The downside for Qantas in its war of words with Etihad is that it might cause the media to ask harder questions about the performance of the group under chairman Leigh Clifford and CEO Alan Joyce.
Etihad, which has approval to lift its stake in Virgin Australia to 10% — substantially less than held by either Air New Zealand or Richard Branson’s family company — had Qantas lobbyists predicting the end of their world in Canberra recently, not long after a closer relationship between Qantas and Etihad’s larger rival, Emirates, failed to eventuate.
The focus ought to be on the catastrophically poor leadership at Qantas, rather than sky-is-falling stuff from apologists trying to externalise its failings on geography, its employees, the public, and the free-trade policies that have contributed to the strength of the Australian economy, and the demand for air traffic without which the airline group would be in even more trouble than it is now.
There are a lot of challenges facing Qantas, but surely none as large or fundamental as those it has made for itself.
One of the most troubling is its gradual introduction into the language of market guidance of its concerns over domestic yields. Until recently the airline’s guidance was that domestic was strong and it was was being dragged down by its international flights, which it is mitigating by cutting back on them, thus creating even more room for carriers like the evil Etihadians and Singapore Airlines and Cathay Pacific to take even more passengers off Qantas more rapidly than they might have envisaged.
Kicking own goals like this is a Qantas management skill. But the whole purpose of dividing the management of Qantas international from the rest of Qantas (which itself is going to be a fascinating exercise in accountancy, rather like dividing the sauce mixed into a bowl of tagliatelle when it comes to fuel, training, loyalty program operations and fleet deployments) is to prove how good domestic is and how bad the overseas business is.
But what happens if domestic is also not so good after all? More to the point, what happens if it is botched? On Monday Qantas announced it was going to add capacity to Hobart and Canberra routes, including to Adelaide, with 72-seat Q400 turbo-props, even replacing a critical Hobart-Melbourne 737 two-class service with a small, decidedly less comfortable turbo-prop.
The measures, breathlessly reported as positive by the assorted tools who analyse for investors or represent other interested parties, are like gift wrapping the Hobart-Melbourne route and sending it around to Virgin Australia’s CEO John Borghetti with a nice little card from Alan Joyce. As is the case with Canberra-Adelaide. If Qantas is going to be the preferred airline for domestic business travellers, why, why, why, would it run a Q400 for two hours at less than cloud-top altitudes, with no business class, between these cities?
If the motive is to punish or frustrate, surely it would have been simpler to put Jetstar onto the Adelaide-Canberra route, enabling it to lose more than twice as many customers with each flight.
A substantial component in the domestic air fares contest at the moment is Tiger. Now that the Singaporean-owned carrier has discovered the merits of complying with Australian safety regulations it is back exercising real pricing power where it hurts the most, between Sydney-Melbourne-Brisbane and on the major Perth transcontinentals, although if you fly in a full 180-seat A320 for more than four hours, it is you that will be doing the hurting.
Tiger is Singapore’s response to Jetstar Asia. It does what Jetstar was supposed to do, by competing on price. But Jetstar doesn’t appear to be succeeding in containing Tiger’s influence on domestic yields, yet it does appear to be succeeding in driving very annoyed Qantas customers across to Virgin Australia, which is everything in one brand, from a cheap seat to something akin to the Royal Barge in business class.