So, does Qantas international really need to make radical changes involving the slashing of 1000 jobs on international services? In short, yes.
The trickier follow-up question though is this: will these changes turn the international business around? The answer, which is not likely to be short, is that it depends on the details of the plans to be announced on August 24.
These new plans must address the reasons for the chronic underperformance of the carrier's international business. If they don't, then its revival will have little chance.
To understand what's at stake, it pays to examine the reasons for Qantas's underperformance.
Qantas international has made above-target returns on assets or invested capital just three times over the past 15 years. This performance is unsustainable.
While some unions often see Qantas announcements about concerns for the international business as jawboning, on the basis of my experience with the airline those concerns are genuine.
The group's share of the international market has fallen from 40 per cent in 1994 to 26 per cent in 2011 while the mainline carrier's international network reach has sharply declined. Over a little more than a decade,
Qantas has pulled out of destinations such as Canada, China, France, India and Italy (although it is returning to some of them).
Excessive growth
The dominant reasons for the consistently poor performance of Qantas international is that there is a subset of players in the market that expands capacity, over a long horizon, at rates that exceed what aviation economists call underlying demand.
Underlying demand is the level of demand that is not stimulated by price.
When supply or capacity grow above underlying demand then average airfares fall.
(According to Tourism Research Australia data, inbound tourists from a number of countries, such as China, the USA, Hong Kong, Japan and the UK, today pay lower airfares than they did 10 years).
Falling or at least stagnant airfares combined with higher unit costs brought about by rapidly accelerating jet fuel prices is a recipe for disaster for international aviation. That recipe has cooked up a poisonous profit broth over the past 15 years, with a few notable exceptions (eg, 2008).
Foreign government-owned carriers
Foreign airlines in Australia that are household names - Emirates, Etihad, Singapore, Malaysian, Thai, Air New Zealand (just to name a few) – are majority, if not entirely, owned by their governments.
Their collective share of the international market has more than doubled over the past two decades – from 20 per cent to just under 50 per cent.
Some may say that these airlines have been good for competition. That's not true. They've been wonderful.
Standard measures of competitive intensity indicate that the international market in Australia is 55 per cent more competitive today than 10 years ago.
While these airlines have been good for competition they have been a disaster for the Australian tourism industry, jobs, gross domestic product and welfare (the impact of which far outweighs the guilt sponsorship dollars they pump into major sporting teams, stadiums and events).
There are at least two reasons for these negative results.
Inbound percentages
Some of these airlines, particularly those from the Middle East and non-China Asia, have steadily seen a reduction in the percentage of their passengers that are foreign visitors entering Australia (effectively an export for Australia) and an increase in the percentage of Australian residents travelling abroad (an import).
Tourism economists often call these percentages the inbound and outbound percentages.
The inbound percentage for a selection of key government-owned carriers has fallen by around 1 percentage point in each year for the past 14 years.
This trend started well before the dollar began to strengthen in early to mid-2000 so the strong exchange rate cannot exclusively be blamed for these changes.
The increasing outbound percentages have been a big draw on domestic tourism, which has been in trend decline for over a decade, generating falls in tourism's contribution to economy-wide employment.
Exit of foreign privately-owned carriers
The excess capacity and intensity of competition has forced the exit from Australian routes of foreign privately-owned carriers that have exceptionally high inbound percentages, such as Alitalia, KLM, SwissAir, Lauda Air, Austrian Air and Olympic Air.
If Australia wishes to improve its inbound tourism then it must provide a sustainable level of profits for these types of carriers.
Cost advantages
Foreign Government-owned carriers enjoy significant cost advantages as a result of paying little or no company and payroll tax.
Their employees pay no or much smaller rates of personal tax, allowing the airline to pay lower before-tax wages, and they also enjoy tax advantages generated by more generous accelerated-depreciation allowances.
As they are owned by a government, these airlines also enjoy a sovereign credit rating when borrowing money.
More importantly, however, the owners of these airlines don't care as much as the owners of private airlines, such as Qantas, do when they make a loss.
This nonchalence is because the owner's objective is the welfare of the economy they run not the airline they own and they get a far greater return from inbound tourism then they do from the airline.
It also helps that the owner of the airline is actually better off when oil prices are high, as is the case of the carriers based in the oil-rich Persian Gulf.
Unions say Qantas's announcement that it will slash 1,000 jobs and forge into Asian markets heralds one of the "darkest days" in the airline's history.
Chief executive Alan Joyce announced this morning that the airline would launch a new Jetstar line in Japan and another low-cost airline in Asia that will not carry the Qantas brand.
The five-year plan, designed to return Qantas to international profitability, includes delaying the delivery some of the airline's Airbus A380 fleet, and strengthening ties with Asian airlines.
It also includes laying off 1,000 jobs from the international arm of the airline's operations, with unions furious at that decision.
They are questioning how much loyalty to Australia remains within the airline.
Australian Council of Trade Unions (ACTU) secretary Jeff Lawrence says Qantas has shown contempt for its workforce.
Mr Lawrence says it is one of the airline's "darkest days."
"It is of great concern. I don't think Australians are going to support a race to the bottom by a company that's prepared to trade off conditions," he said.
"There is question about whether Qantas remains an Australian company. I think today Qantas management has actually turned its back on Australian jobs.
"The announcement, of course, has got a lot of detail around it and there are some things that are foreshadowed that we don't have detail about, and that's a concern as well."
