Unfriendly skies

Speculation was rife that short sellers had entered the market hoping for an equity play although Qantas executives were not aware of anyone lining up a bid.

Any way that you look at the numbers or the situation, Qantas is at best in unfriendly skies and some would say in the middle of the biggest crisis that the airline has ever faced.

None of it is the fault of Mr Joyce — he’s just the doctor who has picked up a very sick patient — although some unions see it differently.

But is Mr Joyce responsible for not buying the 777 in 1995, 1997, 2000 or 2005? No.

Is he responsible for not putting seatback videos in economy until early last decade — 10 years behind market leaders? No.

Is he responsible for not putting in premium economy in 1997 when this magazine put a presentation on the subject to Qantas? No.

He certainly isn’t responsible for the five-year delay in delivery of the 787 that has cost Qantas possibly over $1 billion in lost revenue and flexibility, higher maintenance costs and increased fuel costs, not to mention market share and long-term brand damage.
The cost is incalculable.

And to those who suggest Qantas should have ordered the 777 as an interim, they forget that the 787 delays were rolling — six excruciating months at a time. That situation underscores the enormous trust that Qantas – and many other airlines – have — or had — in Boeing’s word.

Qantas probably should have purchased the 777-300ER in 2008 instead of eight more A380s, which are now deferred. And it can well be argued they should possibly swap some 787 options for the 777-9X and 8X.

Unfortunately for Mr Joyce, while his plan for the airline’s turnaround is essentially sound, matters are almost out of his and the board’s control. Adding to the complexity is the federal government’s desire to have Qantas as a flag carrier supporting Australian jobs while opening the floodgates to competition.

There is no turning back liberalisation but the government and unions must understand what that means.

There are two dynamics that are unshakable: every time a foreign aircraft lands on Australian soil it imports that country’s labour costs and most passengers today will change airlines for $10 as safety is no longer a major concern for 75 per cent of travellers.

If a foreign-owned company such as General Motors qualifies for $275 million in assistance to keep open the Holden plant then 51 per cent Australian-owned Qantas certainly ticks the box for federal aid or at least a more level playing field.

At the same time, Qantas management needs to be more aggressive with its vision and needs the pilots, engineers and baggage handlers on board.

There is no question the airline industry is the world’s least profitable and littered with the wreckage of those companies and their staff, as well as aircraft manufacturers, that would not or could not change.

Qantas’s future is not guaranteed. If staff think the federal government will bail them out no matter what, by the time that happens — if it happens — there will effectively be nothing worth saving.

Qantas management also needs to understand its staff is one of the industry’s most committed and professional groups but they need to be inspired and harnessed.
All parties must pull together because the last thing staff or management want is another debt-funded equity play.

Qantas is limping and only just controls its future. Any more damage and its destiny will lie elsewhere — and that is not a good place to be for the staff or the country.

So while some union leaders would like to see Mr Joyce fall — be careful what you wish for!