In the bigger picture, Qantas blinking in the capacity war it was waging with Virgin Australia doesn’t change the external factors that have destroyed what might be called the classic post-'90s privatisation model, in which the airline set out to be a blue-chip enterprise earning the dividends that made it an important -- and performing -- part of numerous investment fund portfolios.
By deciding not to grow available seats faster than available passengers Qantas aims to prevent further loss of value in a game where it cannot survive in the form that it's in today.
It’s something some fund managers, analysts and critics have been urging for months. But will the discussion shift focus from the failings of the Qantas management under group CEO Alan Joyce and its board under chair Leigh Clifford, to these global issues besetting a global industry?
Will an opportunistic bid be made to take over Qantas, with objectives ranging from the shorter-term disposal of putative assets, such as the Jetstar franchise, or the frequent flyer and grocery and petrol buyer program, or will a longer-term plan emerge for a speculative seat in the tent in the long-predicted trans-border consolidation of the larger airline sectors of the world?
One thing is abundantly clear: no one in their right mind would be in Qantas for the dividends, which ceased more than five years ago, nor its share price, apart from the upside that a leveraged buyout or other form of consolidation or asset sale might bring.
This is the issue that fuels so much resentment about the Joyce/Clifford management. The value of the parts themselves are being eroded. Jetstar is officially sick, according to ASX traffic and yield monthly filings, and the franchise’s Asian puppet ventures are a costly and embarrassing joke, especially with the current chief executive Jayne Hrdlicka using code terms
like "growing within its existing footprint".
The perception of value in the loyalty program is under siege, although to be fair to Qantas, this is a global phenomenon as such schemes become increasingly sales-oriented and the notion that they actually materially reward members is eroded by media dissection of costs and benefits.
If the Qantas plan is to sell such assets, they are past their best. And expediency in recovering value is being called for in some circles.
Back in the days when he was preparing Ansett for the disposal of News Corporation’s controlling stake to Air New Zealand, the now-Sir Rod Eddington as CEO declared that the managements of airlines had to determine whether they would be among the consolidators or the consolidatees. Eddington was seeing the shape of things to come, even if he couldn’t see the fine detail 15 years later.
Qantas is now weakened to the role of being consolidated, by some means or another, rather than recovering the clout needed to be a consolidator.
That’s an uncontroversial observation. What remains controversial and speculative is precisely how this will occur, and what risks and rewards await Qantas' owners, keeping in mind its prime assets, its skilled and experienced people, and its reputation and international network, are being squandered or "slaughtered", like the value of any longer-term existing investment.