Qantas separates international and domestic operations into independent business units

Qantas announced a restructure that saw its operations split into two distinct businesses, namely Qantas International and Qantas Domestic, under different management teams which will be reporting their financial results separately. The move, effective from July 1, is part of the five-year transformation plan announced last year.

The company hopes that the split will help reverse the fortune of the loss-making international division. Chief honcho Alan Joyce said: “Formerly separating the management of Qantas international and domestic will ensure that we can independently run each business according to its specific priorities and market conditions. These measures give us the right structure to address the challenges and opportunities we face – and the right people.”

Along with the restructure is the appointment of new chiefs. Current CEO of Qantas Frequent Flyer Simon Hickey will head Qantas International, and Group Executive of Qantas Airlines Operations Lyell Strambi will head Qantas Domestic. Qantas Frequent Flyer is a star performer in the Qantas stable, its success attributed to Mr Hickey’s driving its rapid growth, so there will be expectations of new directions when he comes on board to reverse the A$216 million (US$211 million) loss that international operations incurred last year.

Mr Joyce may be right that international and domestic businesses face different demands and challenges. Note however that they are not effectively separate companies in the way that rival Virgin Australia has restructured its international and domestic businesses – this earlier initiative that could have precipitated the Qantas move. “There’s no splitting the group off or selling core aspects like international, domestic, or frequent flyer,” said Mr Joyce. Still, the restructure will enable each business unit to focus on different priorities and the flexibility to implement policies as relevant to its operations and market conditions.

For one thing, the independence may give Mr Hickey a freer hand in pursuing the Asia dream of setting up a premium carrier in the region. He may also find it timely to reassess Qantas’ relationships with existing and potential partnerships. While expressing satisfaction with the OneWorld alliance, he has reportedly said: “But it doesn’t mean that we shouldn’t be open to always looking at what are the right partnership structures we should have going forward.”

With Virgin Australia forging closer ties with Singapore Airlines (SIA), there are already rumors that Qantas may consider working with instead of against Emirates – a possible partnership that would give it access to the wide network of the Middle East airline in not only the Gulf region but also Europe and Africa. Emirates, of course, would be interested to have greater access to and possibly within Australia as well as beyond Sydney and Melbourne to the US west coast – that same dream that has eluded SIA.

“We have begun the process of restoring Qantas International to a sustainable position,” announced Mr Joyce. It is time, even as the turbulence for the industry does not look like substantially abating any time soon, thereby adding to the challenge moving forward.

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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