All good points, however we are referring to Qantas mainline international. The frequency and destinations are being wound back because of demand and competition. Demand has reduced because of the high cost base which has made the fare prices higher than their competitors. With a lower cost base they would be more competitive. This is why Jetstar has been successful as it has a lid on its cost base.
I think it's very simplistic to lump it all together and say 'Qantas Group', but you are actually talking about a number of separate businesses - QF Domestic (highly profitable, 2 competitors - only 1 serious), QF International (loss making, high cost, 20+ competitors), Jetstar (actually loss making in parts, but profitable overall due to low cost base), Freight, Ancillary (QFF etc).
If you could separate these businesses, most competent managers would have closed QFi a long time ago - but there is a reputational risk which would cost the carrier's domestic market share. Without a significant international operation, the domestic business would lose some of its appeal.
Your assumption that Qantas have 'chosen' to supply the market with 20% of capacity is actually incorrect. If they had more competitive fares, they would have more of this market, and therefore supply more capacity. You can't run empty planes - it is an expensive exercise.
You will find Jetstar has taken over routes that are primarily leisure routes, utilised by pax who are price sensitive and are chosing competitors over QFi. While many may have used the routes for business, note the word 'primarily'.
I think these two posters are both really getting to the crux of the issue - whether Qantas International is really losing money or not. And I really start to question these artificial "silos" that are being built up inside the Qantas group - it would seem that the group now has Qantas International, Qantas Domestic, Qantaslink, Jetconnect, Jetstar International, Jetstar Domestic and the soon to be annouced Jetstar Japan and Qantasia. The problem with "silos" is that the supposed loss-making one (in this case QFi), also feeds and assists the others. If QF stopped flying internationally altogether tomorrow and everything else continued would it really stand up on its own? Have a good think about that.
I see a lot of annectotal evidence everywhere of QFi planes being chock-a-block with load factors like >80% or 90% and Jetstar International with much lower load factors. I dunno - something just dosen't add up to me - if you are filling A380's and B747's full to LHR and LAX and still losing money, then what is really going on? And sure - yes your competitors are running B777's A340's and A330's with satisfactory load factors and they are growing their business??
Now I know its not all about load factors, but until someone can get to the bottom of the accounting practises and attribute all the overhead costs like fleet decisions/admin/leasing costs/maintenence/training etc then that perception out there that "the books are being cooked" in J* and Jetconnects favour will continue.
Its all about how you measure profits of course - from revenue per passenger kilometer to revenue per employee - or maybe revenue per available seat?
I think we can all agree that QF domestic is doing OK - although VA under John Borghetti is presenting more of a challenge. I think we could all agree that J* which was originally set up to put Qantas's competitors out of business by predatory pricing, is very good at that, but also has the unintended consequence of putting QF mainline out of business! (for the cost conscious market). For the business/frequency domestic and international market - we all know that QFi has a natural geographic disadvantage but making everyone fly through inconvenient and expensive hubs like LHR but its domestic network is an absolute cash cow.
I agree with some of Comeflywithme's comments but there are a number of ways to address the 20% (or 30% incl J*) of international capacity. The argument that if QFi had more competative fares then they would have more of the market and would offer more capacity has a fatal flaw that capacity/aircraft can't just turn up or dissapear when they are/aren't needed. This also flies in the face of the counter arguement of "economy of scale", obviously the "economy of scale" argument is best suited to a commodity or price-taking business.
We know that supply/capacity is partially elastic and demand/fares are also partly elastic. It would seem that over the last few months that QFi and QF Domestic has taken capacity off-line - and then everyone gets all surprised when QF's market share is shrinking. It would seem that other carriers have spare capacity - and the sudden appearance of Ethiad A340's between SYD-MEL attest to that. I take the attitude that spare capacity sitting around on the tarmac and not being utilized is simply a dead-weight on the companies bottom line. I know that posters have said that "empty planes don't make money" but manipulating capacity to the point of very high margins, only invites more competition, and once the competition is there - its there with a lower cost base and you have to deal with it.
And all that before we even address the re-fleeting and equipment selection for the Qantas Group - which I know has been done to death in other forums!
Now I know that some of QFi competitors have cost advantages over QFi - but those competitors don't operate in in a fixed never-changing vacumn. If they are government subsidized then their governments will go broke, if they have cheaper fuel then their competiors will have cheaper fuel, if they don't open their skies to competition then their market customers will find that competition - i.e. in a relatively open market then outliers or cost anomalies will be found out and circumvented.
Obviously the cost of labour and wages plays some part in the recent dispute, but I would suggest to people that wages aren't the only cost you can control. With proper management - businesses can be profitable even with higher wages than their competitors - why is that?
