Monday, October 31, 2011

What is to Become of Qantas

With flights grounded over industrial disputes and share prices in steady decline for the past year. According to their media release on the 28th of October, which is, for some reason, not listed on their website as of the time this article is published, protests, organised by unions, had by that date cost Qantas 68 million dollars. The costs have no doubt increased further over the past few days. Note that Qantas CEO Alan Joyce compared the costs to those incurred during the grounding of flights during the recent volcanic ash cloud, which were significantly less costly. Perhaps the comparison was for dramatic effect. Joyce certainly seemed at pains to emphasise the costly nature of the protests.

  Using rather more measured language, fund managers from AIF released a brief ASX announcement this morning to the effect that they did not expect revenue from airports to be significantly effected. However, by contrast, The Age, in the coverage linked above, interviewed various airport food service proprietors who complained that their daily takings had reduced by 30 to 80 percent.

  The extent to which the impacts are either downplayed or emphasised appears to depend largely on the party's respective interests. Of course small businesses, with tighter budgets, will suffer indirect consequences of the flight groundings, which were a Qantas decision and not a natural consequence of the protests.

  Joyce's constant reference to the cost of the protests is a very obvious and cliched attempt to shift responsibility for Qantas mismanagement to the unions. Traditionally, such attempts have worked, since companies occupy a higher echelon in western social hierarchy than unions. All he has to do is describe the unions as violence inciting mobs of working class ruffians and the corporate community will pat him on the back and give him another CEO job once he's finished, no matter how badly Qantas does.

(Google images)

  For Qantas share holders, however, the future could be very bleak. In fact Joyce's communication strategy should be making him extremely unpopular with share holders right now. In recent years, Qantas has been a failure. In reaction to the success of budget airlines, it has sacrificed its status as a premium service for futile attempts at compromise. Cutting costs by outsourcing maintenance operations is probably the silliest decision a board ever made. The biggest selling point Qantas ever had was it's reputation for safety. In the past, Qantas pioneered innovations in maintenance and testing and was a world leader. That's gone now and it would take many years and cost a great deal of money to bring it back.

  Qantas's other selling point as a premium service was it's reputation as a good employer with professional pilots and staff. That too is being sacrificed. The unions "unreasonable demands" (Joyce, 2011) are for the kind of decent employment and management practices that have in the past made the company a success.

  Qantas will never be as cheap as Jetstar or Virgin. If it was, it would lack a raison d'être. Shaving a few dollars off the price of an air ticket in panic at falling passenger numbers was never going to help if it came at the expense of quality. The food was never in my experience much good and they didn't have the kind of sexist hiring practices that let other airlines lure passengers with the beauty of their air hostesses. The sad fact of the matter is, Qantas are now a bad airline with little hope of recovery and the most likely outcome is that they will be bought out by another company, probably from somewhere in Asia, at a heavily discounted price. It's a waste. 


  If your interested and would like to read some other ideas about the demise of Qantas or other relevant literature, you could consider this book. A percentage of proceeds will help support my blog.

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