The $2.8 billion loss Qantas reported on Thursday is not as shocking as that figure implies.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
But the numbers in the airline's annual results nonetheless make for unpleasant reading. They also provoke further questions about the company's long-term strategy and viability. Questions are already being asked by the airline's investors – and in Canberra – about whether Qantas' management and directors are best placed to continue to lead the organisation.
This is an issue for the whole country.
It is an issue not only because of Qantas's position within the nation's history and psyche.
But it is also an issue because of the way in which Qantas appeals to that history, and the certainty that it will continue to do so, in arguing for a better deal within its regulatory environment.
Chief executive Alan Joyce will soon begin his seventh year at the head of Qantas.
The result he has just handed down was made to appear more painful than it may have by a $2.6 billion re-evaluation of aircraft purchased when the dollar was higher.
But to look a little deeper into the figure that Qantas wants investors to look at – the $646 million pre-tax underlying loss – is to see widespread evidence of self-inflicted financial trauma, notwithstanding the fact the share price rose in the wake of the result being announced.
The results, for instance, of the airline's decision to continue to pile on domestic flights in a capacity war with arch-rival Virgin are clear.
Qantas' domestic arm reported earnings before interest and tax of $30 million last year – more than $330 million less than it did the year before. This was partly the result, the airline conceded, of "market capacity increases ahead of demand".
In other words, domestic travellers got a great deal at the expense of the airline's profitability.
There is a similar story within Jetstar.
Qantas' lower-cost offshoot reported an earnings loss of $116 million, about $250 million worse than the year before. Mr Joyce partly blamed fuel costs. But again, much of the result could be attributed to the capacity wars he so willingly signed up to.
It is difficult, meanwhile, to see where the airline can turn things around internationally. The half-billion dollar earnings loss in Qantas's international division is about par these days, tie-ups with Emirates notwithstanding.
Apart from continuing cost savings from the remaining of 5000 staff redundancies already announced, and a more efficient use of its fleet, Qantas seems without a clear plan to arrest the decline in its international operations.
The revaluation of fleet should help, potentially making the foreign division more attractive to overseas investors in a rearranged corporate structure.
And the decision to retain the airline's frequent flyer business – which earned $286 million before interest and tax last year – rather than selling it off also suggests some level of confidence at board level.
That business, the board seems to have decided, makes most sense when combined with a well-functioning airline.
And it appears that airline will continue to be led by Mr Joyce, who has retained the support of his chairman, Leigh Clifford, since winning the job in late 2008.
After the drastic decisions he has taken as head of Qantas – most notably grounding the fleet in an industrial battle in late 2011 – Mr Joyce has made himself the public face of the airline's travails.
He has energetically, and somewhat histrionically, taken the airline's arguments to Canberra. Without government support, the airline has argued, Qantas will struggle to compete in a distorted international aviation market.
To the surprise of some, Tony Abbott's government rejected some of Mr Joyce's heavier advances, including the request for a debt guarantee to lower the airline's borrowing costs.
But if the airline continues to struggle, it may not be long before Qantas is again appealing for more assistance.
These appeals are unlikely to be helped by the somewhat polarising figure of Mr Joyce – the man who grounded a fleet, alienated a holiday-making public, lost the support of many of his staff, and who has now delivered the worst result in the history of his company.
The aviation industry represents a constant struggle to survive, let alone succeed. But Mr Joyce has had more than half a decade to define a long-term and sustainable strategy for Qantas. The fact that he is still reporting multibillion-dollar losses can only reflect upon the decisions he has taken.
The $2.8 billion loss Qantas reported on Thursday is not as shocking as that figure implies.
But even the more telling numbers contained within the airline's annual results make for unpleasant reading, provoke further questions about the company's long-term strategy, and must surely foster deeper introspection among the airline's investors – and within Canberra – about whether Qantas' management and directors have earned the right to continue lead the organisation.
This is an issue for the whole country.
It is an issue not only because of Qantas' position within the nation's history and psyche.
But it is also an issue because of the way in which Qantas appeals to that history, and the certainty that it will continue to do so, in arguing for a better deal within its regulatory environment.
Chief executive Alan Joyce will soon begin his seventh year at the head of Qantas.
The result he has just handed down was made to appear more painful than it may have by a $2.6 billion re-evaluation of aircraft purchased when the dollar was higher.
But to look a little deeper into the figure that Qantas wants investors to look at – the $646 million pre-tax underlying loss – is to see widespread evidence of self-inflicted financial trauma.
The results, for instance, of the airline's decision to continue to piling on domestic flights in a capacity war with arch-rival Virgin are clear.
Qantas' domestic arm reported earnings before interest and tax of $30 million last year – more than $330 million less than it did the year before. This was partly the result, the airline conceded, of "market capacity increases ahead of demand."
In other words, domestic travellers got a great deal at the expense of the airline's profitability.
There is a similar story within Jetstar.
Qantas' lower-cost offshoot reported an earnings loss of $116 million, about $250 million worse than the year before. Mr Joyce partly blamed fuel costs. But again, much of the result could be attributed to the capacity wars he so willingly signed up to.
It is difficult, meanwhile, to see where the airline can turn things around internationally. The half-billion dollar earnings loss in Qantas' international division is about par these days, tie-ups with Emirates notwithstanding.
