AIR TRANSPORT Qantas centenary

Qantas
One hundred not out

On 16 November 1920, Australian flag carrier Qantas was established. Former CEO JOHN WARD looks back at the history of this airline and considers its future challenges in this time of unprecedented turmoil in air travel.

During one hundred years of monumental change, Qantas has provided global aviation industry leadership in product innovation, technical excellence, operational performance and managerial acumen. In doing so, it has survived many dark moments. Periodically reinventing itself, it is a rare exemplar of a successful and resilient Australian business with global reach. Today, it is confident in both its capability and in its economic and social relevance and another reinvention is in prospect.

In the beginning... ​

Qantas founders, Paul McGinness and Hudson Fysh

The story behind the formation of Qantas began in March 1919 just after Paul McGinness and Hudson Fysh arrived in Hobart, having sailed from Egypt, their First Word War military flying days over. It culminated when the papers formalising the establishment of the airline were signed at the Gresham Hotel in Brisbane on 16 November 1920. Shortly thereafter, Qantas commenced domestic operations in Queensland, initially carrying mail and then passengers. Its network expanded and it began international operations in 1935.

It was an active participant in many theatres during World War II and kept supply lines open between Australia and the UK by operating the 33 hour ‘Double Sunrise’ flights between Perth and Ceylon to break the Japanese blockade of the Indian Ocean. It was acquired by the Australian Government in 1947, at which time it ceased domestic operations. 

Historically, regular direct, consistent and open employee and political communication has been necessary to gain trust, secure engagement and have stakeholders develop sufficient appreciation of business reality to mitigate shortsighted political and industrial agitation.

The lesson of history is that, for these audiences, spin is counterproductive. It dilutes the credibility of the real message and breeds cynicism which is neither conducive to an engaged and motivated workforce, nor to government support. Hubris must be avoided.

Until the 1990s, economies of scale were a prime source of competitive advantage. Since then, the balance between economies of scale and scope has shifted. Many economies of scale have been mitigated by technology and by outsourcing. While this reduced some of Qantas’ resilience and domestic competitive advantage, from a group perspective, it has had positive, albeit painfully achieved, results.

As economies of scope became the increasingly potent source of competitive advantage, these have underpinned Qantas’ recent success. Examples are its superior network alliances, its customer loyalty programme, the reach of its differentiated dual-branded manifestations and the defence of its ‘line-in-thesand’ 65% domestic market share.

Not since foreign hub operations began in earnest in the 1970s has Qantas been able to overcome its structural geographic disadvantage as an ‘end-of-the-line carrier’ and have some semblance of control of its own destiny in the Europe end-to-end market. This may now be in sight.

Qantas Boeing 707 in Seattle in 1959.

The longest haul​

For the Australian East Coast, finally the aircraft technology is arriving to allow a broader fightback against geography with an extended long-range variant of the Airbus’ A350 selected as the aircraft best suited for viable non-stop services to the UK, Europe and New York, demand for which could become increasingly strong in the post-pandemic years.

The intermediate hub-based carriers cannot offer equivalent non-stop products without securing traffic rights to operate without landing in their country of designation. This is unlikely. Moreover, the European and US competitors which could offer equivalent products do not consider Australia or ultra-long-haul flying to be a strategic priority. Indeed, the introduction of such services by Qantas is simply not going to provoke a raft of airlines to follow. That, no doubt, is just how Qantas would like it.

In the future, Qantas will also have to compete with restructured competitors and new entrants. It will face continued volatility associated with recessions, fuel prices, currency fluctuations, industrial disruption, wars and pandemics. Then there is the ever-present potential of technological disruption. There is, however, a serious emerging threat: that of dealing with aviation’s contribution to greenhouse gas-driven global warming.

So far, heavy industry and energy generation have played the most significant role in meeting emission reduction targets. With greater ambition to further reduce emissions there will be a need for other emissions-generating sectors to have a much larger role.

Left: A Qantas flying boat promotional poster, right: In July 2020 Qantas retired the aircraft most associated with it, the Boeing 747. Qantas

The emissions challenge​

Qantas recognises that, between now and 2050, as other sectors contract, aviation will make up an increasingly significant share of remaining positive emissions with its highly uneven distribution of emissions on a per capita basis, raising equity concerns. It has announced its ambition to reduce its emissions to net-zero by that date and to contribute to the funding of research into alternative low emission fuel sources.

There are sound business reasons for this. Unless low-carbon aviation technology becomes technically feasible, there will be increased pressure to restrain demand. The imposition of a frequent-flyer levy, escalating with the distance travelled by an individual within a defined period, would spare the large majority of travellers significant extra cost. This has been proposed along with a ban on frequent-flyer programmes that are seen as incentivising excessive flying. The impact on Qantas of such globally induced moves to encourage behavioural change would be massive.

Accordingly, successfully avoiding such an outcome through the development of low-carbon aviation fuel technology is becoming a key priority. While an offsets program might be useful during a transitionary period, some carbon-offsetting schemes stand up to scrutiny little better than the Catholic Church did in the Middle Ages when it sold indulgences for the forgiveness of sin. Ultimately, aviation will need to reduce its carbon footprint in ways it can control, not by relying on middlemen offering to absolve guilt over polluting if they are paid to offset carbon, often by planting trees. While this will not be easy, as the 100-year history of Qantas demonstrates, overcoming new challenges never was easy.