacity of Virgin so threaten it and also refuses to lose the whole 65% capacity rule.

    Thankyou for explaining this to everyone!! Etihad at current only owns 5% and will probably soon go up to 10%. That’s not ownership. I’m sick of the flying kangaroo and it can’t play with my heart strings any longer.

    Virgin has such a good business plan that even without Etihads investment, I see it eating away at qantas yields and capacity

  • Kettle Black?

    says:

    Without getting into the “should have got 777’s and other arguments” I find it very odd that Qantas are jumping up and down about lost market share, etc and then seemingly not doing anything about it. They spruik being the first to launch business class (some sources dispute that) and pushed Boeing to reduce the 707 size and have turbofan engines essentially creating a custom airliner picked up by other airlines. They now seem to be content to sit back and let others be the innovators and the industry leaders, hoping if they cry poor enough people will come back with sympathy. The stuff that seems to matter to people, they don’t seem willing to implement (reading other comments) to try and capture those passengers back! Surely its simply a matter of seeing what the competitors have and offering one better.

    In terms of crying wolf over capacity dumping, as Ellis stated, they themselves have previously done that to the domestic market in some cases causing competitors to cancel the route and in other cases causing the airline to go insolvent and be absorbed into Qantas. It hurts when the shoe is on the other foot!

  • Gabrielle

    says:

    The only one that should have gone under ages ago is Alan Joyce – it is painfully obvious now, isn’t it/ Who employed him and why – who is backing him and protecting his job and why? This man has ruined Qantas – RUINED. Joyce first ruined morale of everyone working for Qantas, company’s ethic overall, undermined trust and confidence in Qantas as employer and Qantas as an airline, and went on justifying one blunder after another convincing everyone how every blunder is a unique success and salvation. In any other “less democratic” country, Joyce would not only be sacked but jailed.

  • The Plane Truth

    says:

    At the end of the day, the biggest threat to QANTAS is and has always been Alan Joyce. He is married to the low-cost model AKA RyanAir which the majority of Australians hate. I for one would rather pay a few extra dollars and fly VA or QF mainline. JQ is alright if you want a cheap holiday but at the end of the day “you’s gets what you’s pays for’.

  • Des OS

    says:

    As an Aussie working overseas I do several return flights a year into Oz. I have been doing this for 14 years now and dumped Qantas after the first 2 years and actively try not to travel with them. I replaced Qantas with Singapore Airlines then Emirates and now use Etihad. I found the quality of the service and the aircraft, particularly entertainment systems, on long haul flights with Qantas, and its BA codeshare, very much lacking. I’m not the only regular international Oz traveller to give Qantas the flick.
    Anyone who has travelled with Emirates or Etihad will know how airy and bright their cabins are compared to the dark, dour (old) Qantas cabins. Also, has anyone here been in a Qantas A380? The décor of those cabins is just bloody awful. Qantas have really lost the plot and I truly wonder if they deserve our support.

  • Cooper

    says:

    Gabrielle
    I think that’s a bit selfish only blaming one person. Everyone at Qantas has played a part. Their pilots, engineers, flight attendants and ground staff. Refuse to change with the rest of the world and are still as arrogant as ever. I flew on a new qantas a380 years ago and I found it quite comfortable. They could
    Have chosen better colours. It was their
    Service that turned me off. Rude ignorant flight attendant. Even worse service on their 747’s. Is it just me or do I get the feeling majority Of QF flight attendants think they are above serving their passengers?

    Like Des I changed from Qantas years ago. Etihad or virgin Atlantic. And within Australia Virgin.

    Qantas created this all by themselves

  • Tired

    says:

    I’m sure we wouldn’t be talking about any of this if QF had’ve given Borghetti the top job instead of Joyce. I applaud Borghetti on his job with Virgin. It continues to go through a massive organisation change, and that’s not easy to accomplish.

    Haha…Kettle Black?…agree with the 777 comment! I remember when the 777-200LR come out for a visit, there was a QF 777 model in the cabin. Bet we wouldn’t have seen the same problems on the 777 as with the 380.

