back to all news

Qantas International facing 'triple whammy', says Alan Joyce

By David Flynn     Filed under: qantas, alan joyce

Qantas is facing a 'triple whammy' on international routes and opening new global hubs will be a cornerstone in the airline's recovery, says CEO Alan Joyce.

"Qantas International has been hit by the post-GFC triple whammy: high fuel prices, the high Australian dollar and the economic downturn in major markets like Britain, Europe and the United States" Joyce recounted today in a speech to the American Chamber of Commerce.

On top of that, he said, Qantas faces three more direct challenges: "our high legacy cost base, our end-of-the-line geography and our small population."

One of the solutions remains the development of en-route gateways or "large hub airports" which Qantas flies into and other airlines fly out of.

"They can pull in travellers from all over the worked and send them on to their final destinations" Joyce said, noting that for Qantas these hubs mean "extending our reach while restraining our costs."

Asia: the Red Roo's missing link?

And while Joyce highlighted the Red Roo's relatively new hubs of Dallas/Forth Worth and Santiago, he admitted that "we have a gap (in Asia), because our current schedule is predicated mainly on travellers transitting through Asia en route to Europe."

That said, Joyce noted that a roster of existing partnerships with Jetstar, JAL, China Eastern and Cathay Pacific means "we do take customers to and between the largest Asian hubs" – a family which from early 2013 will include Malaysia Airlines and its Kuala Lumpur base.

But hubs hinge on partnerships with other airlines, and in what could be seen as a veiled reference to recent discussions on a Qantas-Emirates tie-up, Joyce prescribed patience.

"Qantas is recognised in the aviation world as an alliance specialist, but we only enter partnerships when we have the right arrangement for the long term. In the current economic environment, taking our time with this part of our agenda will clearly not undermine our broader transformation plan."

Jetstar soars while Qantas stalls

Joyce also took the opportunity to simultaneously trumpeted the success of Jetstar and take a shot at Virgin Australia.

"People like Richard Branson and (Virgin Blue co-founder) Brett Godfrey said it would never works: that Qantas would never be able to produce a truly competitive low cost carrier. Well its been such as success that its not Qantas but Virgin that had given up on the low cost model."

However, the near-term outlook for Qantas' international arm is far from rosy.

Joyce once again signalled to the market that the airline's looming annual result for the 2011-2012 financial year will reveal "an underlying profit but but a statutory loss, which will reflect the cost of the industrial dispute, the high fuel price and, importantly, the size and pace of the transformation of Qantas."

Keep up to date with the latest news for business travellers and frequent flyers: follow @AusBT on Twitter.

Profile

About David Flynn

David Flynn is the editor of Australian Business Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

 

Have something to say? Post a comment now!

1 on 8/8/12 by Justin

@Alan Joyce "Virgin have given up on the low cost model". Not sure they have necessarily Alan, their cheapest economy flights MEL-SYD-MEL are generally at least $10 cheaper than QF. Would be more accurate to say they are embracing a lower cost model than Qantas is willing (or able) to. Certainly their Business fares are cheaper and the product is newer and in my opinion superior to the 20+ year old 767 product on QF.

1 on 8/8/12 by ryandami

You must remember with Virgin, food and bagage come at an extra cost, unlike Qantas

2 on 8/8/12 by AusFlyer

When you add up the extras to put Virgin on an even keel to a Qantas flight, Virgin do come up more expensive.

Whilst their product is newer and aircraft better than the aging 767... I balk at the fact that when I buy a ticket on Virgin, 10% is going to Etihad, 15% is going to Air New Zealand and whatever percentage of the rest is going to Richard Branson. I'd rather fly on an aging 767 than feed the coffers of the others.

1 on 8/8/12 by Al

I'd rather fly on modern aircraft, get good service, pay for only what I need (eg no carry-on bags so I don't need carry-on baggage included in the ticket) and be rewarding a competitive challenger with my business, and thus ecnourage them or even enable them to keep doing more of the same.

2 on 8/8/12 by asw

Dont mix ownership and loyalty.  Qantas has foreign owners, as allowed under the Qantas Sale Act, and some of these owners are large investment funds like The Capital Group of the US.  Qantas depends on foreign cash for equity, debt & aircraft leases.  These 'nasty' foreigners also employ local Australians through these investments.  If they demand a ROI, then so be it.

