Qantas will carve its domestic and international operations into two distinct businesses from July 1st in a dramatic restructure which Qantas CEO Alan Joyce describes as an "essential program of change."

The result will in effect be two airlines – Qantas Domestic and Qantas International – each with its own CEO and reporting financial results independently.

Simon Hickey, currently chief executive of Qantas Frequent Flyer, will head Qantas International while Lyell Strambi, currently Qantas' executive of operations, will take charge of Qantas Domestic.

The move comes as Qantas seeks to protect its domestic market share from an increasingly competitive Virgin Australia, while also stemming the flow of red ink from its international arm.

Qantas' domestic arm reported a profit before tax of $552m in the 2010-11 financial year, compared to a loss of $126m by its international sibling.

“Formally separating the management of Qantas International and Qantas Domestic will ensure that we can independently run each business according to its specific priorities and market conditions," Joyce said in a statement.

“Qantas Domestic and Qantas International face very different situations. Qantas Domestic is strong and profitable. We are seeing the most sustained levels of high customer satisfaction on domestic services since 2004, and we are the airline of choice for corporate Australia."

“But we cannot be complacent – we must continue to offer customers the best network, frequency and flying experience in the domestic market, and find new ways to earn and reward their loyalty."

Joyce trumpeted Qantas International as "a great airline with a rich history", albeit one which is "is loss-making and does not deliver sustainable returns".

"However, we are committed to turning it around through the five-year strategy we announced last year, based on flying to global gateways, deeper alliances, smart investment in product and disciplined capital management."

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