The Times Australia
The Times World News

.
The Times Real Estate

.

why things won't get better any time soon

  • Written by Peter Galvin, Professor of Strategic Management, Edith Cowan University
why things won't get better any time soon

Unlike many airlines, Australia’s flag carrier Qantas has survived the pandemic. But its return to normal service – and profitability – is proving to be a bumpy ride. It could well get worse before it gets better.

As domestic and international travel picks up, the airline is struggling to keep up – having laid off thousands of staff whose experience, it turns out, was quite valuable for running such a complex business. Cancelled flights, lost luggage, long delays at airports and low staff morale are pummelling its carefully cultivated reputation.

Qantas engineers took industrial action[1] last month. This week there’s a strike by baggage handlers[2] employed by the contractor used since the airline retrenched almost 2,000 ground crew workers in 2020. (The Fair Work Commission has since ruled this outsourcing was unlawful[3].)

Read more: Qantas fights on against court ruling it unlawfully sacked 2,000 workers[4]

Former staff have told the ABC’s 4 Corners program[5] they fear the cutbacks will undermine the airline’s safety record.

There is no quick or easy fix. These issues are tied to the airline’s profitability – or lack of it. Last financial year it reported an underlying loss before tax of A$1.89 billion[6]. Since 2020, total losses have been A$7 billion, with the shutdown of travel costing about A$25 billion in revenue[7], according to chief executive Alan Joyce.

A challenging industry

Qantas is by no means alone when it comes to the challenges of rebuilding after COVID. Even in normal times[8], airlines are notoriously hard businesses to keep in the black.

The products they sell – seats – are highly perishable. Once a flight takes off, any empty seat becomes worthless. It is tempting to fill seats by discounting, but this can lead to competitors doing the same, and create a perception that leads customers to undervalue the product.

There’s a reason so many national carriers are fully or partly government-owned[9] – including Air New Zealand, Emirates, Etihad, Garuda Indonesia, Malaysia Airlines and Singapore Airlines.

It’s debatable how many of these airlines would be viable as standalone commercial operations. An airline regulated by a government with a vested interest in its prosperity may be assisted in a variety of ways, from bailouts and tax subsidies to policies that help protect it from competition on domestic routes.

How to cut costs?

Adding to these difficulties in 2022 are fuel prices, inflated since Russia invaded Ukraine in February. Fuel costs typically account for about a quarter of airline costs[10].

Hedging contracts[11] have protected Qantas from the full impact of these increases. Like other airlines, it has few options to cut fuel costs besides cutting routes or buying more fuel-efficient aircraft. (It is buying 12 new Airbus planes, but with the plan to offer long-haul flights without stopovers, which will increase fuel consumption[12].)

Read more: Bucking the trend: Is there a future for ultra long-haul flights in a net zero carbon world?[13]

So cutting staff costs has become the default option.

Qantas has never shied away from this under Joyce, who was appointed chief executive in 2008.

In 2011 he notoriously grounded the fleet[14] and locked out staff during “hardball” collective bargaining with three unions (the Australian and International Pilots Association, Australian Licenced Aircraft Engineers Association, and Transport Workers Union).

Qantas passengers stranded at Hong Kong International Airport on Saturday, October 29 2011 after management grounded the airline's global fleet and locked out workers during enterprise agreement negotiations.
Qantas passengers stranded at Hong Kong International Airport on Saturday, October 29 2011 after management grounded its global fleet and locked out workers during enterprise agreement negotiations. Kin Cheung/AP

But this combative stance on wages and conditions, and outsourcing so many key activities, has thinned corporate knowledge. Qantas’ problems with lost luggage[15] are clearly linked to sacking so many experienced staff and replacing them with contract workers who don’t necessarily understand how the airline’s complex systems work[16].

A difficult outlook

It’s easy to look for scapegoats – there are mounting calls for Joyce to go, for example – but there are no easy solutions to the problems Qantas faces.

In the short term it must to balance the cost-cutting required with the reality that further aggravating its workforce will lower customer service – and ultimately its reputation.

