Is Qantas and Australia’s aviation system in meltdown? No, but challenges are all around

Qantas' 5-Dec-2013 pre-tax loss projection of up to AUD300 million for the six months to 31-Dec-2013 is accompanied by plans for an accelerated cost reduction programme involving an additional 1,000 head count reduction.

Since Qantas started getting its international network into order last year with a ground-breaking Emirates alliance, at least one major issue seemed to be solved. A new codeshare alliance announced with China Southern on 3-Dec-2013 complements its existing one with China Eastern, offering a good platform for future growth in the massive China market. Meanwhile Jetstar, with joint-venture alliances, is developing new markets across the region from various country platforms.

Many of the main ingredients are in place for a viable longer term international operation. It is the short term that is proving hard to digest. Virgin Australia is being annoyingly aggressive, at home with its expanded product and capacity including a Tigerair dual-brand to match Qantas', and internationally through its equity partnerships with Etihad, Singapore Airlines and Air New Zealand. There is also a host of very aggressive foreign airlines feeding off the still relatively strong Australian outbound market.

The Qantas mainline brand remains overweight and proving increasingly vulnerable as competition persists. Hence the emergency measures.