    If only we could turn back time…

  • Overload

    says:

    Thats it, buy 10 percent of an airline and then pump loads of money into it to benefit all other share holders and try and put Qantas out of business. Yeah, that should do it….Seriously! This is about Qantas wanting and probably needing the same rules regarding foreign ownership as Virgin. Qantas have just restructured their operation, and oddly enough it’s much the same as Virgin. Funny, no mention of a 100% foreign owned airline called Tiger.

    Now Mr Joyce if you want to keep the theme going and loose some serious money, why don’t you put 747’s on the Perth run from the East Coast. Oh, sorry, you already said thats what you are going to do, but hay, at least you will maintain market share. Maybe, possibly, hopefully. Also, whilst in Canberra asking for what you really want, just remind them why you shut your airline down, that way they will understand why your really going broke and need another airline to bail you out of this mess!

    Sure, you have some industrial problems, probably why the unions see this as a good band wagon to jump on. At least you finally agree on something, even if it is nonsense.

    I wish the staff at Qantas good luck, sadly, you are going to need it!

  • James

    says:

    Kettle Black and Des OS have brought up good points. What is QF doing to win us over? I have been loyally flying with QF since mid 90’s and I keep seeing old aircraft while JetStar get new ones. Yes I know JetStar is successful but perhaps QF is going too far.

    Almost every step taken recently to turn around the International division has been a negative thing for passengers. Why not innovate to make flying more enjoyable and your brand more attractive? We can put up with high cost and bad PAs but just give us something.

  • Cooper

    says:

    Even if QF had of chosen Borghetti QF would still be in the same predicament. This has been long time coming. Virgins cost base is much lower than QFs. It has been a blessing in disguise for Borghetti as the changes he has done at Virgin he would not have been able to do at QF.

  • ron

    says:

    Amen to all of the above.

  • PeterL

    says:

    As Cooper says Virgin has a lower cost base.

    Qantas employees have been living in the past on the legacy of government ownership. It is now time for them to realise that if they want a job in the future then the cost base has to come down or Qantas will cease to exist.

    It does not matter if Joyce or Borghetti run Qantas, Qantas has to reduce its cost base or it will go under.

  • Aaron

    says:

    Qantas has been greedy for too many years!
    As Dick Smith predicted in early 2002-2003, if Qantas were not careful, they could become another Ansett?
    I say go Virgin Australia! Everyone is tired of Qantas’ ruthless decisions and it’s disgusting greedy sharholders!
    Maybe the old saying is true, what goes around comes around!

  • Clive Derwent

    says:

    I have just one comment re “legacy of Government ownership”. Actually go and read a good book; it’s called “Who Killed Qantas”. Perhaps you will then truely understand is’s about the mis-management of Qantas!

  • Cooper

    says:

    Doesn’t matter what a book says.

    It takes two to tango. Management and employees

  • Trevor

    says:

    After witnessing the fiasco at Brisbane Airport last Sunday, I would say QANTAS domestic are doing a grand job of losing customer market share all by themselves, and that the QANTAS executive need to look a lot closer to home to find solutions to their current predicament!

  • Bandit

    says:

    I think AJ is just another Sol Trujillo ( Telstra Boss) who is hired to come in and destroy another Australian company and walk away with millions as a golden hand shake and everyone will blame him. The board are just paying for a scapegoat to rip us all off, shareholders and the travelling public. A great icon is being destroyed by greed as many mentioned and the government know it and it will just be a cheap pickup by the Australian governemnt like NZ picked up Air NZ. It’s a shame, but it’s globilization killing our iconic brands

  • Air Observer

    says:

    It’s astounding that the closest thing to ‘ownership’ the average Australian has, is Richard Branson’s Virgin brand. If Rain Man was remade, Dustin Hoffman would scream because he had to travel on Qantas!

  • Pacer

    says:

    Cooper stated

    “I think that’s a bit selfish only blaming one person. Everyone at Qantas has played a part. Their pilots, engineers, flight attendants and ground staff. Refuse to change with the rest of the world and are still as arrogant as ever.

    Qantas created this all by themselves”

    “Doesn’t matter what a book says. It takes two to tango. Management and employees”

    Cooper, it wasn’t the pilots, engineers or any of the other employees that shut the airline down last October. It was a selfish board member, who couldn’t get his way that shut it down. NOT industrial disputes. The only arrogance displayed comes from QANTAS HQ. They talk about staff engagement. The only engagement is in disputes and threats.

