I thought it timely to revisit Aug 2011 when the master plan was unveiled. So where to now AJ? Do nothing or tinker around the edges ? What will you do with the 100 A320s, that will be paid for by QF? Paint them silver and orange i guess? GLTA@QF !
Matt O'Sullivan August 17, 2011
Qantas chief executive Alan Joyce. Photo: AFP QANTAS will shift its centre of gravity closer to Asia as part of wide-ranging changes that include slashing 1000 jobs, setting up a low-cost offshoot in Japan and establishing a premium airline in Asia.
As part of what Qantas dubbed a five-year plan, it will also order up to 110 Airbus A320 aircraft, some of which will join the fleets of the new low-cost carrier to be called Jetstar Japan and a premium airline to be based in Asia. All but about 32 of these will be the more fuel-efficient, next-generation A320neo aircraft.
''To do nothing, or tinker around the edges, would only guarantee the end of Qantas international in our home Australian market,'' Qantas chief executive, Alan Joyce, said. ''That would be a tragedy.''
Advertisement: Story continues below In a move that has inflamed unions, Qantas will lay off about 1000 staff, including pilots, engineers and cabin crew, from its 35,000-strong workforce.
The airline said it would try to ''minimise compulsory redundancies'' and had already received more than 400 applications from cabin crew.
Shares in Qantas rallied about 4 per cent shortly after the strategy was unveiled but closed down 0.5¢ at $1.525 yesterday. In contrast, Virgin Australia rose 2 per cent to 25¢.
''Overall the moves seem reasonably strategically sensible,'' White Funds Management director Angus Gluskie said.
Singapore has been seen as the most likely base for establishing a premium airline but Mr Joyce indicated he was becoming more keen on Kuala Lumpur. He talked up Qantas's close relationship with Tony Fernandes, the boss of low-cost airline AirAsia. Last week AirAsia took a cornerstone stake in Malaysia Airlines.
As part of the fleet changes, Qantas will defer orders for six A380 superjumbos by up to six years, and retire four Boeing 747-400 aircraft. It also said it was unlikely to take delivery of its first Boeing 787 Dreamliner until early 2013, which is later than the most recent timetable.
The latest aircraft purchases will increase the debt on Qantas's balance sheet by about $600 million over the next nine years. It will spend $2.5 billion on new aircraft this financial year, and $2.8 billion the year after.
The focus on operations in Asia is expected to strip tens of millions of dollars of operating costs from Qantas. But Mr Joyce would not put a figure on the cost savings, other than to say the international operation's cost base was 20 per cent higher than that of its competitors.
As part of the overhaul, the airline will also eliminate ''unprofitable'' flights from Hong Kong and Bangkok to London. Its alliance partner, British Airways, will provide onward flights to London from those two cities.
Qantas said the ditching of flights from Hong Kong and Bangkok would be a ''material saving'', helping to ''bring this part of the business into profitability in the short term''. Qantas has also scrapped flights to Buenos Aires, but will begin new services to Chile's capital, Santiago.
Mr Joyce said Qantas was still assessing the ''transformation costs'', but earlier estimates were between $350 million and $450 million - more than half of which will be in impairment charges for aircraft retirements.
However, it does not include a $64 million investment in Jetstar Japan.
Mr Joyce said the ''prime locations'' for a premium airline would be Singapore and Kuala Lumpur.
But deciding on the base for the yet-to-be named airline was taking longer than anticipated because Qantas was still assessing the implications of AirAsia taking a stake in Malaysia Airlines.
''To turn the Qantas international business around … we need to have this venture in Asia,'' Mr Joyce said. ''It is not about replacement flying. It is about making us more competitive.''
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