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."
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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.