    The only thing keeping QANTAS in the air is the staff, regardless of how rude you think they are. Board members come and go, but it’s the staff that keep the airline flying, despite the incompetence, poor decisions regarding aircraft types, cutting of sectors or deliberate white-anting of the company by the board.

    You also mention cost base. One should look at the cost base and bonuses paid to board members for declining profits and share price. High cost of maintaining new generation of aircraft that allegedly require no maintenance. The high cost of trashing your own brand, and to repeat one more time, the high cost of grounding your own airline and inconveniencing up to 100,000 passengers worldwide and then saying sorry to them.

  • Cooper

    says:

    Pacer…

    Clearly your a QF employee.
    Maybe you should tell your employees to get on with the job and keep your unions from trashing the brand. QF employees are among the highest paid in the business. Why don’t you compare the salaries of QF with those of DJ or JQ. A good example are baggage handlers. Whilst QF still employs QF baggage handlers DJ and JQ mainly employee contractors through Aerocare or Oceania Aviation with bad pay, conditions, and almost nil benefits.

    Airlines with even the best customer service and the highest morale in the world still need a low cost base to compete, e.g, Virgin Atlantic

    But you keep to your our opinion, it’s clearly one that majority of QF staff have. Like those at Ansett.

    And even whilst Virgin continues to steal your market share and corporate clients…. You
    stick to this opinion. QF has already “stalled”, now let’s put it into dive.

  • Steve P

    says:

    Virgin Engineers get paid more than the Qantas ones. I would know, I negotiated both the deals.

    The problem with Qantas is that for the best part of 10 years they have been promoting fools who have no ability to senior positions at all levels. I had a boss that we called stainless. He was cold, company through and through, would work in his own time and knew everything about the business. He was a fair man but was not in the “club”. He was overlooked for promotion in favour of a bloke who had never worked in our department. When the temp on the tarmac hits 40 degrees Qantas are required to hand out bottles of water to keep people hydrated. Last summer this new manager had to hand out the water but when the temp dropped to 39, his primary focus was to make sure that he went around to every Engineer to get the bottles of water back. These scenarios are being played out all across the country every day.

    If Qantas had just one Pilot or Engineer on their Board things could be different. Instead of opting for brand new aircraft types that we know would be late and not all they were explained to be in the glossy Boeing/Airbus brochures, we would have recommended a proven, reliable and fuel efficient aircraft. Unfortunately not one person on the Board has ever worked as an airline operational employee. The only one who came close was Alan Joyce who was head of strategy, at Ansett, when it collapsed. If only people could learn from their mistakes.

  • Pacer

    says:

    Yes Cooper, I am a QANTAS employee and proud of it. The company that is and not our management. You on the other hand may be a QF manager or one who despises QANTAS for whatever reason.

    “Maybe you should tell your employees to get on with the job and keep your unions from trashing the brand. QF employees are among the highest paid in the business. Why don’t you compare the salaries of QF with those of DJ or JQ. A good example are baggage handlers. Whilst QF still employs QF baggage handlers DJ and JQ mainly employee contractors through Aerocare or Oceania Aviation with bad pay, conditions, and almost nil benefits.”

    When did the unions trash the “brand”? The management have done well in that, and not only have they trashed the brand, they are the trash in the “brand”!

    I can make a direct comparison of wages between QF, JQ and DJ. A base licenced engineers rate at QF is about $20,000 behind that of JQ and DJ.

    You may or not be aware that there is a steadily increasing number of contractor baggage handlers and ramp personnel within QANTAS that wear the QANTAS uniform, but are paid about equal to their DJ and JQ counterparts together without the benefits of regular QANTAS employees.

    There is also Jetconnect. A New Zealand based QANTAS subsidiary, flying in the QANTAS colours and staff wearing QANTAS unifroms, but being paid local NZ rates whilst a premium fare is charged.

    What does DJ have that QF doesn’t? John Borghetti. A QF man of over 30 years who did a good job there before he was ejected, because he didn’t fit the Dixon/Joyce mould. Also, DJ has only one CEO. Joyce needs three in the business to make it run. So when you talk about cost base, talk about the management’s cost base, and a management that is bereft of any idea to grow a business, but sharp to downsize it.

