Qantas Airways, said it plans to split its loss-making international and profitable domestic businesses, though Australia's top airline was viewed by analysts as unlikely to spin off or sell the international operations.
The businesses will have separate chief executives and operational and commercial plans, Qantas said in a stock exchange filing.
The two businesses will also report earnings separately, it said. The changes are part of a five-year turnaround plan aimed at shrinking costs and getting the international operations into profit.
"This is aimed at showing external stakeholders, such as unions and government, how difficult the international business is," David Liu, head of research at ATI Asset Management said. ATI owns Qantas shares.
"The split brings in added transparency and detail to the two units. It lets Qantas say this is what we have to do to fix it. I don't think this is about selling the unit."
Qantas named Simon Hickey, CEO for its frequent flyer programme, as CEO of Qantas International, and Lyell Strambi, group executive for airline operations, as CEO for domestic operations. But it said Bruce Buchanan, CEO of its low-cost offshoot JetStar will leave in six months.
Mr Buchanan is credited with building the JetStar brand across Asia.
Qantas announced an underlying profit before tax of Aus$552 million in the 2010/11 financial year. But it also, for the first time, gave a glimpse of the troubles at the international operations by saying it lost more than Aus$200 million, surprising investors.
The airline, which is emerging from a bruising industrial dispute with unions, would also need a change in legislation to sell off the unit. The legislation is designed to protect Qantas' position as an Australian airline.
"Qantas International, a great airline with a rich history, is loss-making and does not deliver sustainable returns," chief executive Alan Joyce said.
"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."
RBS analyst Mark Williams called the move a sensible approach but said the challenge was to ensure the maintenance of the strong level of integration between the domestic and international businesses that is driving profits now.
Reuters