Qantas chief Alan Joyce said today there was "a real question mark over the viability of Qantas International" if it keeps going the way it is.
Speaking to journalists at a Melbourne Press Club lunch, Joyce said he had appointed a senior executive to review the whole Qantas International business and turn it into a "global airline", not just one flying in and out of Australia.
However, Joyce said Qantas International's financial problem was not due to quality of customer service compared to other airlines, but simply a numbers game.
"Qantas International market share has dropped from 35% to 20%," he said, pointing towards the oversupply of the Australian travel market with 39% more seats from international carriers, despite only a 10% growth in actual passenger numbers.
Joyce said the majority of Qantas' money was tied up in its international planes and operations, and it also soaked up most of the airline's annual spending.
"We face severe limits to growth," Joyce claimed, saying Qantas was an "end-of-the-line" carrier that serves a market of only 22 million people, "in a marketplace flooded with so much capacity that our competitors aren't even using their quota."
"We have set up a taskforce headed by one of our executives, Lesley Grant, to explore options that will invigorate the business, generate new and profitable markets, and protect our jobs and assets," Joyce announced.
"It is time we looked at opportunities to become a great global airline."
So if international flights in and out of Australia aren't the breadwinner for Qantas, what is?
According to Joyce, former chief of Jetstar before Qantas Chief Alan Dixon's retirement, the money will come from booming growth in Asian countries such as China and India.
He said Asian travel demand was already 70% of the USA and would be 140% within 10 years. "Substantial portions of the Chinese and Indian populations already have significant purchasing power. Last year 56 million Chinese people travelled abroad, with the Chinese outbound travel market forecast to grow at around 16% per year until 2020. India too has a young and affluent consuming class."
Joyce also admitted that the A380 engine explosion on QF32 and subsequent grounding of the whole superjumbo fleet had done Qantas' brand significant damage.
"Qantas was certainly hurt by the events of last year and we know that there is rebuilding to do," he said.
He indicated a major part of Qantas' reputation-rebuilding efforts would come from providing assistance to the Australian community at times of need, such as its recent contribution to flood relief in Queensland and NSW, as well as evacuating Australian citizens from Egypt to Europe at the Australia government's expense, then providing free onward flights from Europe back to Australia.
Qantas also announced today it was hiking international ticket prices and was considering raising domestic ticket costs too. However, the price rise will be applied via the ever-unpopular fuel surcharge, which means frequent flyer redemptions will come at an extra cost.
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