Qantas to overhaul international flights, service cuts expected

Qantas will embark on a substantial overhaul of its international flights, with CEO Alan Joyce set to reveal his plans for "a strategic renewal of Qantas international" on August 24.

Warning that a restructure of the airline's international operations is "essential", Joyce has promised to "cast a ruthless and honest eye over non-performing and unstainable parts of our business."

While holding back specifics until the August announcement, Joyce has already flagged the plan as being likely to include an increased reliance on sharing flights with partner airlines in the oneworld alliance.

"We will be working with our alliances more strongly" Joyce predicted.

"As a founding member of oneworld we have a deep relationship with (many leading) airlines and we will be taking these relationships even further and that means a lot more joint ventures. We can leverage joint ventures with our alliance partners a lot more than we are doing today."

Joyce cited the Qantas-British Airways codeshare relationship as a model for the new Qantas international, saying "we think more examples of that type of arrangement will help", and identified Asia as a key market for such moves.

Joyce also talked up the success of Qantas' low-cost sibling Jetstar, particularly in the Asian market, fuelling suggestions that Qantas will hand several Asian services over to Jetstar while axing others in favour of 'codeshare' flights with partners, which may include new chum Malaysia Airlines.

Qantas is sponsoring MAS' entry into the oneworld alliance, a process which is expected to be completed within 12-18 months, but the airlines could enter into a direct codesharing arrangement before then.

Joyce framed the impending changes as necessary to reign in the costs of Qantas' loss-making international arm, which is over $200 million in the red and he says "absorbs more capital than any other part of our business: $5 billion plus (which is) 38% of Qantas total assets."

The airline is also facing a loss of over $206 million in weather-related impacts in the current financial year, with $21 million for ashcloud flight cancellations and disruptions to date.

Qantas is already moving to squeeze more seats onto its flagship Airbus A380s and long-range Boeing 747-400s, and earlier this month cut back on orders for new aircraft in an effort to slash A$700 million from its capital budget over the next two years.

It's also possible that Qantas will look to speed up Jetstar's debut of the cost-efficient Boeing 787 Dreamliner, currently due to enter service late next year, as the 787 would allow Jetstar to take on new routes to Europe, America and Asia and allowing Qantas to inherit several of Jetstar's current aircraft rather than purchase new planes.

David Flynn

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.