November 1st, 2011
07:39 AM GMT
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(CNN) - The Flying Kangaroo, with its distinctive cherry red background that adorns the tail of Qantas airplanes, is an Australian icon.

It has a special place in the hearts of Australians.

Over the decades countless thousands of young travelers with a backpack and a Lonely Planet travel guide, or seekers of fame and fortune, have started their adventures on a Qantas flight. And when it's all over, Qantas has taken them back home again.

The 1980s movie Rain Man, starring Dustin Hoffman, cemented the airline's outstanding safety record for a generation of movie-goers. It has been a reputation that Australians have been justifiably proud of.

But Qantas is currently struggling in the globalized, deregulated world of air travel.

Compared with a new generation of rivals, particularly from Asia and the Middle East, its profitability is sinking on its international routes. Earnings are now propped up by the group's domestic operations or its low-cost carrier Jetstar.

Alan Joyce, the combative Qantas CEO, says international operations lose about $200 million dollars a year because costs are about 20% higher than rival carriers.

Qantas CEO's move 'gutsy' or an 'ambush'?

He says to survive he is cutting the overseas operations of the airline and launching two brand new airlines based in Asia, where staffing costs are much cheaper.

About 1,000 jobs out of 35,000 will go in Australia. The unions claim this outsourcing could ruin the airline's safety record and they have taken industrial action to protest and protect jobs.

The increasingly bitter relations between management and unions culminated in a 44-hour grounding of the whole Qantas fleet, disrupting passengers around the world.

The reason for the shock move, which caught even Prime Minister Julia Gillard by surprise, was that the unions were preparing to continue their low-level industrial action for another year.

But by confronting the unions head on with a lockout, Joyce has also created new uncertainties about Qantas reliability.

Has the action by Joyce destroyed the brand, as the unions are warning, or will loyal passengers put it behind them?

It's too early to tell. But as Qantas heads ever deeper into the crowded competitive skies of Asia, brand loyalty will become ever more important. Something that now hangs in the balance at Qantas.

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Filed under: Air industryBusiness

soundoff (15 Responses)
  1. Geoff Dixon

    "The unions claim this outsourcing could ruin the airline's safety record and they have taken industrial action to protest and protect jobs."
    WHUUTTTT?!?! I think with the spate of technical/engine problems Qantas has had over the past 2/3 years, they have no right to make statements like that. Hell, maybe safety would improve if they outsourced maintenance. Not a week goes by without at least 2 such incidents from them..... Crazy unions.

    November 1, 2011 at 8:13 am |
  2. Great Blue

    When Qantas was privatized, Qantas mangement was legally required under the Qantas Sale Act to maintain Qantas as an Australian airline. Alan Joyce and his Board are in clear violation of this law. Mr Joyce wishes to break the terms of the Qantas Sale Act and, in doing so, is clearly attempting to subvert the law. To my mind, this is criminal activity. Unions, under law, have a right to negotiate contracts with management; managemen, under law, are required to negotiate. Alan Joyce and the Qantas Board's decision to lock out all Qantas employees–whether they were involved in industrial action or not–is illegal. S Qantas is engaging in criminal activity, and management should be treated as such. That tens of thousands of innocent Qantas customers were treated like animals is a matter of indifference to Alan Joyce and the Board. The customers are pawns, and they were treated with utter contempt. Qantas employees, I would venture, are also pawns. Is this the new business paradigm? Management does as it wishes, for some spurious future profit, for shareholder returns, for greed, and the customer be damned? Qantas has a job–to fly us at reasonable cost, safely, from one place to another, under law–and until it gets back to doing this job, I will avoid Qantas and use other airlines.

    November 1, 2011 at 8:47 am |
  3. someone

    Geoff dixon?!?!?! Surely not the same Geoff Dixon, CEO of QANTAS before Alan Joyce!?!?

    November 1, 2011 at 8:55 am |
  4. peter

    shame on you allan joyce , pack your bags take your five million dollars and go back to ireland and ruin air lingus not qantas

    November 1, 2011 at 9:16 am |
  5. peter

    mr joyce when you talk about your turkey five tousand employees what are you actually saying, turkey

    November 1, 2011 at 9:21 am |
  6. Michael F

    I think it was the one previous.... "When the boom for CEO's was on" lol.
    I can see the management pays are starting to get alittle over the top; But all parties need to work together and stop putting the public in the firing line....

    November 1, 2011 at 9:42 am |
  7. Colmery

    Hi Andrew, as an American you doubtless know about the FOX approach to manufacturing news which resulted from Rupert Murdoch surrendering his Australian citizenship to become one of your lot. However, in Australia he left behind what I call Politico-Media Simplex (after President Eisenhower's last speech), which is a disease journalists spread from news outlet to news outlet down here, creating much drama, but no facts. Your piece includes some of this PMS drama, namely the idea that in a month the QANTAS strike will remain a significant marketing factor.

    On a personal level, if you have intentions of becoming a journalist contracting PMS could seriously hurt you. As a precaution I'd suggest you steer clear of reading Australian reporting until you have developed some immunity. You could start by exposing yourself to short bursts FOX TV news. However, until professionals have assessed the damage this is causing, make sure the sound is off.

    November 1, 2011 at 3:05 pm |
  8. Stephen

    Methinks Andrew is not an American @ Colmery. If you take the time to listen to him, you will hear a distinct Antipodean accent...and I tend to agree with what he says, from a marketing perspective. And yes, before you blather on a bit more, I had a family member stuck in Bangkok because the QF1 was grounded so yes, in my opinion, and judging by the Facebook/Qantas pages, there was a lot of displeasure with both Joyce and the unions – and yes, it'll damage the brand short-term.

    November 1, 2011 at 4:50 pm |
  9. Sarkissian

    QF is, and will remain, a highly respected airline. The media overblows everything related to aviation; it makes the situation look a lot worse than it is

    November 1, 2011 at 5:18 pm |
  10. Iwouldliketoknow

    Let us really get to the point. Mr. Joice would delight in dismantelimg the whole of Qanta's overseas operations.
    He has clearly said that!
    If he can blame the Unions it helps Australians swallow this bitter pill, so why not?
    Qantas overseas is struggling not so much against Unionism, but agaiinst a State Owned and Run Airline which has landing rights in Australia, a hub just a stones thow away from Europe, and which serves directly many more terminals than Qantas ever could. End of story

    November 1, 2011 at 5:20 pm |
  11. SueHelen

    Alan Joyce is a greedy thug. Send him back to Ireland away from our Oz please. QANTAS management is known for it's greed and corruption.

    November 1, 2011 at 8:24 pm |
  12. Blaine

    Anybody seen my kangaroo.....?

    November 1, 2011 at 8:29 pm |
  13. A. Tandukar

    QUATAS CEO should be suspended and ACCC should make inquiry on Grounded all the Plane and should be punished the people who is responsible for lthe debacle of the whole saga blackmailing the present government.

    November 23, 2011 at 7:03 am |
  14. icons designs

    What interesting question

    October 9, 2012 at 12:23 pm |
  15. Shenna Marcrum

    Manufacturing takes turns under all types of economic systems. In a free market economy, manufacturing is usually directed toward the mass production of products for sale to consumers at a profit. In a collectivist economy, manufacturing is more frequently directed by the state to supply a centrally planned economy. In mixed market economies, manufacturing occurs under some degree of government regulation.-^–

    Take care

    June 3, 2013 at 6:58 am |

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