Qantas develops Virgin-phobia

Courtesy Qantas

Courtesy Qantas

NOT a pretty picture for Qantas. The Australian flag carrier is expecting a Group loss of up to A$300m (US$271m) for first half performance ending 31 December 2013. Subsequently Standard & Poor downgraded Qantas’ credit rating to below-investment level, or junk.

There are the usual culprits – high fuel costs, uncertainty of the global economy and competition, the first two easy to blame and the last that should not even be considered blameworthy in the business. Ever since the global economic meltdown, airlines have been struggling to find their balance and unfortunately any success seems to be short-lived. In its last financial year, Qantas reported a profit of A$6m, bouncing back from a loss of A$24m in the previous year.

The poor first half of the current financial year is unlikely to be helped by the second half, whose outlook remains volatile. Going forward, it will be further cost reductions. Qantas expects to cut another 1,000 jobs. CEO Alan Joyce said: “We will focus relentlessly on cutting costs and improving productivity, while maintaining our competitive advantages as a business.”

But the flying kangaroo has another culprit to blame for its expected deteriorating performance: the restrictions on foreign ownership which it claimed to have hurt its growth and advantaged rival Virgin Australia instead. Foreign holding of Qantas is limited to 49%, and no foreign airlines are allowed to own more than 35%. It is no brainer to state the obvious, that Virgin’s strategy is to weaken Qantas, as is expected when we talk about, say, Japan Airlines vs. All Nippon Airways in Japan and British Airways vs. Virgin Atlantic in the United Kingdom.

Virgin has attracted investment from foreign carriers Etihad, Singapore Airlines and Air New Zealand. Mr Joyce’s gripe is that Virgin will use foreign government capital to finance increases in domestic capacity. Mr Joyce has complained often about foreign airlines being supported by their governments in an allegedly uneven playing field, something that the Abbott government has indicated in not so many words to Qantas not to expect. But Qantas is petitioning the Australian government to at least change ownership rules. Would Emirates, which had previously said it was not interested in an equity swap when executing the mega marketing alliance between the two airlines, be interested?

Indeed, why is Qantas with a majority share of the Australian market now developing Virgin-phobia?

Distractions are part and parcel of the game.


About Dingzi
Writer by passion, with professional expertise in aviation, customer service and creative writing. Aviation veteran, author, editor and management consultant. Besides commentary on business issues and life-interest topics, travel stories and book reviews, genres include fiction, poetry and plays. Nature lover who abhors cruelty of any form to animals, and a tireless traveler. Above all, a dreamer.

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