Mr Joyce says the airline's cost base is 20 per cent higher than its key competitors, meaning that changes had to be made.
But Mr Lawrence says it is not a question of doing nothing, but just how the issues are addressed.
"For years, the ACTU and the airline unions have been calling on Qantas to sit down and actually be honest about these issues and negotiate a package," he said.
"Instead, Qantas have proceeded on a path of using various corporate entities ... in a way which is designed to evade their responsibilities under Australian Industrial Regulation, and this appears to be a continuation."
'Third-world standards'
Tony Sheldon, from the Transport Workers Union, says the decision to move Australian jobs offshore will result in a rapid decline in standards.
Pilots have previously warned that jobs will be lost overseas and safety standards will decrease.
"This company has a responsibility as the Australian icon to make sure that this airline is kept in Australian hands with Australian jobs," Mr Sheldon said.
"What they've decided to do is go the low road: go to third-world standards, third-world training and third-world safety."
However, Qantas denies safety standards will put at risk its plans.
Mr Joyce says the airline's safety standards "will be the safest we can make them because safety is our top priority".
Australian Licensed Aircraft Engineers Association president Paul Cousins says his members were not consulted at all about the moves.
He says the union is shocked and "extremely disappointed".
Qantas changes
• 5-year plan to return Qantas International to profitability
• 1,000 jobs to be cut under restructure of international arm
• Strengthening ties with LAN, Malaysia Airlines, South African Airways and BA
• Jetstar Japan will launch domestic Japanese services by end of 2012
• Delaying delivery of some Airbus A380s and ordering 110 new A320s
• Creating premium airline based in Asia, not under Qantas brand
• Santiago to replace Buenos Aires as entry point to South America
"They're considering job redundancies across the network of Qantas airlines, and both the international and domestic, and that obviously concerns us," he said.
"We're also extremely disappointed that Qantas continues to fund start-up airlines across the network and across the globe without actually continuing that investment in Australia."
The ACTU's Jeff Lawrence says the union will look at its options and industrial action will be taken.
"There's a range of bargaining issues at the moment that each union will be looking at - what this announcement means from the point of view of jobs and the future of the workforce," he said.
"We will be coordinating activity and of course there'll be industrial issues that we will have to work through.
"But as well as that, clearly we'll be looking at what needs to be done in terms of regulation of the airline to ensure that the real intention of the Qantas Sale Act and all of the regulation of Qantas is actually maintained."
Within the rules
Federal Transport Minister Anthony Albanese says the job cuts are regrettable, but the Government acknowledges the commercial decision taken by Qantas.
Mr Albanese says the airline has indicated that it is "in complete conformity" with the Qantas Sale Act.
"Any loss of jobs is very much regrettable. The Government believes that Qantas is an iconic Australian brand. We believe it's important that the provisions of the Qantas Act be maintained, [and] we'll ensure that that occurs," he said.
Mr Albanese would not comment on whether the job losses were unavoidable, but he said it is vital that Qantas remains a leading Australian company.
"It is very important that Qantas reassure the Australian public that it regards itself very much as the Australian icon," he said.
"Qantas management and its employees need to have much better relationships develop through better dialogue so that we have indeed a promotion of the brand of Qantas, because I know that many Australians fly on the flying kangaroo because of the way that it is."
INDEPENDENT Senator Nick Xenophon says Parliament should examine Qantas' plans to cut up to 1000 Australian jobs to ensure the airline is not breaching any laws.
Qantas chief executive Alan Joyce unveiled a five-year plan to increase profits at the national flag carrier through changes to flights and scrapping Australian jobs.
The airline was privatised in 1992 by the then Labor Government, with a condition of sale being that its main operational base and headquarters remain in Australia.
Senator Xenophon said he would ask the Senate to hold an inquiry into what the airline has announced "particularly with the view as to whether it is in breach of the Qantas Sales Act (1992)."
He said a bill would be introduced into the senate tomorrow concerning the operations of Australian airlines with the VH registration prefix that fly internationally and around the country.
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If (these airlines) employ foreign-based crew, they must be employed "on the same terms and conditions as Australian crew", Senator Xenophon told reporters in Canberra.
ACTU secretary Jeff Lawrence said the Qantas announcement was an "outrage".
"It is an attack on Australian jobs and it really brings into question whether Qantas is truly an Australian airline," Mr Lawrence said in Canberra.
"You can't properly call Australia home, legitimately call Australia home, by putting ads in newspapers."
Federal Transport Minister Anthony Albanese said the Government was disappointed by the proposed job cuts at Qantas.
"Job losses are always regrettable, but the Government acknowledges that this is a commercial decision taken by Qantas," Mr Albanese said.
Australian Greens MP Adam Bandt said concerns over Qantas moving its business overseas were not just about job security.
"It is also an issue of maintaining Qantas' safety record and ensuring we maintain an Australian air industry," Mr Bandt said.
Mr Lawrence said passengers, shareholders and workers at Qantas should be worried about the future of the airline.
He said Qantas has decided to trade off its good name and high standards by outsourcing the work overseas.
Mr Albanese said the Civil Aviation Safety Authority (CASA) was holding an inquiry into allegations of overworked foreign employees at Australian airlines.
"CASA is also currently initiating a project to implement new international civil aviation standards for managing fatigue in aviation personnel," he said.
"The new standards will come into effect from December this year."