The consumer watchdog didn’t buy Qantas’s argument that its international business was doomed without Emirates – but it waived the alliance through anyway. The global aviation market mightn’t be a death trap, but it can be a minefield. Australia’s business commentators are in broad agreement that this is a crucial deal for Qantas and one to be celebrated by chief executive Alan Joyce.
Fairfax’s Malcolm Maiden writes that Qantas’s international business has already shown massive improvements, booking a $91 million loss in the December 2012 half compared to $262 million the previous year.
“The lift in profit and profitability that Qantas gets out of the alliance depends on how well the deal is executed (the signs so far are good), on the competitive response in Europe and Asia from competing carriers, and on the highly rated Emirates not turning out to be such an attractive partner that it wins over Qantas passengers long term. Qantas should do more business on more flights with Emirates at its side, however, and do so without buying more expensive airborne metal: Joyce's unchanged target for Qantas International to be back in the black by 2015 is beginning to look conservative.”
The Australian’s John Durie argues that the Qantas decision was always “an easy one” for the consumer watchdog because the international aviation market is so viscous.
“This meant the formal decision was of interest more because of the nuances laid down. The trans-Tasman route was always going to be the tough one because, together with Virgin-Air New Zealand, the four key routes are now in the hands of two parties.”
Business Spectator’s Stephen Bartholomeusz explains that those conditions that have been set on Qantas and Emirates don’t appear to unsettle them.
“While they are committed to maintaining existing capacity on the route they can rethink the way that capacity is deployed to shift from competing and duplicating services to profitably cooperating and, by redeploying any overlapping capacity, actually improving their trans-Tasman offering. Similarly, the alliance will open up additional routes and capacity into Asia by adding Emirates’ capacity to Qantas’ new schedules. The clearance of the alliance is a watershed moment for Qantas and Joyce, creating clarity for its international strategy where previously there was none other than cutting costs and routes to reduce the losses. Now they just have to execute it.”
The Herald Sun’s Terry McCrann believes that the deal is important to both carriers, but it’s more important for Qantas. That’s a pretty safe bet. McCrann also argues in a separate piece that the Gillard government’s plan to hit out at superannuation as part of the upcoming budget is simply further evidence of its fiscal incompetence.
“There is one reason, and one reason only, that the trio of Julia Gillard, Wayne Swan and Penny Wong are now aiming to rip billions of dollars a year out of super. Out of your savings. Their inability to otherwise have even the slightest hope of getting the budget back to balance – not just next year, but in future years as well.”
There’s a bit of Labor bashing still lingering in the pages of Australia’s business scribes this morning. The Australian’s Judith Sloan has a crack at federal Labor, particularly Prime Minister Julia Gillard and Workplace Relations Minister Bill Shorten, for their failure to take the ACTU on over its call for a lift in the minimum wage at twice the rate of inflation.
The Australian’s Asia Pacific editor Rowan Callick expresses concern that the responsibility of selling the Asia white paper now rests in the portfolio of Craig Emerson, who is also responsible for tertiary education, skills, science and research, trade and competitiveness.
Staying with politics (in a sense), The Australian’s John Durie points out the distinction between cartel behaviour in the way we envisage it, like systematic rigging of cardboard box prices, and what former New South Wales Premier Nick Greiner is accused of contributing to – a private arrangement over a single asset.
In company news, Fairfax’s Elizabeth Knight says Woolworths isn’t cutting out the middle man in its proposal to deal directly with dairy farmers. The milk they produce still has to be processed.
“But, rather than processors buying the product, processing it and then selling it to the supermarkets, the processors are just paid a toll along the way – and it would be a skinny one.”
And finally, The Australian Financial Review’s Chanticleer columnist Tony Boyd has spoken to a partner at “a top five corporate law firm with more than 30 years experience,” who revealed a shocking forecast for the Australian M&A sector.
“The lawyer, who declined to be named, said the ‘new normal’ means mergers and acquisitions activity in Australia and elsewhere has moved permanently to a much lower level than prevailed before the global financial crisis in 2008.”