Qantas shirked hard choices

By DANIEL RIORDAN

Qantas NZ's financial accounts for its last full month of operations show an airline bleeding in the provinces, but making money on the key main trunk routes that are being eyed by Qantas Airways and Australian discount operator Virgin Blue.

Yesterday, a Qantas NZ insider said this was a pattern the airline had been passively following for far too long, and that the management's refusal to take the tough decisions and close down its unprofitable routes in the regions was the key factor in its demise.

He said staff were bewildered by the sudden receivership as no attempts had been made to cut costs in the year since Tasman Pacific took over from Ansett NZ. Substantial savings could have been made in several key areas.

The airline was also making good returns connecting with the inward and outward flights of its international codeshare partners, including Malaysian Airlines, Cathay Pacific and Polynesian Airlines.

Only five of Qantas NZ's 18 routes were profitable in its last full month of operations, according to the airline's profit and loss statement for March obtained by the Business Herald.

Overall, the airline made an operating loss of $140,000 in March.

Compared with March 1999 its profitability dived on almost all routes (figures for March 2000 could not be obtained).

Provincial routes that lost a total of $300,000 in March 1999 lost $1.4 million in March 2001. The Queenstown and Rotorua routes held steady, returning a combined profit of $370,000, with Queenstown having $200,000 trimmed off its profit but Rotorua gaining the same amount.

The Auckland-Wellington route, hit hardest by the decline in corporate traffic following disruptions to flight schedules from a dispute with pilots in late 1999, saw profitability trimmed by $1.5 million. Overall, profit on the main trunk routes (connecting Auckland, Wellington, Christchurch and Dunedin) fell from $3.6 million to $900,000.

The airline made $900,000 on its Auckland-Wellington route, $900,000 on Auckland-Christchurch, $280,000 flying Christchurch-Rotorua, $80,000 Christchurch-Queenstown and $10,000 Auckland-Queenstown.

It lost money on every other route, most notably Wellington-Christchurch ($400,000), Christchurch-Dunedin ($300,000) and Wellington-Nelson ($240,000).

Total passenger numbers were down by 17,000 to 143,000. The biggest decline was on the Auckland-Wellington route, from 47,000 to 35,000, with the load factor (the percentage of seats filled) diving from 70 per cent to 53 per cent.

The average load factor on the main trunk route fell from 68 per cent to 60 per cent, but the load factor on the Queenstown and Rotorua routes was up from 66 per cent to 73 per cent.

The provincial load factor was down from 67 per cent to just 56 per cent.

Qantas NZ's cost per RPK (revenue passenger kilometre) was 31c on its main trunk routes, 32c on the Queenstown and Rotorua routes, and 33c on its provincial routes.

Air NZ's domestic operations operated at a cost per RPK of 23c in the June 2000 financial year - the last year the airline provided such a breakdown for its domestic operations.

But the national carrier enjoyed lower fuel costs that year, and was also able to take full advantage of its competitor's industrial woes.

An aviation analyst said Air NZ's costs would be slightly higher today, but still well under Qantas NZ's.

The airline's biggest costs were leases on its aircraft (paid to Air NZ/Ansett). These came to just under $3 million in March. Fuel costs were $3.5 million.

Qantas NZ management and shareholders yesterday continued their reticence on the collapse.

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