    I agree, QF has stalled. This is not the doing of the employees. This is an agenda set by the board to drive the price down and prepare it for a selloff. The only thing to get it out of the dive is to wipe the board from it and replace it with QF people, as it had in the pre-Strong/Dixon/Joyce days.

    I will keep to my opinion, like those at Ansett. QF and AN have a couple of things in common. They both had/have Dixon and Joyce in them.

  • Cooper

    says:

    Pacer. I work for Rio Tinto. Could not imagine working for Qantas. Too much going on there.
    I never said it was just the employees. It’s both. The fact you can’t see that is arrogant. QF engineers to not earn less than DJ and JQ. Conspiracy theories there my friend. Head out of the gutter now and consider the fact that even if Borghetti was at the helm of QF, things would not be all rosy in QF land. Any CEO going into that job had problems coming, but yes, staff engagement could be handled a little bit better between management and staff

  • Pacer

    says:

    Cooper, employed by Rio Tinto, that would explain why you would favour the tactics employed by Clifford, who is the real force behind the board, not Joyce, although Joyce is the supposed face of QF.

    No conspiracy theories behind the engineers earning less than DJ and JQ. I know engineers in both camps that were laid off in earlier years from QF and who were ex-Ansett. I don’t know where you get your facts from, but you’re well out of the aviation league if you’re unaware of those basic facts. That’s not to say all DJ and JQ engineers earn more than QANTAS engineers, but a reasonable percenatge of them do.

    I don’t know if it’s your view that I’m too arrogant to see what’s going on, or whether you are like a lot of non-industry lemmings that just blindly follow the press releases put out by the QANTAS PR machine, and that certain “aviation experts” regurgitate.

    “Head out of the gutter now and consider the fact that even if Borghetti was at the helm of QF, things would not be all rosy in QF land. Any CEO going into that job had problems coming,”

    That is why I had stated earlier that the whole board has to be wiped from QANTAS in order for it to survive. Borghetti alone couldn’t do it when there are others who are more prepared to block him and bring him down. If he was to be given the free hand at QANTAS that he has at DJ, QANTAS would be a very different story. His record at QANTAS speaks volumes.

    The biggest competitor to QANTAS is the board, not international airlines wanting to buy a measley percentage of Virgin.

    “I never said it was just the employees. It’s both. The fact you can’t see that is arrogant.”

    Over the many years I have been in QANTAS, the number of changes, for change’s sake, that have been thrown at us, and they have been mostly incorporated, even against better judgement, nothing has really changed. More money is spent in trying to save money than the actual amount of money saved. QANTAS can boasr one thing many other airlines or companies can. That is the length of service that employees stay at the company. Low wages and high turnover do nothing for the company. A steady and loyal workforce reap greater dividends for the benefit of the company as a whole. I guess loyalty has no value in management’s eyes. Here’s some Richard Branson quotes for you and the QF board to contemplate:

    “The companies that look after their people are the companies that do really well. I’m sure we’d like a few other attributes, but that would be the most important one.

    A company is people…employees want to know…am I being listened to or am I a cog in the wheel? People really need to feel wanted.”

    “Having a personality of caring about people is important. You can’t be a good leader unless you generally like people. That is how you bring out the best in them.”

    Aircraft come and aircraft go. Aircraft break down and need to be fixed. This has always been and always will be. People want to fly. They need pilots to fly the aircraft, flight attendants to serve the passengers, caterers to put food on board, cleaners to clean the aircraft, engineers to fix them and the list goes on. Aviation is inherently an expensive industry. New generation aircraft are not exempt from problems the older aircraft are.

    Cooper, we’ll just have to agree to disagree. I will never agree to your viewpoint, particularly as I’m directly involved with what’s going on, and you’ll never agree to my viewpoint, as you’re an outsider looking in with no idea of what’s going on, but to just rehash the press releases and managerial guff.

  • Baseline

    says:

    Im with you Cooper, you sound like you know what is going on, while Pacer sounds like someone who is paid way to much to just dig stuff out of the ground.
    Being in the air with upwards of 300 people lives in your direct control sounds pretty important to me.

  • Baseline

    says:

    oops got the names arse about but you know what i mean

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