In Alan’s mind, he’s saving the airline from ruin.

There has been an ongoing dispute with labor for years at Qantas. This issue in particular centered around the pilots, mechanics, and baggage handlers. Most of the problems stem from a couple things. Qantas employees believe they deserve all the compensation in the world while Qantas management disagrees. Qantas is actively trying to go around them by setting up subsidiaries elsewhere, most notably with low cost carrier Jetstar which has employees with different work rules and pay rates.

This move has had the Qantas employees steaming for years, and it only got worse when Qantas announced it would set up a new premium airline in Asia as well. The assumption is that Qantas employees are not going to be a part of that enterprise because the pay and work rules for the Australian airline just don’t work in the world today.

Labor likes to point to the continued profitability of Qantas and how the airline can’t just push them aside in favor of cheap labor just to goose profits further. But Qantas is quick to respond that profits don’t come from the core international airline operation. That has been a money-loser and there needs to be changes in pay/work rules to get closer to what other airlines pay. That point is certainly up for debate in my mind.

The reality is that like in everything else, a compromise is necessary, but just as we see in the US political scene these days, none is at hand. There has been increasing industrial action from the labor groups with little strikes here and there. The mechanics have been working to rule and Qantas has seen performance suffer significantly.

Alan Joyce is Crazy … Like a Fox?
So what can Qantas do? It could keep negotiating in a situation where no deal will ever be made, or it could do something drastic. Alan chose Option B; he went scorched earth and shut down the airline.

Now why the heck would someone do that? It’s actually a clever move. (Don’t read that as me supporting it, but it is clever.) First, it shows the labor groups that Qantas is not screwing around. Alan is willing to shut the place down if the unions won’t come to the table and get serious about an agreement that works. Note that Jetstar, Qantaslink and JetConnect subsidiaries all kept running – it’s just Qantas itself that shut down. Qantas wants the unions to think that this will be a permanent solution if things don’t get resolved.

But more importantly, it pushes the government to get involved. The expectation had to be that by doing this on Saturday, the government would have acted swiftly and had the airline up and running again by the end of the weekend. That’s exactly what’s happening, though cancellations are likely to persist into the week as operations ramp back up. I think it probably took a little longer for the government to act than Qantas thought.

Qantas spent the weekend shut down but now, with the government’s urging, Fair Work Australia made the airline start flying again. The airline was deemed to be too vital to the economy to let it stay shut down, and that’s exactly what Alan was banking on. The airline was forced to re-start operations and labor has to stop all industrial action. Labor and management will enter into intensive negotiations over a 21 day period. if that doesn’t work, they go to binding arbitration.

And that’s probably what needs to happen here, because both sides seem completely loony to me with their thoughts about what’s right. If someone rational gets in the middle and strikes something fair, both sides will be unhappy but at least this will all be over.

So does that make this a smart move? It’s certainly a creative way to force the government into action, but it is also highly destructive of the relationship with every single employee as well as with the traveling public. Sure, it will end the industrial action but at what cost?

Some employees may have supported Qantas management before; not the unions, perhaps, but others. Now with this reckless grounding, employees have to be livid and somewhat nervous. I would start looking for a new job if this is how my senior management behaved. I certainly would have lost a great deal of respect for management.

If you pull a stunt like this and inconvenience thousands of travelers, you run the risk of pushing them off permanently. In the past, Qantas really didn’t have much competition within Australia or even to and from the country, but that has changed dramatically. Internationally, there are more flights every day from Asian/Middle Eastern carriers, and Qantas management isn’t shy to talk about it. That’s why it wants concessions from the union.

Virgin Australia Must Be Smiling
The biggest winner, however, is Virgin Australia. Even though Qantas wasn’t putting people on other airlines, Virgin responded quickly by offering discounted fares to Qantas fliers, lounge access for Qantas elites, and a bulked up schedule to accommodate the stranded folks. It also saw partners step in to help. Etihad offered to start flying routes on the airline’s behalf to pick up the slack.

For Virgin, it’s exactly what it needs. The airline has changed itself to focus on business travelers over the last year or so, and this is the perfect way to show Qantas loyalists what it can do. Those who have been burned by Qantas may not go back, or so Virgin Australia hopes. But Alan Joyce thinks that he’s found the way to success and he’s making that gamble.

