| | |  Business News | July 2008 
Qantas' Dixon Outlines New World Order
 Steve Creedy - The Australian
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Surging fuel prices will create a new world order in aviation with a few giant global airlines, Qantas chief executive Geoff Dixon predicts.
Mr Dixon warned a business lunch in Sydney that the industry faced a permanent transformation, driven by globalisation and high fuel prices.
Qantas would survive, provided it continued to change, improve, innovate and streamline its business, he said.
"Over the next 12 years, many more airlines will vanish, unable to cope with high fuel prices, or they will be swallowed up in takeovers or mergers," he told the Community for Economic Development of Australia lunch.
"The work that Qantas has done to date means we will avoid any such dark destiny. And if we get the commercial strategies and policy framework right, then Australia has a very strong future in the new aviation world."
But Mr Dixon was less certain about the future of competitor Air New Zealand, telling the conference that he disagreed with the Kiwi carrier's view it was too small to be a takeover target.
Predicting that the cost of oil would continue to climb, Mr Dixon said Friday's announcement to cut 1500 jobs and reduce capacity was a response to this new aviation era. The fuel emergency might be a catalyst for an accelerated push towards industry globalisation, he said.
He said a key development had been the negotiation of an aviation agreement between the European Union and the US, which initially allowed any European airline to fly to any US airport.
Negotiations towards a second stage of the EU-US agreement began in May and there are signs the US could accept airlines based on their principal place of business rather than their ownership.
"This would be a groundbreaking development," Mr Dixon said.
"It would open the way for airlines to engage in meaningful cross-border investment and, sooner or later, it will happen."
"Over time, consolidation will transform aviation."
"It will produce a few very large and extremely efficient global airlines with a portfolio of interests and brands - like Air France and KLM."
"These players will have enormous power in marketing, in fuel buying and hedging, in aircraft purchasing and in reach."
Mr Dixon said there would still be niche airlines with specialist offerings, but these would need to be skilfully run, and any weakness would lead to a quick death.
Mr Dixon said the challenges for Qantas were to achieve global efficiency standards, build internationally effective commercial arrangements, sustain strong brands and have appropriate national policy settings that allowed it to survive.
Yesterday's speech came as Qantas released May traffic figures that underscored its problems with domestic growth.
Although group passenger figures for the month were up 4.3 per cent compared with a year ago, domestic yields were down 0.6 percentage points.
Passenger numbers and load factors for Qantas domestic and |
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