Qantas to Be Divided Into Domestic and International Businesses

Major news from Australia's flag-carrier this morning: BusinessWeek and other sources are reporting that Qantas Airways is looking to separate its domestic airline business from its international operations, which have been operating at a loss.

Qantas's domestic and international operations will be headed by separate chief executives and independently managed starting July 1, 2012.

Qantas has faced strong competition at home from Virgin Australia while Qantas International lost $210 million in its last financial year amid competition and high costs.

After being restructured over the coming months, Qantas International and Qantas Domestic—currently operating as one airline—will be formally managed as two distinct businesses. Each will have its own CEO and its own operational and commercial functions. Their financial results will also be reported separately. The new structure will be effective from July 1.

CEO Alan Joyce said that the two sides of the business are facing different situations. “Qantas Domestic is strong and profitable,” he said in a statement, noting that the domestic side has seen the most sustained levels of high customer satisfaction on domestic services since 2004. “Qantas International...is loss-making and does not deliver sustainable returns. However, we are committed to turning it around through the five-year strategy we announced last year, based on flying to global gateways, deeper alliances, smart investment in product and disciplined capital management.

“Formally separating the management of Qantas International and Qantas Domestic will ensure that we can independently run each business according to its specific priorities and market conditions.”

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