Sunday, October 30, 2011

News Report on 29th Oct, 2011: QANTAS grounds flights - My analysis

This case was part of our Integrative Week. Here is a related news report about flights being grounded:

29th October, 2011. 10 PM EST. Toronto, ON, Canada.

Here is my understanding of the current situation about QANTAS. The airlines just grounded all its flights. I have not had the time to read all updates. AJ (CEO Alan Joyce) is a son of a gun. A frikkin' GENIUS. Qantas is still gold. Has been for 90 years.

What AJ is trying to do: (a) Refuse to be pressurized by the Unions come what may. Make the Unions look bad by grounding all flights. (b) Make the government of Australia look bad since they are pro-union. (c) Educate the world that Aussie Unions & Government are not doing enough to help Qantas, but are only interested in short term self interests. As per AJ, with status-quo, Qantas shall die a slow death within 5 to 9 years anyway, due to competition.

The situation: (1) What Unions want: Job security, high pay, easy life, no outsourcing. Does not like AJ's strategy to go to Asia (2) What government wants: Votes of Union workers. Popularity. Tax revenue by squeezing Qantas. Does not want to give Qantas tax breaks or special privileges (3) What AJ wants for Qantas: Survival, Growth, Profits & Excellence. AJ is willing to let Qantas take a blow in the short run in order to keep it alive in the long run. AJ is trying to arm-twist both the Unions and the government of Australia to follow the Asian growth strategy.

How this will play out in the near future (I think. Unless the B.O.D. sacks AJ, which is unlikely): Exactly as AJ has planned it. (This is all pre-planned). AJ will refuse to budge. Having already made deal with LAN, having already set up Jetstar Japan and having already announced announced new hub for premium airline in ? Singapore / ? Malaysia within the last 5 months (since the case was written in May 2011 – in 5 months – can you believe how fast this guy acted?), expect AJ to announce the name of the new airlines and details of operations of new airlines in SEA very soon. Unions shall raise hell. But the Unions are being unreasonable. AJ shall proceed with his Asian strategy despite the opposition.

Jetstar will expand operations exactly as the BOD & CEO want it. Jetstar will penetrate Asian markets more effectively. Maintenance shall be outsourced to its new hub in ?Singapore, where labour is cheap. Dependence on Australian workers shall be decreased. Non-Australian pilots shall be hired. Non-Australian crew and mechanics shall be hired. Jobs shall be lost in Australia in the short run. Qantas shall become an AUSTRALASIAN Airlines rather than an Australian airline and become highly profitable once again. With good revenue generation, Unions workers can be paid well and on time. BOD & CEO shall probably win this battle.

From a purely business point of view, this is the best that can happen and should for Qantas and AJ has an excellent business strategy in mind. Yes, CSR is important. But there can be no “CSR” without a “C”. No Corporate Social Responsibility if the Corporation is dead. Survival comes before growth or charity. No, I am not a right wing activist. Actually, I think I have discovered a Liberal & a J.M.Keynes fan in me as I understand these ideologies better. But I have no sympathy for this particular Union or this particular govt. Hope Qantas Group comes out a winner in the long run. Sometimes, in order to make a leap forward, you have to take 2 steps backwards. And this is what is happening right now.

Gerry Som.
MBA Candidate 2012. Ryerson U.

(Disclaimer: These are personal, random, stand alone views. No intention to get into a debate. We are all entitled to our individual opinions and perhaps we are all right)

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