Story of the fortnight: Survival of the fittest

Story of the fortnight: Survival of the fittest
By admin


After stranding 80,000 passengers last year and cutting 500 jobs in February, Qantas is in the doghouse again, slashing a further 500 jobs late last month as it consolidates its heavy maintenance operations.

Qantas's medium term track record isn't exactly immaculate either. The carrier has laid off 5000 employees since 2006. It's a figure the company isn't particularly proud of – and one that has seen it continually angering union groups. But despite the battering Qantas is taking in the headlines, chief executive Alan Joyce is adamant the cuts are necessary to save the airline's imperilled international operations.

JOINING THE DOTS

Rewind to August last year, and subsequent events are put in context. After admitting that Qantas's international operations were dragging the chain for the whole Qantas Group, Joyce launched an aggressive five year plan to turn things around. Job cuts were always on the agenda, along with a host of new routes and alliances. And ten months on, as the plan rolls into its second phase, the changes are still coming thick and fast.

For one, Qantas is consolidating its heavy maintenance operations into Brisbane and Avalon as it looks to improve its bottom line. Heavy maintenance at Tullamarine will be phased out by August, leaving 500 employees without a job – the same staff forecast to go by Joyce in recent weeks.

Making the announcement last month, Joyce explained the move would bring Qantas's inflated cost base in line with its competitors and secure the airline's long term success. And with the savings expected to deliver an annual benefit of up to $100 million, Joyce clearly thinks the rejig will deliver the "best result" for Qantas.

In other changes, Qantas's executive team will also to receive a shake up, with a number of senior executives to leave the airline, including Jetstar CEO Bruce Buchanan and group executive commercial, Rob Gurney. But the biggest shift will see Qantas's international and domestic operations being split apart.

In what management have described as a "radical shake up", Qantas International and Qantas Domestic will have their own chief executives to manage the respective businesses. Each entity will also have its own operational and commercial functions and deliver separate financial results from July this year.

THE HARD REALITY

It all comes down to Joyce's plan to maximise the success of the airline's domestic arm and revive the declining fortunes of Qantas International, which has been losing money and relinquishing market share in recent years.

The restructure has been met with scepticism by some within the industry, who claim it could potentially double management costs down the track. Others, meanwhile, see the reshuffle as an inevitable step in the ongoing battle to save Qantas International.

Whatever the verdict, the changes should come as no surprise to those who are familiar with Qantas's transformation strategy. Joyce signalled that significant changes were on the cards back in August after admitting Qantas International was a "steadily fading business" that was sure to collapse without action. "Qantas International faces serious structural challenges¬ we don't have the option of pretending that things will change if we stay the same. They won't," he said in August last year.

Given that Qantas's domestic operation is going strong while the international arm is battling to hold on to its 18% market share, it may seem an odd plan to send the flailing operation out on its own. But Joyce believes going solo will help both operations to be more accountable to their own balance sheets. "Qantas Domestic and Qantas International face very different situations," he said last month. "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."

FUTURE ON THE LINE

Joyce's plan has been scorned by union activists, including Transport Worker's Union national secretary Tony Sheldon, who labelled Qantas a "militant, arrogant employer". But Joyce has stressed that no action will yield a worse outcome. "To do nothing, or tinker around the edges, would only guarantee the end of Qantas International in our home Australian market," he announced.

The airline is a mere 10 months into the five year plan and more changes lie ahead. Further job cuts are a possibility, along with more shuffling within Qantas's heavy maintenance operations. The changes will undoubtedly be scrutinised yet again, but there's no denying that change is needed to secure Qantas's long term success.

Email the Travel Weekly team at traveldesk@travelweekly.com.au

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