The last of the senior dead men walking at Qantas has left the building with yesterday’s departure of group executive John Borghetti.

But what exactly will CEO Alan Joyce do with Qantas in a radically changed airline game in which the ideas and values that were held by many of its recently departed “legacy men” had also died before they were fired or retired?

Qantas is now in a race for “the middle”. The old pyramid-shaped revenue model where most of the money was made from the smallest cadre of high-fare paying frequent flyers was fatally wounded by the rise of low cost carriers. Just like Jetstar, that airline Joyce ran when it started flying in June 2004.

Joyce is now unopposed by legacy values at a moment when the top or luxury end of demand is shot. Yes, the first class suites on the A380 are full, there have been good discounts out there — and it is the newest thing around — but the fares and attractions that fill its premium cabins are also emptying the Qantas 747s.

At the bottom, in Jetstar, the ultra cheap seats are being filled more than before by people in suits being forced by corporate account managers to cram themselves into tiny uncomfortable places and reorganise their diaries around “cheapest fare of the day” rather than “most convenient time to fly”.

In the middle Virgin Blue is looking okay, in that the latest domestic figures (for February) showed its traffic almost unchanged from a year earlier, while Qantas and Jetstar went down, by more than 10% and 3% respectively.

This is where the fight is on, for flexible fares cheaper than Qantas used to like to sell them, with the Virgins only needing to gain a little more market share to overrun Dixon’s line in the sand of a Qantas group share of 65% of domestic passengers.

It is obvious that Qantas under Joyce will not continue the way it had under Dixon, including the ruthless decline in standards of punctuality and quality in aircraft that were at times presented in a filthy condition and broke down the moment they were towed toward a boarding gate in anger.

But Joyce is determined to drive the Jetstar approach to lower pay and higher productivity arrangements as completely through the ranks of better paid Qantas staff as hard and fast as it can be done without provoking prolonged industrial action.

It is a knife edge situation, maybe blunted a bit by the job insecurity of Qantas employees looking at a sharp global as well as domestic recession in demand.

Joyce also faces a crisis brought about by a wrong call on fleet renewal made when his predecessors nailed the painfully overdue modernisation of the Cityflyer services and secondary international routes on a huge order for Boeing 787 Dreamliners.

That program is in crisis. Too heavy and too late, and too fanciful, given that Boeing still insists it will make first deliveries of the un-test flown jet by the second quarter of next year.

The original plan, for aggressive Jetstar expansion into routes to Europe where Qantas has bled market share to Singapore Airlines, Thai International and Emirates, was stapled to the Dreamliner.

And V Australia is finally up and running, with the Boeing 777s many argue Qantas really needed to acquire, and with a market smart configuration and cost base that is competitive with Qantas A380s that have been laid out to suit a demand for luxury travel at the corporate level that could well be in a longer term recession.

Qantas can never be the same as it used to be, even without Joyce.

Peter Fray

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