Will people, employees and travelers alike, leave Qantas over this and look for better options? Qantas is betting that won’t happen, but I wouldn’t be so sure. Qantas has probably done serious harm to itself here. I would expect calls for Alan Joyce’s head to get louder and louder. But maybe that’s what the airline wants? Maybe, as the unions think, Qantas wants to shut down the old airline and start anew with cheaper labor and lower costs.

Now there’s a scary tale that you can tell at your Halloween party tonight.

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 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]

I’m not just talking about the Chilean ash cloud that has wreaked havoc on the Continent but rather airline shut downs, shifting strategies, and unlikely partnerships. It is incredibly exciting for airline industry dorks like me.

For years, the Australian market has survived as a duopoly. On one side, we had Trans Australia, which became Australian Airlines before being merged into Qantas in the 1990s to form the domestic and international powerhouse we know today. On the other side, Ansett was the counterbalance until its collapse in September 2001. Ansett’s collapse created an opening for upstart Virgin Blue, and the hole was quickly filled.

Plenty of airlines have tried to form a third challenger over the years. Most recently, it’s been a subsidiary of Singapore-based Tiger Airways that has tried to squeeze in with an ultra low cost service. That service is now in serious trouble.

Tiger was just shut down for a week by the Australian authorities because the regulatory agency “believes permitting the airline to continue to fly poses a serious and imminent risk to air safety.” This only impacts the Tiger subsidiary in Australia; the other Tiger operations in Asia continue to fly but the damage could be widespread.

Tiger is fighting this, but such terrible press is bound to put a serious dent in bookings regardless of whether it flies again or not. It’s going to be very hard to recover from something along these lines.

But that’s not the only blow to low cost flying in Australia. After years of acting like a low cost carrier, Virgin Blue has decided to go upscale. It’s combining its Virgin Blue, Pacific Blue, and V Australia brands into the new Virgin Australia.

Virgin Australia is focusing on competing with Qantas. It’s introducing new onboard products to compete with what Qantas offers and it’s trying to form partnerships in order to expand its reach for its customers.

One of those partners is Air New Zealand, which actually owns 15 percent. This may seem eerily similar to Air New Zealand’s last venture across the Tasman when Ansett collapsed under its ownership, but this is a very different Air New Zealand. Instead, the two airlines can come together to compete against Qantas instead of each other.

Internationally, it’s a different story. Virgin has hitched its wagon to Delta in the US with a joint venture between the two over the ocean. Since they both currently fly between the US and Australia, this will allow them to cut capacity and share traffic. But this is where it gets weird.

Over in Asia, Virgin Australia has joined up with Singapore Airlines in a broad alliance partnership that includes codesharing, frequent flier benefits, and more. Why is this weird? Because Singapore Airlines owns roughly a third of currently-grounded Virgin competitor Tiger Airways.

Will all these changes, Virgin Australia loyalists can get just about anywhere in the world on the airline and its partners. They can also get the same level of service on domestic flights as they’ve come to expect from Qantas. Qantas can’t be happy about this, but in a way, Qantas did this to itself.

Who’s running the show at Virgin these days? It’s John Borghetti, a 30+ year veteran of Qantas. Why did John leave Qantas? Well, he was in line to take the top job but he was passed over for Alan Joyce. Now he’s got Qantas in the crosshairs.

What is Qantas doing about all this? Well, as it has in the past, it’s complaining a lot about its business being under attack. Recently, its international business has been suffering the most with big losses while its domestic operation actually makes money. Makes sense that Virgin Australia would focus on taking Qantas’s profitable domestic business, huh?

While Virgin Australia chips away domestically, international is about to become a bloodbath. The airline is losing millions, and CEO Alan Joyce said in a speech last month that a major restructuring would be announced on August 24.

You can expect to see some cuts and some strengthened partnerships with other airlines. I imagine that as usual, much of the focus will go on to its low cost subsidiary Jetstar. Jetstar is one of the few “carrier within a carrier” experiments that has been called a success, though not everyone is convinced that the numbers are telling the whole story.

Jetstar has taken over more and more of the airline’s business, and now there is word that a joint low cost carrier will be started with Japan Air Lines in Japan. This is on top of the Jetstar Asia brand that already flies within Asia. There has also been interest in starting a full service airline division based in Singapore. This all seems strange since Asia is so hotly contested right now. You would think Qantas would prefer to focus on its home turf and doing that right, but the only thing on the menu for that region seems to be cuts.