Australian domestic airlines by market share, January 2019 to April 2022

CAPA - Centre for Aviation; ACCC, CC BY[17][18] Domestically it has the advantage of its major competitor, Virgin Australia, being in an even worse position. Virgin only survived the pandemic by being sold to US private equity giant Bain Capital. This should save Qantas from a domestic discounting war for the foreseeable future. But even with subdued domestic competition, the airline industry remains unattractive. For the flying kangaroo, the path back to profitability looks set to be one of many ups and downs. Read more: Why COVID-19 means the era of ever cheaper air travel could be over[19] References^ took industrial action (www.abc.net.au)^ a strike by baggage handlers (www.abc.net.au)^ was unlawful (australianaviation.com.au)^ Qantas fights on against court ruling it unlawfully sacked 2,000 workers (theconversation.com)^ 4 Corners program (www.abc.net.au)^ A$1.89 billion (cdn.theconversation.com)^ A$25 billion in revenue (www.bloomberg.com)^ in normal times (www.mckinsey.com)^ government-owned (gulfbusiness.com)^ quarter of airline costs (www.iata.org)^ Hedging contracts (simpleflying.com)^ increase fuel consumption (theconversation.com)^ Bucking the trend: Is there a future for ultra long-haul flights in a net zero carbon world? (theconversation.com)^ grounded the fleet (www.abc.net.au)^ lost luggage (www.9news.com.au)^ complex systems work (www.ft.com)^ CAPA - Centre for Aviation; ACCC (centreforaviation.com)^ CC BY (creativecommons.org)^ Why COVID-19 means the era of ever cheaper air travel could be over (theconversation.com)

Read more https://theconversation.com/qantas-the-trying-kangaroo-why-things-wont-get-better-any-time-soon-189558

The Times Features

Why You Need an Expert Electrician for Your Business’s Electrical Upgrades and Repairs

When it comes to maintaining and upgrading your business’s electrical systems, it’s essential to call in a professional. Electrical work in any commercial setting requires the ex...

Why Is It Crucial to Have a Building Inspection Done Before Buying a New Home?

Purchasing a new property is a big financial decision that can impact your future for years. Whether you are a first-time buyer or an investor, good or bad, it is essential to en...

Online Application for Sick Leave Certificate: Understanding When and How to Secure One

A sick leave certificate is an official document issued by a healthcare professional to verify an individual's inability to attend work due to illness. It typically includes the ...

A No-Fuss Guide to an Effective Beauty Routine

Taking care of the skin and appearance need not be complicated; it need not even consume your hours of time. Smart and simple approaches can give one that glow and fresh look witho...

Safe & Effective Tattoo Removal in Auckland – What You Need to Know

If you're looking for tattoo removal in Auckland, modern laser technology offers the safest and most effective way to fade or completely remove unwanted ink. Whether it's an outd...

Fleece-Lined Tights vs. Regular Tights: What’s the Difference?

When temperatures drop, choosing the right pair of tights can make a significant difference in comfort, warmth, and durability. Whether you wear tights for fashion, work, or outdoo...

Times Magazine

The Ultimate Guide to Apple Watch Faces & Trending Wallpapers

In today’s digital world, personalization is everything. Your smartwatch isn’t just a timepiece—it’s an extension of your style. Thanks to innovative third-party developers, customizing your Apple Watch has reached new heights with stunning designs...

The Power of Digital Signage in Modern Marketing

In a fast-paced digital world, businesses must find innovative ways to capture consumer attention. Digital signage has emerged as a powerful solution, offering dynamic and engaging content that attracts and retains customers. From retail stores to ...

Why Cloud Computing Is the Future of IT Infrastructure for Enterprises

Globally, cloud computing is changing the way business organizations manage their IT infrastructure. It offers cheap, flexible and scalable solutions. Cloud technologies are applied in organizations to facilitate procedures and optimize operation...

First Nations Writers Festival

The First Nations Writers Festival (FNWF) is back for its highly anticipated 2025 edition, continuing its mission to celebrate the voices, cultures and traditions of First Nations communities through literature, art and storytelling. Set to take ...

Improving Website Performance with a Cloud VPS

Websites represent the new mantra of success. One slow website may make escape for visitors along with income too. Therefore it's an extra offer to businesses seeking better performance with more scalability and, thus represents an added attracti...

Why You Should Choose Digital Printing for Your Next Project

In the rapidly evolving world of print media, digital printing has emerged as a cornerstone technology that revolutionises how businesses and creative professionals produce printed materials. Offering unparalleled flexibility, speed, and quality, d...

LayBy Shopping