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Australia: Qantas splits international airline business from domestic

Qantas Airways Ltd. said Tuesday it had split its loss-making international flights operation from its profitable domestic arm as part of a wider restructure.

Qantas a380 pilot explosion 2012 5 22Enlarge
Qantas pilot captain Richard de Crespigny poses infront of the Qantas Airbus A380 jet dubbed 'Nancy Bird Walton', in honour of Australia's first female commercial pilot, on the tarmac at the Changi International Airport in Singapore on April 21, 2012. A Qantas Airbus A380 jet that dramatically lost an engine in a mid-air blast off Singapore in November 2010 was formally handed back to the Australian flag carrier April 21 after extensive repairs. (ROSLAN RAHMAN/AFP/Getty Images)

Qantas Airways Ltd. said Tuesday it had split its loss-making international flights operation from its profitable domestic arm as part of a wider restructure.

The news comes a day after Qantas — one of a few profitable airlines in the world — confirmed plans to cut 500 engineering jobs from its operations at Victoria's Tullarmarine and Avalon airports, citing a newer fleet with less need for maintenance.

More from GlobalPost: Australia: Qantas fires 500 workers to cut costs

Qantas suffered an 83 percent slump in first-half net profit in the six months to December.

The carrier recently also announced it would delay the delivery of two A380 superjumbos by three years as part of spending cuts. 

Qantas described the restructure as part of a five-year turnaround plan for its struggling international division, whose losses are due largely by soaring jet fuel costs and intense competition from state-backed Middle Eastern carriers, according to the Wall Street Journal.

The airline's success is underpinned by a domestic flights unit that derives much of its success from Australia's booming resource-rich economy.

Qantas shares rose as much as 3 Australian cents, or 2.1 percent, to 1.46 Australian dollars in morning trading on the news, the Fairfax media reported.

The two new Qantas businesses will have separate chief executives and operational and commercial plans, Qantas said in a stock exchange filing cited by Reuters.

"Formally separating the management of Qantas International and Qantas Domestic will ensure that we can independently run each business according to its specific priorities and market conditions," Qantas CEO Alan Joyce said in a statement cited by Fairfax.

"These measures give us the right structure to address the challenges and opportunities we face, and the right people."

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However, NineMSN.com.au cited an Australian aviation expert and former Qantas economist as saying the decision to split Qantas domestic and international operations was "cosmetic" and would not address long-standing issues that had affected the carrier's profitability.

"It won't have any impact on their international plans and it won't enhance their ability to solve any of their problems," Tony Webber said.

He said the losses at Qantas's international operations were due to an oversupply of flights to Australia that brought down air fares, thanks largely to competition from the airlines Emirates and Etihad.

Qantas now took more Australians out of the country than it brought in, mainly owing to the strength of the Australian dollar, which in turn has encouraged more Australians to travel overseas.

"To solve the problem the only thing they can do is pressure the government to stop giving air traffic rights to international carriers, especially when the dollar is so high," he said. 

The skyrocketing price of fuel was also a factor, he said.

http://www.globalpost.com/dispatch/news/business/companies/120522/australia-qantas-international-domestic-airline-business