Men Who Killed Qantas - Matthew Benns [92]
To complicate matters, other balls were in play. BA had already been in talks with Iberia about a possible merger. The Spaniards were not too happy when it came out that the Brits had gone behind their back and snuggled up with their old Aussie mates. Qantas had also sounded out partners in Asia, including Malaysian Airlines and Cathay in Hong Kong. However, when news of the Qantas and British Airways talks emerged in December 2008, that partnership seemed the best option. On the surface, historically and culturally, the two airlines had a great deal in common, including language and highly skilled, highly unionised workforces.
But the merger was just too hard. The 51 per cent Australian ownership condition was a deal breaker. ‘Despite the potential longer-term benefits for Qantas and BA, the airlines have not been able to come to an agreement,’ Qantas said in a statement at the end of 2008.3 Alan Joyce was going to have to face his annus horribilis alone.
Two thousand and nine started badly and then got worse. The problem with a global financial crisis is that nobody wants to travel. IATA predicted the global aviation market would lose $6.7 billion in 2009. Qantas was not immune. In February the number of passengers flying on Qantas planes dropped by 8.4 per cent. At Easter there were 10 per cent fewer domestic travellers and 17 per cent fewer international travellers. Qantas services to Los Angeles, London, Hong Kong and South Africa were cut back as Sydney airport reflected the global market with an 8.7 per cent drop in international passenger numbers in March – the fifth drop in consecutive months.
The opening up of the trans-Pacific route between Australia and America, one of the last truly profitable routes in the world, was further bad news for Qantas. Domestic rival Virgin Blue unveiled V Australia flights to Los Angeles, while Delta’s Boeing 777s added almost 20,000 more seats a month to the route. Before Delta decided to fly the route it was putting 200 of its passengers a day on Qantas jets under a code-share deal (when two airlines use one plane and two flight numbers on a route to save money). Obviously they would now be flying Delta. ‘If you’re the incumbent carrier this is a disaster – if you’re the non-incumbent carrier this is an opportunity,’ said Delta’s network planning chief, Glen Hauenstein.4 Qantas was not helped by Delta and Virgin agreeing to allow passengers to use a single ticket to travel on either network, giving passengers extensive links to domestic networks in Australia and the US.
The stiff competition sparked a loss-making fare war, with Qantas offering return economy tickets to New York for as little as $1,100 including taxes. Business-class travel was particularly badly hit on all routes and still the competition kept coming, with Abu Dhabi-based carrier Etihad increasing flights to Australia.
Qantas responded swiftly to the plunging market. It stopped spending. Orders for four new Airbus A380 super-jumbos and 12 new Boeing 737-800s were put on ice and talks began on delaying delivery of 15 long-awaited Boeing 787 Dreamliners. Twenty of Qantas’s existing fleet, including Boeing 747-300, 747-400 and 767-300 jets, were parked in the desert at Tuscon in Arizona to await an upturn in the economy. ‘We are not exiting from any of our routes. What we are doing is scaling back our existing networks,’ Joyce said in April.5 He also announced that the airline would probably make a $180 million loss for the first six months of the year, which in turn pushed the share price down as low as $1.74. ‘Is today my toughest day? It’s been four months of