Qantas announced this week profits of just $250 million — that’s twice what they made last year, but, as their CEO Alan Joyce pointed out, not enough to keep investors happy. With a 4 percent return, he says you’d be better off putting the money in the bank.
That’s why he has announced a major restructure program for the airline, involved 1,000 redundancies, cutting back on long haul flights and deferring the purchase of six A380s and six B744s. While Qantas is slimming down its traditional business, the plan is to tap into growth in Asia by forming a partnership with a regional airline.
It’s been an unpopular move with many, who wonder whether the flying kangaroo is skipping the country for cheaper labour overseas. After all, Joyce has earmarked the airline’s high cost base as one of the biggest problems: he claims it is 20 percent above their competitors.
But whilst the growth in Asia makes sense, doesn’t a program of cutbacks on its home turf mean its market share will further diminish? Not so, says veteran aviation journalist Tom Ballantyne. In this edition of BTalk he says airlines are all forming partnerships to survive and compete.
I ask him whether he thinks Joyce’s plans will work? Or should he follow his suggestion this week, that investors would be better off putting their money in the bank?