Jetstar japan has a joint venture with local partners

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Jetstar Japan has a joint venture with local partners Japan Airlines, Mitsubishi and Tokyo Century Leasing Company and has grown to become the largest LCC in Japan by fleet size. Jetstar Hong Kong is still awaiting regulatory approval with local joint venture partners China Eastern Airlines and Shun Tak Holdings and recruitment of local staff is underway. Despite these initiatives, Qantas has since issued a market update on 5 December 2013 expecting to report an underlying loss before tax in the range of $250 million to $300 million for the six months ending 31 December 2013 7 . This is compared to underlying profit before tax of $223 million for the same period a year earlier 8 . Consequently, Qantas has experienced ratings downgrades by Moody's and Standard & Poor's to a negative outlook 9 . This will further increase its cost of debt. Qantas management claims their poor results are due to an unfair advantage held by its main competitor Virgin Australia in that it is not bound by the same restrictions on foreign ownership by the Qantas Sale Act, thereby giving them greater access to overseas capital. Qantas would like the Australian government to provide some form of financial support or more likely, to repeal the Act. 10 On the face of this, Qantas' current prospects are not ideal. Although it 6 Bureau of Infrastructure, Transport and Regional Economics 2013, Aviation – International airline activity 2012-13, page 13 Chart III, Commonwealth of Australia 2013 7 Qantas Group Market Update, 5 December 2013 - 8 (Results for the half year ended 31 December 2012 - ). 9 Qantas Response to Moody's Downgrade, 9 January 2014 - - downgrade 10 Knight, E., Qantas caught in pincer movement between Air New Zealand and Singapore Airlines, viewed 19 January 2014, BusinessDay 17
currently has adequate liquidity and cash reserves, its operational profitability is in serious question and made more apparent with its appeals for government assistance. Its direction under current management and CEO Alan Joyce has seen a squandering of its brand value and weakening of its formerly strong oligopoly leadership 11 . The current direction undertaken by management is clearly not working and have been value destroying such as trying to hold 65% market share, enormously expensive forays into super competitive Asia with Jetstar, and an over expansion of Jetstar cannibalising Qantas domestically. On top of that, Qantas' main reaction to any earnings issue is to further reduce the workforce and other cost-cutting measures. The latest announcement accelerated a headcount reduction of 1000 on top of the 3000 made redundant since August 2011. This cost-out may be taken too far as to compromise the long-term viability of the business, as well as drastically reducing staff morale and productivity. Qantas will need a change in direction, new focus and

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