As you can see, this market is truly fascinating and it’s changing quickly. I imagine that what we see next summer will look very different than what it looked like last year.

[Original tiger photo via Wikimedia Commons user Monika Betley/CC 3.0]
[Original Virgin Australia photo via Wikimedia Commons user YSSYguy/CC 3.0]

US Airways: Without Fees, We Have No Profit – BNET Headwinds
US Airways says that its entire profit will come from fees this year. That’s not a surprise and it’s why the change to a fee structure is so important for the industry.

Continental’s FareLock Is the Kind of Fee Everyone Likes – BNET Headwinds
A fee that’s good for the airline and customers? It’s true.

Airlines Temper Their Urges to Grow in November – BNET Headwinds
November traffic numbers saw less growth than October.

In the Trenches: Are Customer Newsletters Worth It? – Intuit Small Business Blog
Sending random emails wasn’t enough, it was time to consider a monthly newsletter.

Qantas: Engine Problems Mean Its A380s Can’t Fly to the U.S. Big Problem – BNET Headwinds
Qantas continues to struggle with the A380, and now it’s revealed that without some real engine fixes, the airplane can’t fly to the US.

How United Turned Southwest Into a New Direct Competitor – BNET Headwinds
Southwest is sitting right on top of the new United in Newark with the slots that United gave the airline. This isn’t as bad as it sounds.

Getting the Most Value from Your Travel Budget – Intuit Small Business Blog
You have a travel policy now but that doesn’t mean you’ll still do the best you can with your budget. It requires really knowing your travel habits.

Silver Lining: A380 Grounding Helps Qantas Maintain Its Safety Reputation – BNET Headwinds
The A380 grounding has been a mess for Qantas, but in the end is does help it keep a strong safety reputation.

How Southwest Could Deploy a Larger 737 for Greater Profits in New Markets – BNET Headwinds
Now that the 737-800 is all but a done deal for Southwest, it’s time to think about where those airplanes are going. I’ve got a good idea myself.

In the Trenches: Looking Beyond the Customer for Revenue – Intuit Small Business Blog
This talks about our decision to start booking travel via Cranky Concierge and why we did it.

Southwest’s Performance Problem: How to Fix Those Late Arrivals – BNET Headwinds
Southwest didn’t have the best month for on time arrivals in October and it looks like some bigger changes may be required to get back on track thanks to a changing model.

How to Set a Travel Policy for Your Business – Intuit Small Business Blog
Talking about a travel policy is not usually at the top of the list for small businesses, but it should be. Here are some ideas for getting started.

Aggrieved Fliers Ask, ‘What Now?’ – The New York Times
A very small part of a much longer conversation was published in this article about tarmac delays.

Executive guide: From delays to fold-out trays – sites that let you vent your spleen – Financial Times
Cranky got a great mention in the FT saying that my site is “the website of choice for business travellers focused on airports and airlines.”

Delta Flight Attendants Reject Unionization Following Northwest Merger – BNET Headwinds
Delta flight attendants have rejected unionization, and that’s a big deal.

Virgin America Finally Posts Its First Profit, But It’s No Surprise – BNET Headwinds
Congrats to Virgin America for posting its first profit but it’s not a surprise considering how good things are in the industry right now.

In the Trenches: Handling the Surge From Good Press – Intuit Small Business Blog
We had some great Cranky Concierge press in the LA Times recently, but that made me a little nervous.

Qantas A380: Rolls-Royce Faces Uncertain Future After Engine Failures – BNET Headwinds
Rolls-Royce may be an engine giant, but some high-profile problems lately leave the company on shakier ground.

Four Challenges to Virgin America’s Long Term Success – BNET Headwinds
Just because Virgin America is profitable now doesn’t mean it will be for long. Here are some major challenges.

In case you haven’t seen it, one of the engines on the A380 had what’s called an uncontained failure, meaning that pieces came out of the engine and threatened other parts of the airplane. While some flew harmlessly to the ground, others shot up and punctured the wing. Take a look:

As you can imagine, that’s not good. But the airplane flew just fine, the crew dumped fuel, and everyone was safe in the end. Still, there was something so concerning to Qantas that it decided to ground the entire fleet. It remains grounded today and Qantas has apparently found more problems on other airplanes so it could be a few more days.

