Qantas: changing flight plans

Hard to see what shuffle at Australian airline will achieve

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How not to win suitors and influence prices, Alan Joyce-style: describe a part of your company as “lossmaking and [which] does not deliver sustainable returns”. That will damp speculation that the Qantas chief wants to sell its international arm, which the Australian airline is splitting from its profitable domestic business. But aside from making the two more distinct, it is hard to see what the shuffle achieves.

Qantas will now have four divisions — the newly split airlines, plus Jetstar (its low-cost operation), and its frequent flyer programme. Each will have its own head, which could mean that the most visible result of the restructuring will be constant speculation over an internal succession fight. But competition of a different sort is what Mr Joyce wants: units negotiating with others, such as the domestic arm charging international for engineering services, as they watch their costs.

More cost discipline is welcome, as is the transparency from splitting the airline’s two arms. Combined, their 2 per cent operating margin in the last financial year disguised widely divergent fortunes. But it does not take new reporting lines to understand that Qantas’ frequent flyer programme, with an operating margin of 30 per cent, has carried the entire group for the past three years, generating more than two-thirds of operating profits.

There is a whiff of the cosmetic about the move, coming after 500 job cuts and six months after Qantas grounded its fleet during a bitter union battle. Better visibility on cost pressures, however, will help make the case for further restructuring.

Qantas’ share price gained 3 per cent on Tuesday. That may have less to do with the reshuffle than with a report that it could revive code-sharing talks with Emirates. That would do far more to improve its international operations than this seating redesign.

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