Qantas falls deeper into crisis

ELIZABETH KNIGHT
Last updated 15:59 05/12/2013

Relevant offers

World

One Blackberry closes 450 start-ups open Major US cable TV merger backed Euro hedge funds booming Yellen bares her teeth on financial regulation Bridgestone executive in court China's credit falls, money supply slows Citigroup income up, concerns remain Mexico cracks down on financial kingpins Murdoch Jr's $30m superyacht calls Aussie shares being manipulated

OPINION: Time is up for Qantas. The Australian government can't fix the commercial disaster that the national carrier faces. The airline is in crisis and in need of radical surgery.

Impeccable as its airline safety record is, from a financial perspective Qantas is careering towards a crash. It has endured numerous external shocks since it privatised in the early 1990s - the bombing of the World Trade Centre, SARs, the global financial crisis and the industrial relations-inspired grounding of the fleet.

But it now faces its first operating loss in the six months to the end of December.

The rescue will come with its fair share of pain and dislocation. More than 1000 workers will lose their jobs and costs will be slashed.

But this won't be enough.

Qantas is now running cashflow negative and that situation is not sustainable.

Chief executive Alan Joyce needs to raise money. His first port of call was the government, but following an initial flourish of interest from treasurer Joe Hockey, the trail to Canberra went cold.

The door may be open for some changes to the foreign ownership down the track but Qantas' current needs are more urgent.

The airline needed the government to stop its competitor Virgin from raising money to continue to finance a market share war. Joyce was never going to receive that Christmas present.

Qantas is now alone to fix its own problems - which is completely appropriate. That is what management is paid to do.

Joyce talks of structural solutions to 'unlock sources of capital'.

It could be time for the giant garage (or at least hanger) sale with the two most significant items potentially on the block being the Frequent Flyer business and/or Jetstar.

Such a move would fly in the face of Qantas' integrated airline model in which the domestic, international, mainline and low cost carrier feed each other.

Another option would be for Qantas to seek capital from its shareholders - but the money wouldn't come cheap and Joyce is loath to go there.

Ad Feedback

- Sydney Morning Herald

Special offers

Featured Promotions

Sponsored Content