If you’re booked on an A380, what should you do? Well, keep an eye on flight status updates on the Qantas website. Those seem to be accurate, but just because the flight is running doesn’t mean you’ll actually be on it.

I was trying to help someone this weekend who had flown from Chicago to LA, ready to connect to an A380 on Thursday night after the incident. When she arrived, she was told her flight would be going 24 hours later, and they would put her up for the night. She tried to get more information by calling Qantas, but the wait times were excessively long and she gave up. She went for her flight the next day but when she got there, she was told she wouldn’t be going.

See, the A380 is the largest airplane in the Qantas fleet, so when they find a 747 to substitute for it, they can’t get everyone on that airplane. Apparently they never bothered to tell this to the person I was helping, and when she showed up, they said she wasn’t on it and had no idea when she would be going. Very helpful, right?

Things were a bit more complicated for her, because she was on a codeshare with American Airlines. She had the American confirmation number but not the Qantas one. So if you’re flying, make sure you have the Qantas confirmation number so you can look up your status online. That undoubtedly could have saved some trips to the airport for some people.

If you’re hoping for more specific updates from Qantas, you’re probably out of luck. The only thing Qantas has done on Facebook is link to its website. The @QantasUSA Twitter account has had limited information, but it took more than 24 hours before Qantas even started responding to people via that channel. Your best bet is probably to just rely on what you find on the Qantas website. If you’re feeling stranded, we can, of course, help you via Cranky Concierge.

It’s unfortunate that Qantas’ response has left a lot to be desired here. With any luck, the airplanes will be back in the air within the next week, but we don’t know that for sure just yet. And what if you’re flying an A380 on another airline?

At this point, it looks like the issue is engine-related. Qantas uses a Rolls-Royce engine on its A380s, and Singapore is the only other airline that uses that engine. So if you’re flying on a Singapore A380, you have nothing to worry about just yet. The airline has inspected its airplanes and continues to fly them. But if something is found that requires immediate assistance, it could cause disruptions. On the other hand, if you’re on Emirates, Lufthansa, or Air France, those airlines use different engines and should be unaffected. My mistake, Lufthansa also uses the Rolls engines, however it has very few and likely has the ability to substitute other aircraft without nearly as much pain.

Airline reviews: Find out if an airline is any good – Budget Travel
Sean over at Budget Travel asked me how to find if an airline is legit or not. Here’s my response.

Southwest: Why It’s Promoting No Change Fees and Its Web Site – BNET Headwinds
Now that Bags Fly Free is working, here’s what’s next. From Media Day, of course.

In the Trenches: The Stress of Exhibiting at a Conference – Intuit Small Business Blog
I have started blogging about my experience as a small businessperson at the Intuit Small Business Blog. My first post was on exhibiting at a conference.

Election 2010: Airlines Lose Key Merger Opponent in the House with Oberstar Defeat – BNET Headwinds
Rep Oberstar, the constant airline merger opponent, has lost in the race for re-election. That’s good and bad news for airlines.

Southwest Tells Airports to Keep Costs Under Control – BNET Headwinds
Airport costs are skyrocketing, and I asked Southwest about that during a one-on-one interview with EVP Bob Jordan. He said airports do need to keep costs under control.

Qantas Grounds A380s After Engine Failure: There’s More to This Story – BNET Headwinds
The big news at the end of the week was Qantas grounding the A380 fleet. There has to be more to this.

Qantas A380: A History of Problems With the Rolls-Royce Trent 900 Engines – BNET Headwinds
This isn’t the first problem with the Trent 900 engine on the A380. Not sure what’s related at this point, but it’s worth taking a look.

Premium Air Traffic Surpasses Previous Year for First Time Since 2008 – BNET
Yes, it’s true. More premium passengers flew in December than in last December. Granted, they were paying 20% less . . .

Airline Labor Unrest – Is This Catchy? – IAG Podcast
I sit down with Addison Schonland to talk strikes.

American and United Switch to Small Planes for Big Routes – BNET
American is shifting its 70 seaters to compete with United’s 70 seaters. Go figure.

End of the Affair: Are American and Alaska Set to Compete? – BNET
It’s only one little route addition, but I tend to think it could mean big things.

High Speed Rail May Hurt Airports, But How Much? – BNET
High speed rail is coming to California, and the aviation world is gearing up to fight it. Boo, I say.