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Ailing Qantas won’t drop 65% domestic line in the sand

March 7, 2014 Aviation, Headline News 1 Comment Email Email

egtmedia59Qantas may be losing money hand over fist but it will defend to the last its 65% domestic market share “line in the sand”.

The airline may have posted a AUD 252 million half-year pre-tax loss, announced plans to cut 5000 jobs and been refused a AUD 3 billion dollar loan or a debt guarantee by the Australian Government – but the line in the sand remains sacrosanct, the airline has confirmed.

Yesterday, laws to remove the 49% cap on foreign ownership of Qantas passed Australia’s House of Representatives 83 votes to 53. It means little, however, as the legislation can be expected to fail in the Senate.

Replying to opposition questions about how the legendary Qantas safety record would fare if maintenance was sent offshore, Prime Minister Tony Abbott said the safety record did not depend on whether the airline was foreign-owned.

“It’s reckless of the leader of the opposition to suggest it does,” Abbott said.

Independent MP Bob Katter cut to the chase, asking how a “cut-rate, cheap-jack, overseas-based workforce” could be trusted to keep Qantas aircraft safe.

A day earlier, Qantas chief executive Alan Joyce, addressing the Australia-Israel Chamber of Commerce, confirmed that Qantas would maintain its self-imposed target of a 65% share of the Australian domestic market. Coles-Training_250X250px

At the premium end of the market, Joyce said, people travelled with Qantas “because of our loyalty program, lounges, terminal, check-in, brand, people, service” and also “because we have the best frequency, the best network across Australia.

“If you narrow that advantage, you narrow the desirability of our product, compared to our competition,” Business Insider Australia quoted him as saying. 

Joyce said that over the past two-and-a-half years, judged by available seat kilometres (ASKs), Virgin Australia had notched up 18% capacity growth and Qantas had added just half of that.

“In absolute numbers, we’ve added 4.3 billion ASKs and our competitor 4.5 [billion].”

Joyce said that if Qantas cut its capacity by 10% Virgin Australia would not reciprocate and “at the end of the day the market would still be oversupplied and Qantas will be a smaller player in that market”.

Qantas’ revenue advantage would start to disappear as the airline lost its network advantage and Jetstar’s cost-base advantage would suffer the same fate as its scale advantage diminished.

In short, the Qantas 65% will remain, though some analysts say it’s not quite achieving the target.

The 65% “line in the sand” strategy, and the term, were in fact created by Joyce’s predecessor Geoff Dixon, who said in 2004: “This is our line in the sand and we will provide the capacity and infrastructure to defend it…” and then in 2007: “Our strategy is to keep 65% of the [domestic] market and we will.”

Joyce has stuck with the line-in-the-sand mantra and critics are increasingly accusing him (mistakenly) of having created the idea.

Virgin supremo Richard Branson said recently (in his usual direct manner): “Alan Joyce is in deep shit because he drew a line in the sand.”

Qantas had lost hundreds of millions through Joyce’s strategy of maintaining a 65% share of the domestic market, Branson said.

Written by : Peter Needham

Currently there is "1 comment" on this Article:

  1. qf supporter says:

    and ask the pollies, Branson et al where the Virgin EJ90’s are sent for maintenance??

    Portugal!

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