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Qantas shake-up cosmetic, won't stem intl decline: economist

Reported by Martin Zavan, ninemsn
Tuesday, May 22, 2012
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The decision to split Qantas domestic and international operations is "cosmetic" and will not address long-standing issues that have decreased the carrier's profitability, an Australian aviation expert has said.

Dr Tony Webber, former Qantas chief economist and founder of Webber Quantitative Consulting told ninemsn the airline already had separate domestic and international divisions and the previous arrangement has just been more formalised.

"The previous Qantas Frequent Flyer boss (Simon Hickey) could have said to Alan (Joyce) 'I need a change' and they've had a shakeup," Dr Webber said.

"It won't have any impact on their international plans and it won't enhance their ability to solve any of their problems."

Qantas Airways is splitting its international and domestic operations into two separate businesses from July.

Each of the two businesses will have its own chief executive and will report its financial results separately, Qantas said in a statement.

Dr Webber said the losses at Qantas's international operations were due to an oversupply of flights to Australia that brought down air fares.

"To solve the problem the only thing they can do is pressure the government to stop giving air traffic rights to international carriers, especially when the dollar is so high," he said.

He notes that Qantas now takes more Australians out of the country than it brings in and the strength of the dollar has exacerbated the trend.

Another key contributor to Qantas's financial woes has been the price of fuel, which has risen sharply since 2002.

Dr Webber said the way the carrier has conducted itself suggests it is still not able to respond to the increased fuel bill, periodically lifting surcharges instead of seeking to cut capacity growth.

He said the rate of capacity growth would need to be roughly halved from the current four percent to around two percent.

Nine News Finance Editor Ross Greenwood told Macquarie Radio that the restructure could pave the way for sale of some of Qantas's business divisions but Dr Webber doubts there will be much interest.

"Who would buy it?" Dr Webber asked.

"No-one would buy it. They should do what other major airlines operating in Australia do, have it owned by the government."

While a return of the flying kangaroo to government ownership is unlikely, Dr Webber said the state-owned carriers that fly in Australia enjoy a significant advantage.

"Government-owned airlines have a huge advantage because many of them make decisions not to maximise airline profits but to maximise the objectives of the owner (the state)," Dr Webber said. "Emirates, Etihad and Singapore Airlines are from small countries and aim to bring in lots of people for a few days and then fly them to their next port."

In Australia the government's commitment to liberalising the skies has increased competition, arguably to the detriment of the flag carrier.

Yesterday Qantas announced it would slash 500 maintenance jobs as it consolidates three heavy maintenance facilities to two by closing its Melbourne Tullamarine facility.

Qantas chief executive Alan Joyce said the decision to stop heavy maintenance at Melbourne's Tullamarine airport, which will save between $70 million and $100 million a year, was due to the airline's more modern fleet requiring less work.

25/10/2014 05:47Sydney, Australia. 25 October,2014
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