From theaustralian.com.au, 5th December 2013
Xenophon calls for Qantas heads to roll
INDEPENDENT senator Nick Xenophon is calling for the heads of Qantas chief Alan Joyce and the airline’s board, saying the crisis facing the carrier is “of their own making”.
Qantas has announced it will cut at least 1000 jobs as it works to save $2 billion over the next three years after announcing it expects to post a half-year loss of up to $300 million.
Senator Xenophon acknowledged it was a big call to demand the Qantas chief and board resign.
“But this is a crisis of their own making,” he said in a statement today.
“Why should 1000 Qantas employees and their families be sacrificed for the failed strategy of Joyce, (chairman Leigh) Clifford and the board?”
But Mr Joyce rejected any suggestion Qantas management was responsible for the poor results.
He said the board was doing a good job under challenging conditions.
The South Australian senator hit out at the “bean counters” who had trashed the airline and jeopardised the future of 30,000 workers.
Before the federal government considered any bailout requests, it should take a forensic look at the books produced by the current management team, he said.
“The Jetstar Asia experiment – first implemented by Alan Joyce as Jetstar CEO – has been an abject financial disaster,” Senator Xenophon said.
Qantas critics point finger at failed management decisions for airline’s woes
From abc.net.au Friday 6th December 2013
A former Qantas chief economist says the airline’s response to its competition with Virgin is pulling it into the red, after the airline announced it faces a massive half-year loss and will slash 1,000 jobs.
Qantas’s share price dived 11 per cent to finish $1.07 on Thursday after it shocked shareholders by forecasting a loss of up to $300 million for the current half-year.
Chief executive Alan Joyce put the blame for the loss squarely on his main domestic competitor, Virgin, and its foreign-government-owned backers.
“Our competitor has just received $350 million, meaning that they can continue their uncommercial behaviour,” he said.
The fight for market share means both airlines are adding domestic seat capacity to an already over-supplied market.
“We saw 8 per cent growth in the domestic market in the last financial year. [We] saw nearly 4 per cent growth in the first half of this year,” he said.
“Certainly the weak environment has had an impact.
“I think the underlying market growth is probably flat, but given the fact that we’ve got an oversupply of capacity, that’s made things worse.”
But a former Qantas chief economist, Dr Tony Webber, says what is really hurting the airline is the way it is reacting to the challenge from Virgin.
“Certainly Virgin’s capacity expansion has done a lot more damage than expected,” he said.
“It’s also Qantas’s reaction to that. Because Qantas is targeting 65 per cent of the domestic market, whatever Virgin does Qantas has to match that.
“I think of Qantas domestic, the main line, as the BMW of the airline business.
“[That] part of the business is all about preserving yield and generating strong margins by getting your yields up.
“And you don’t get your yields up by pouring lots of capacity into the market to match market share.”
Large-scale ventures in Asia fail to pay
Other critics point the finger at investments in Asia that have failed to produce decent profits.
The Australian Licensed Aircraft Engineers Association’s Paul Cousins believes the board and top management of Qantas should go.
Should the Government bail out Qantas?
“They’ve made absolutely poor decisions, especially in regards to the Jetstar franchise,” he said.
“They’ve sunk $1 billion into that particular venture, and it’s only given us minimal profits.”
Sacking the board and management is a position Dr Webber agrees with.
He says the current strategy of more staff cuts will not fix many of the underlying problems.
“The dollar being where it is makes it incredibly cheaper to shift offshore a lot of the people who are checking the planes,” he said.
“But engineering costs are only about maybe seven to 10 per cent of total cost.
“So even shifting that offshore is not really going to fix that problem either.”
Dr Webber says the Federal Government could help, but not necessarily by abolishing the foreign ownership restrictions in the Qantas Sale Act.
He says moves to restrict foreign access to international routes to and from Australia would be much more helpful.
“They can certainly help on the excess supply front by just saying to foreign airlines ‘We’re not giving you any more air rights for five years or two years’,” Dr Webber said.
“That’s one thing they could do. And that would directly help them to get their yields up.
“But certainly that would come at the expense of higher airfares.”