Qantas' pressing need to solve the Asian network dilemma, now its European restructure is in place
An under-performing - and ultimately unprofitable - international network has been part of Qantas' fabric in modern history. The old thinking was that the international network ensured loyalty (and corporate attractiveness) in the domestic market, which was not just handsomely profitable but enough to subsidise international: in FY2012 it recorded a domestic profit over AUD600 million while international recorded an AUD450 million loss.
A series of factors, likely irreversible, changed the willingness to support a largely loss-making network and Qantas has conducted two restructures of its Asian and European network in as many years. But Qantas' Asian network is still under-performing. Load factors to Singapore have dropped nearly 10ppt since Qantas discontinued Singapore-Europe services. Although the change is less than a year old, Qantas faces structural challenges owing to limited feed and competition. Its partnership with Emirates may be diluting revenue, while a sinking Australian dollar has variable impacts. Meanwhile Bangkok and Hong Kong, de-hubbed in 2012, also show challenges.
Qantas has spoken of better integrating Asia-based Jetstar units with Qantas to act as feed but this, unsurprisingly, has yet to occur. The challenges in Asia are far out-paced by serious, and potentially de-stabilising, factors at home. Qantas has too many crises to address, and its Asian network has not been granted sufficient airspace yet. But time is running out.
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