Apart from continuing cost savings from the remaining of 5000 staff redundancies already announced, and a more efficient use of its fleet, Qantas seems without a clear plan to arrest the decline in its international operations.
The revaluation of fleet should help, potentially making the foreign division more attractive to overseas investors in a re-arranged corporate structure.
And the decision to retain the airline's frequent flyer business – which earned $286 million before interest and tax last year – rather than selling it off also suggests some level of confidence at board level.
That business, the board seems to have decided, makes most sense when combined with a well-functioning airline.
And it appears that airline will continue to be led by Mr Joyce, who has retained the support of his chairman, Leigh Clifford, since winning the job in late 2008.
After the drastic decisions he has taken as head of Qantas – most notably grounding the fleet in an industrial battle in late 2011 – Mr Joyce has made himself the public face of the airline's travails.
He has energetically, and somewhat histrionically, taken the airline's arguments to Canberra. Without government support, the airline has argued, Qantas will struggle to compete in a distorted international aviation market.
To the surprise of some, Tony Abbott's government rejected some of Mr Joyce's heavier advances, including the request for a debt guarantee to lower the airline's borrowing costs.
But if the airline continues to struggle, it may not be long before Qantas is again appealing for more assistance.
These appeals are unlikely to be helped by the polarising figure of Mr Joyce – the man who grounded a fleet, alienated a holiday-making public, lost the support of his staff, and who has now delivered the worst result in the history of his company.
The aviation industry represents a constant struggle to survive, let alone succeed. But Mr Joyce has had more than half a decade to carve out a long-term and sustainable strategy for Qantas. The fact that he is still reporting multi-billion dollar losses can only reflect upon the decisions he has taken.
The $2.8 billion loss Qantas reported on Thursday is not as shocking as that figure implies.
But even the more telling numbers contained within the airline's annual results make for unpleasant reading, provoke further questions about the company's long-term strategy, and must surely foster deeper introspection among the airline's investors – and within Canberra – about whether Qantas' management and directors have earned the right to continue lead the organisation.
This is an issue for the whole country.
It is an issue not only because of Qantas' position within the nation's history and psyche.
But it is also an issue because of the way in which Qantas appeals to that history, and the certainty that it will continue to do so, in arguing for a better deal within its regulatory environment.
Chief executive Alan Joyce will soon begin his seventh year at the head of Qantas.
The result he has just handed down was made to appear more painful than it may have by a $2.6 billion re-evaluation of aircraft purchased when the dollar was higher.
But to look a little deeper into the figure that Qantas wants investors to look at – the $646 million pre-tax underlying loss – is to see widespread evidence of self-inflicted financial trauma.
The results, for instance, of the airline's decision to continue to piling on domestic flights in a capacity war with arch-rival Virgin are clear.
Qantas' domestic arm reported earnings before interest and tax of $30 million last year – more than $330 million less than it did the year before. This was partly the result, the airline conceded, of "market capacity increases ahead of demand."
In other words, domestic travellers got a great deal at the expense of the airline's profitability.
There is a similar story within Jetstar.
Qantas' lower-cost offshoot reported an earnings loss of $116 million, about $250 million worse than the year before. Mr Joyce partly blamed fuel costs. But again, much of the result could be attributed to the capacity wars he so willingly signed up to.
It is difficult, meanwhile, to see where the airline can turn things around internationally. The half-billion dollar earnings loss in Qantas' international division is about par these days, tie-ups with Emirates notwithstanding.
Apart from continuing cost savings from the remaining of 5000 staff redundancies already announced, and a more efficient use of its fleet, Qantas seems without a clear plan to arrest the decline in its international operations.
The revaluation of fleet should help, potentially making the foreign division more attractive to overseas investors in a re-arranged corporate structure.
And the decision to retain the airline's frequent flyer business – which earned $286 million before interest and tax last year – rather than selling it off also suggests some level of confidence at board level.
That business, the board seems to have decided, makes most sense when combined with a well-functioning airline.
And it appears that airline will continue to be led by Mr Joyce, who has retained the support of his chairman, Leigh Clifford, since winning the job in late 2008.
After the drastic decisions he has taken as head of Qantas – most notably grounding the fleet in an industrial battle in late 2011 – Mr Joyce has made himself the public face of the airline's travails.
He has energetically, and somewhat histrionically, taken the airline's arguments to Canberra. Without government support, the airline has argued, Qantas will struggle to compete in a distorted international aviation market.
To the surprise of some, Tony Abbott's government rejected some of Mr Joyce's heavier advances, including the request for a debt guarantee to lower the airline's borrowing costs.
But if the airline continues to struggle, it may not be long before Qantas is again appealing for more assistance.
These appeals are unlikely to be helped by the polarising figure of Mr Joyce – the man who grounded a fleet, alienated a holiday-making public, lost the support of his staff, and who has now delivered the worst result in the history of his company.
The aviation industry represents a constant struggle to survive, let alone succeed. But Mr Joyce has had more than half a decade to carve out a long-term and sustainable strategy for Qantas. The fact that he is still reporting multi-billion dollar losses can only reflect upon the decisions he has taken.
