There is a more direct way to convey the message delivered by the restrained language of the Moody’s rating agency in downgrading Qantas to one notch above non-investment or junk status.
It is to say that Qantas has lost its way.
Despite having around 64% of the domestic market as a group including Jetstar, Qantas is bleeding away its reputation, market share and effectiveness in international air transport, and confronts investors with a miserably depressed share price and a third year without dividends.
These ought to be sacking offences.
There are serious issues of credibility that emerge from the record of public statements made by group CEO Alan Joyce about an Asian strategy, about his attacks on his own employees, his contempt for his passengers when he knowingly planned to disrupt the travel plans of tens of thousands of passengers by grounding the carrier to leverage an industrial law panic response from the Federal government, and his blowing the cover of what should have been a covert police investigation of death threats allegedly made against management in the course of those industrial disputes.
Whether intentionally or not, the Qantas PR message about itself has been strongly negative, attacking its own staff, attacking competitors who dared to fly where it wouldn’t, and attacking the viability of its international operations while further reducing their relevance to the needs of travellers.
On 16 February when the group is to report its first half results to 31 December, if not before, investors seem keen, at last, to have the hard questions about the confused Asia airline strategy advanced by CEO Alan Joyce rigorously explained.
Is it tenable that Joyce should continue to argue that a single aisle premium carrier set up in Malaysia or Singapore as a flag carrier of either nation, with a 49% stake owned by Qantas, is going to generate the profits that he claims will allow it to re-invest in the long haul operations he is currently throttling back.
Will he announce a major increase in the number of 747s being retired this year from two to seven, as has been widely mentioned in the industry for some weeks? Is this policy, of shutting down old jets with engines Qantas no longer maintains, and further reducing its exposure to competition from better run airlines, really the prerequisite for rebuilding Qantas long haul through the minority proceeds of a short haul Asian premium operation, in which, to conform with international air treaty rules, Qantas must not be in control.
The signals from Malaysia have been confusing. One week the Red Q plan, to use one of the names allegedly researched by Qantas, appears to have morphed into a jointly owned wide body Kuala Lumpur based entity using long range A330-200s in conjunction with Malaysia Airlines and Air Asia, yet in another week it is said to be just another code share arrangement, and in a further week the founder of Air Asia, Tony Fernandes, who is now a substantial investor in Malaysia Airlines, says he’s going to do his own premium single aisle carrier anyhow.
But the strangest thing about the Asia narrow body, wide body, whatever body plan is that Joyce actually announced his ambitions publicly last year, sending a signal to the established brands of SE Asia that Qantas was planning to move into their home markets and take business off them. In terms of cultural sensitivity and business acumen in an Asian context, this was one of the most inexplicably daft things an Australian enterprise has done in the hemisphere in recent years.
It was up there with the announcing of alleged death threats to Qantas management during its industrial disputes, contrary to the normal prudent protocol in such matters of saying nothing that would compromise police investigations, which after several weeks of special operations, found nothing and is said in some quarters to have been ended at Qantas request.
The events of last year made it increasingly difficult to take statements by Qantas management seriously. In the run up to the Fair Work Australia intervention in its industrial disputes, Qantas insisted it would not agree to job security clauses for its licensed engineers, yet in the consent arbitration made by the tribunal Qantas agreed to job security.
These are matters which may not seem likely to drive investor sentiment down on their own, but collectively, they may have contributed to a view that the focus in Qantas is less on product, schedule and costs, the factors that make airlines successful, and more on blaming everyone else for some very ordinary performances by the management and the board.
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