Feb 28, 2014

Virgin’s blues no match for the deterioration of Qantas

Virgin released its own set of bad numbers today -- but the spotlight continues to shine on a Qantas in crisis.

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

On what should have been a day of pain for Virgin Australia -- reporting its own set of very, very bad numbers in a first-half loss of $83.7 million -- it's Qantas where matters seem to be deteriorating fast. Qantas chief Alan Joyce has gone into session with union leaders unable to say precisely where or when the 5000 full-time-equivalent job losses announced yesterday will happen. It's worth noting that both the Civil Aviation Safety Authority (CASA) and Qantas have, to their credit, acknowledged the psychological and potential safety risks of this workplace uncertainty by affirming a set of rigorous checks and ongoing audits to ensure safety isn’t compromised. According to various Qantas sources, Joyce has lost control over some previously untouchable strategic settings, including the continued expansion of Jetstar in Asia and a forced reconsideration of over-ordering of A320s for a vision that has gone dark. The splitting of Qantas into separately, supposedly "independently" managed domestic and international arms is under a cloud, although the fate of that costly and complex Joyce initiative has not been clarified. It seems the "everything is on the table" review of Qantas operations has produced successful resistance to wasting further money on Jetstar in Asia, as well as putting into doubt the very fleet investments in Boeing 787-9s that were to be the key, from 2016, to saving fuel and maintenance costs, and -- as Joyce boasted on several occasions -- reopening routes over Dubai that Qantas had previously abandoned. Joyce has been described as being put in a hype-free zone in which the really severe steps to return Qantas to prosperity are yet to be finalised but the losses arising in its domestic operations by a capacity fight with Virgin Australia continue -- at what the CEO who ordered them now calls "unacceptable" and "unsustainable" costs. Back at Virgin, where today’s media focus should have been, its CEO and former rival at Qantas, John Borghetti, would not be drawn on his commitment to the capacity fight with Qantas. His foray into matching the Qantas dual strategy, with a 60% stake in Tigerair Australia, resulted in an equity accounted loss of $18.4 million in the six months to December 31. During that time, whether it made the situation better or worse, the small fleet of 11 A320s was forbidden to fly at full capacity by CASA pending the removal of the last operational restrictions placed on it after its grounding when it was 100% Singaporean-owned. Borghetti has been very quiet on where he will take Tigerair although there are indications that a significant expansion of that brand of cheap travel into Jetstar’s domestic territory is well and truly being prepared. This is part of Qantas’ problem, as well as the media’s. Virgin Australia is much more disciplined when it comes to not giving away its intentions and internal policy tensions. It is a controversy-light carrier, and if (as many expect) its large foreign-owned airline shareholders take it private, Qantas will find it even harder to guess what it might do next. Instead of a focus on what little is really known about where Virgin Australia sees the rest of 2014 and beyond, Borghetti pushes it onto a speech attacking the Qantas sense of entitlement and warning that any government assistance for that carrier could send airline competition back to the privileged and costly '80s.

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3 thoughts on “Virgin’s blues no match for the deterioration of Qantas

  1. zut alors

    ‘…any government assistance for that carrier could send airline competition back to the privileged and costly ’80s.’

    Ah yes, Ben, as a traveller I recall they were the good old days (apart from smoking being permitted). There were fewer people & queues, the entire process was uncomplicated.

  2. Bill Parker

    And no checking to make sure your trousers do not fall down when the belt ( how do you hide anything in a belt?) is put in the tray with jacket, shoes and phone.

    I then loudly announce”THR”and they get the message and wand me.

    The most officious ones are at CBR. PER are used to explosives traces and steel capped boots.

    None of this in the 80s as ZA says!

  3. Venise Alstergren

    Being ‘privileged’ was fun. And, in those days, you stood a chance of being upgraded to first class. These days it is mass transit, for a mass price and zero service.

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