Qantas to split international, domestic businesses

Alan Joyce, Qantas CEO and managing director Embattled Australian flag carrier Qantas said on Tuesday it will split its loss-making international arm from its domestic operations as part of a drive to turn around its fortunes. Each of the two entities, currently combined as Qantas Airways, will run as separate businesses from July with their own chief executives and reporting of financial results.
The move follows an 83 percent slump in first-half net profit in the six months to December and a day after it announced the loss of 500 maintenance and engineering jobs.
The airline said the restructure would "enable a greater focus on the priorities of turning around the Qantas international business and enhancing the strong Qantas domestic business".
It was welcomed by the markets, with Qantas shares gaining 2.8 percent to Aus$1.47.
Group chief Alan Joyce remains in overall charge and said the transformation would strengthen the airline and help it deliver its strategic goals.
"Formally separating the management of Qantas international and Qantas domestic will ensure that we can independently run each business according to its specific priorities and market conditions," he said.
"These measures give us the right structure to address the challenges and opportunities we face -- and the right people."
He added he was determined to stem the decline in the international business, which recorded losses of Aus$200 million (US$200 million) in the 2010/11 financial year, hit hard by weak demand and soaring fuel costs.
"We are committed to turning it around ... based on flying to global gateways, deeper alliances, smart investment in product and disciplined capital management."
A series of executive changes were also announced with Bruce Buchanan -- the long-time head of Qantas's successful budget offshoot Jetstar, who had been seen as a potential successor to Joyce -- leaving after a six-month transition period.
He plans to work "with other Australian companies seeking to expand into growth markets within Asia".
Simon Hickey, who is currently in charge of the Qantas Frequent Flyer programme, was appointed chief executive of the international business while Qantas operations boss Lyell Strambi will run the domestic arm.
The Australian and International Pilots Association cautiously welcomed the move.
"Hopefully this signals a renewed intent to get on with the important mission of repairing the Qantas brand," said treasurer Adam Susz.
The latest development in Joyce's plan to turn around Qantas's fortunes comes a day after he announced 500 jobs will be axed in its heavy maintenance and engineering operations.
In the reorganisation, Qantas will cease heavy maintenance at Tullamarine airport in Melbourne by August, with work being consolidated in Avalon, another facility near the Victorian state capital, and the eastern city of Brisbane.
Qantas has been forced to act after its disastrous profit figures, caused by high fuel costs and a bitter battle with unions over wages and conditions that saw Joyce ground the entire fleet for 48 hours in October.
Unions remain worried that jobs could be sent abroad to keep costs down, but Centre for Asia-Pacific Aviation chief Peter Harmison said the hiving off of the international arm was more about efficiency.
"Essentially, I see this as trying to make the operations more efficient and transparent," he said.