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Qantas Lays Out Its Conflicting Plans to Fix Itself

If you’ll be near LAX this Saturday, mark your calendar to celebrate 5 Cranky years. Join me and Johnny Jet at In ‘n Out for a little plane spotting between 11a and 1p.

So I thought that Qantas was going to roll out its big plans to transform itself on August 24. There’s apparently still something in the works that day, but CEO Alan Joyce jumped the gun with a wide-ranging speech this week that gave us a look at the high level architecture of how Qantas will try to right the ship. I found it confusing to say the least, and really contradictory. I like half the plan, but I fear the other half will doom the airline.

Qantas Forgets It's Australian

Qantas has said that its biggest problems are on long haul international flying. Domestic is doing well (even if it is under attack from Virgin Australia) and Jetstar is theoretically doing well too. The problem according to Qantas is competition – there’s a lot of it. And Qantas is having trouble competing with the Middle Eastern and Asian airlines that are picking up traffic at an alarming rate. It also doesn’t help that the airline’s costs are quite high (20 percent higher than the competition, according to Qantas), and labor is a big part of that.

So, here’s what Qantas is going to do to fix things:

  • Focusing on a “gateway” strategy which means Qantas will bring passengers to a gateway and then send people on partner airlines beyond that gateway.
    • Flight to DFW took the place of San Francisco because it’s an American Airlines gateway. (Forget that Qantas can’t always make that flight nonstop)
    • Looking at Kuala Lumpur as a good spot to transfer to soon-to-be oneworld airline Malaysia
    • Switch Buenos Aires flight to Santiago and feed oneworld partner LAN
    • End Bangkok and Hong Kong to London flights and let British Airways carry those passengers. Focus London flying via Singapore only
    • Continue to use Jo’burg as a gateway to Africa and connect with South African
  • Turn focus to building up Asia
    • Start Jetstar Japan working with Japan Air Lines and Mitsubishi for domestic Japan first and then international
    • Will “invest” in new premium airline to be based somewhere in Asia (location tbd)
  • Improve the onboard experience
    • Refit nine 747s with the A380 seats
    • Bigger, better lounges in Singapore, LA, and Hong Kong
    • Improved premium cabins and check-in for Trans Tasman flights
    • Order 110 new Airbus narrowbodies, including Airbus A320neos
    • Defer six A380s until the 747 fleet is retired (instead of growth, will become replacements)
  • Cut 1,000 jobs

That’s a fairly comprehensive plan, but there’s one problem. Two of these things are complete opposites. I mean, Qantas says it wants to have this gateway strategy, so then why the heck is it opening hubs in Asia? Shouldn’t that be done by the gateway partners?

The upshot here is that Qantas thinks it can rest on its laurels for domestic flying. Forget about the fact that Virgin Australia is gunning for Qantas passengers and that airline is being run by a former Qantas exec who knows all the airline’s secrets. You would think this would be the best time to keep your eye on the part of your business that works since that’s really the lifeblood, right?

Of course, that doesn’t mean the international operation should be ignored. I like the gateway strategy. Stick to your strengths and then have your partners connect people into your system from elsewhere. It makes a lot of sense, and it’s why close alliance ties can pay real dividends. So why mess around with all this Asian stuff, Qantas?

At the end of his speech, Alan talked about how Qantas is “an Australian company, owned by Australians, with the vast majority of our operations based in Australia . . . we’ll always call Australia home.” So then why aren’t you focusing on Australia?

In Japan, it might simply be that JAL doesn’t have the resources to do something like this. Ok, fine. So lend your expertise to “JALstar” if you want, but this is much deeper with Qantas really running the show and providing the aircraft. I’m just struggling to understand how the Qantas expertise in Australia lends itself to a very different culture in Japan. And for that matter, how does a premium Asian airline fit into the mix as well?

This seems like an airline that’s trying to spread itself too thin. I would focus on the strengths, and those lie in Australia. I say that in particular because its position there is under attack by Virgin Australia. It’s not like it has a monopoly and can just forget about what’s happening.

Cut the unprofitable flying, align with your partners, but stop pretending like Asia is somehow your territory just because it’s the closest thing to Australia. I fear that this focus could push Qantas to lose ground in its home market. And then what? Not good.

[Original photo via Flickr user planegeezer/CC 2.0]

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