2 on 8/8/12 by tonywills

Go right ahead and fly the wholly Australian owned Qantas (haha). Virgin are providing an ever increasing fantastic service. More importantly, they are waking Qantas up and forcing their hand away from the biscuit or apple service in economy (oh and lets not forget the paper bag to put your rubbish in). The Qantas 767's are 20 years old, and the 737-400's even older (circa Australian Airlines). But then they are continuing to refurbish old aircraft (747-400) to make people feel that there is 'newness', whilst the rest of the worlds great airlines are shedding the 747's for more efficient 777-300ER's. Go Virgin

3 on 8/8/12 by 521303

I would have thought Qantas faces a "quadrupple-whammy".  They have Alan Joyce as CEO - the biggest disaster for the airline of all.

1 on 10/8/12 by Christopher

That is the most accurate comment about Qantas. They have lost the word service from Alan Joyce's vocabulary. I don't think he understands the tipping point principal were we Aussie will that something for so long then leave in droves.

4 on 8/8/12 by aero-seat

Firstly, both Virgin Australia and Qantas are owned by many international companies. Virgin hasn't 'given up on their low cost model,' it is both a low cost and full service airline. They have better aircraft, better seats and cheaper airfares (at the start). You then add the stuff you need (eg food, baggage, entertainment). This makes the airline very competitive and with Qantas not profiting, it would definitely be a first step.

5 on 8/8/12 by rob1984

Don't forgot the other Australian airline, started by an Australia, It employs many Australians, contributes massively to the economy and the community. Virgin saw a need to change to remain a going concern and part of this was to restructure to allow more foreign investment. All Qantas seems to be doing is complaining how Virgin has it easier, maybe they should look at ways to change it and focus on that to improve their operation instead of crying poor. If Qantas still had their way we would still be paying $500 one-way to sydney on a sale fare. Just look at what Virgin is doing to the business class fare market. Prices dropping overnight on any route that Virgin challenges Qantas on. For me I support Virgin wherever i can, no because they always get it right or are the cheapest all the time, but because they try, they are always looking for ways to improve and don't just sit back.

6 on 9/8/12 by Southland

From QF website

Pursuant to the ASX Listing Rules, an announcement was made to the ASX on 23 December 2011, advising that the Potential Level of Foreign Ownership at 23 November 2011 was 31%. Qantas is not required to further update the market unless the level of foreign ownership exceeds 44%. Qantas remains subject to an aggregate foreign ownership limit of 49%.

Was harder to pull virgin stats but with EY having 5% and this Sir Richard Branson's Virgin Group currently holds about 26% of Virgin Australia and Air New Zealand has a 19.9% stake. QF has less foreign investment but is it far to say a lot of banks that are registered in OZ with foreign ownership have shares????.

Agree with fares being lowered and QF getting a wake up call. VA will not fold like Ansett so buckle up and watch the show. EY have an intrest and money to pump in to the fight. Hope TG sticks it out so JQ have to keep their fares low.

7 on 9/8/12 by tonywills

Alan Joyce should perhaps approach ILFC about leasing some 777-300ER's instead of painting over the rust with re-furbished 747's. Learn the lesson from most of the other airlines that have retired their old aircraft instead of rehashing them.

8 on 11/8/12 by 11sjw

Wasn' the biggest whammy the fact that QFi get lumped withj many of Jetstar International's costs but none of the profit?  Just ongoing rhetoric from AJ.  Still QF should have the right to use Contract/Non Union labour should they so choose.

9 on 13/8/12 by snoopy7787

I would rather fly Virgin on a much newer plane and friendlier attendants than the Qantas Variety.So you have to buy something from the food court at an airport before getting on the plane or stop somewhere on the way It's still better than some of the rubbish served on board.Last time I flew Qantas was in 2010.Give me Singapore Airlines where I can earn points through either Thai Airways Royal Orchid Plus or Velocity Virgin Australia PROGRAMMES.

 

Related News Items

   

Australian business traveller newsletter

Get Updates as they happen, tailored to your preferences, right in your inbox

|

What topics interest you?