Qantas boss Alan Joyce's tactic to front load costs and take a massive $2.6 billion hit on the value of the international business could be a sign that he is tarting up the national carrier ahead of an exit after more than five years in the job.
With a stroke of the pen, the writedown in the Qantas international fleet translates into a $200 million cost saving next year. Throw in other cost savings and Joyce's pledge that the group will return to profitability in 2015 looks a certainty.
It was music to the ears of long-suffering shareholders who lifted the share price 7 per cent higher to $1.385.
But scratch the surface and little has changed – except that Joyce has called an end to the bloody and illogical 65 per cent line in the sand market-share war against Virgin Australia.
Joyce has also tried to de-politicise the woes of the airline after attracting criticism late last year when he tried to get government assistance, insisting he was blameless for the mess the airline was in. At the time he blamed the losses on a distorted market brought about by Virgin Australia and increased competition from international airlines.
"There is nothing anybody in Qantas has done that has caused this issue," he boldly said.
The problem was Qantas management and the board have had a great deal to do with the problems the airline is facing, which meant his cries for government help fell on deaf ears.
Protecting market share as well as flawed strategies in Asia and a focus on Jetstar at the cost of the Qantas brand can all be blamed for the $2.8 billion loss. It was Qantas that said it would add two planes for each one added by Virgin.
The brutal reality is airlines and challenges are synonymous.
Former Qantas boss Geoff Dixon famously coined the phrase "constant shock syndrome" to describe its challenges, including SARS, the Asian crisis, fuel price explosions, the September 11 terrorist attacks and the rise of low-cost carriers.
The difference between then and now is management had control of the sales side of the business, the Qantas brand and staff. Joyce is trying to regain control.
To this end he has kept a low profile, put up the white flag on capacity wars – for now – completed a strategic review of the business and mentioned the importance of customers.
Not surprisingly, the strategic review has recommended keeping the status quo.
This means its strategic future is the same as it always was. Its loyalty business won't be sold down, Jetstar won't be floated, it will stick with its loss-making Asian business and its alliance with Emirates remains opaque. The most it will do is sell its airport terminals, property and land holdings.
From an earnings point of view, Qantas reported an overall underlying loss of $656 million, which was a stinker, albeit less of one than the market had expected.
And despite the air ticket wars, group revenue was down, which is a good reminder that in the long run few businesses have successfully cut their way to greatness by cutting costs and shrinking.
Its Qantas domestic business produced a full-year underlying profit of $30 million, which shows the cost of Joyce's obsession with maintaining a 65 per cent market share and continuing to grow capacity for the better part of the past year.
To put it into perspective it suffered a $566 million yield and load factor decline from an oversupply of capacity. In the previous 12 months Qantas domestic made a profit of $365 million.
The Jetstar Group was another disaster, losing $116 million compared with a previous corresponding profit of $138 million, largely due to its Asian businesses. Jetstar domestic was profitable, but like Qantas domestic, it was marred by overcapacity in the market.
Joyce's promises of a "significant" improvement in the group's financial performance in 2015 shouldn't be too hard to deliver given the big leg-up he will get from the writedowns and cost cutting that has been put in place.
But how sustainable this is in the longer term is anyone's guess and explains why speculation is mounting that Joyce is looking for the exit.
