Australian carrier ponders major restructuring as part of survival strategy to counter increased foreign competition
Qantas is warning that it could be forced to undertake drastic restructuring – understood to include a transfer of part of its fleet or heavy maintenance overseas – unless the country's government provides more assistance with its policies to fend off an onslaught of foreign competition.
The Australian flag carrier was due to hold a "strategy board meeting" earlier this month to review its options over the next three years for securing a viable future. Chief executive Geoff Dixon has already conveyed their thrust to deputy prime minister and transport minister John Anderson.
Airline sources say that a worst-case "doomsday scenario" could see the transfer of Qantas's entire heavy maintenance work to contractors offshore, which would result in the loss of 2,500 overhaul and maintenance jobs. Significantly, the airline recently placed some Airbus A330 C check business with SR Technics, which will see it ferry aircraft to Zurich for maintenance.
Other options under trans-Tasman single-aviation market policies include the shift of much of its domestic fleet to New Zealand registration and regulation, the transfer of investment in growth initiatives to lower-cost subsidiaries in Australia and Asia, and more outsourcing within Australia and New Zealand of engineering and other support services.
Dixon warns that despite claims by unions, commentators and the public, Qantas has never been more vulnerable and its future "is far from guaranteed". At a recent Sydney business lunch, he detailed a wide range of government policy and industrial issues that had eroded the carrier's global competitiveness. They included tax depreciation, which is out of step with conditions enjoyed by competing international airlines and inhibits fleet-replacement strategies; a cost-of-capital inflated by government- imposed 49% foreign ownership limits; and the exploitation of privatised Australian airports by new monopoly owners.
With Singapore Airlines and Emirates leading the push for more access to Australia's lucrative transpacific routes, Dixon is now pressing the government for restraint until Qantas gains better access to key regional routes.
"We need the government to understand that the appeals of government-run airlines to access prime routes out of Australia must be balanced against the restrictions Qantas faces in international markets," Dixon says.
Describing the Qantas Sale Act's foreign ownership provisions as an "iconic straitjacket" and "nothing but legislative nostalgia", Dixon is insisting the limits must be reviewed. Australia's Labour party opposition would back a government decision to raise the foreign airline ownership limit of 35%.
Qantas has also warned Anderson of the soaring cost of regulatory compliance, which industry attributes to outdated rules and the failure of a current rule rewrite to bring meaningful regulatory reform and needed efficiencies. The industry believes the process is not improving maintenance and overhaul regulation because key Civil Aviation Safety Authority (CASA) decision makers belong to the same union that represents Qantas engineers.
A CASA source says some of the regulator's employees believe that Dixon is "just bluffing".
PAUL PHELAN/CANBERRA
Source: Flight International
