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Etihad’s Australian tourism pact adds to pressure on Qantas

Etihad Airways helps fill the void caused by Qantas quitting Tourism Australia funding, and ensures that questions about the competency of Qantas management remain in the spotlight in a week when its bid to hand over more of its market to Emirates may get a ‘Go’ or ‘No’ from the ACCC.

The question in Australian tourism this morning is how does Qantas recover its relevance to promoting the country to the world?

On 28 November Qantas CEO Alan Joyce withdrew support for the Federal body, Tourism Australia, from the start of the next financial year from 1 July, meaning the loss of $44 million in cash, sponsored promotional travel and other time proven co-operative programs to raise the country’s profile in overseas markets.

The move was aimed at the conflicted position of his predecessor at Qantas, Geoff Dixon, in occupying the chair of Tourism Australia while also being a Joyce critic and party to a potential raid with private equity partners on the various assets that could be stripped out of the airline, notably $3 billion in cash, its frequent flyer program and the Jetstar franchise.

Almost three weeks later Dixon is still at the helm of Tourism Australia, and Qantas competitors are lining up to replace its promotional role, keeping in mind that these co-operative deals are not charitable in nature, but very well constructed programs that seek benefits for the airlines in specific markets by increasing the visitations that will benefit tourism industry stakeholders.

The latest airline to do this is Etihad, with a deal worth $6 million over three years. For a small yet ambitious carrier which also owns 10% of Virgin Australia Holdings, this is a big door opener.

These deals are good business. They make sense. And Qantas won’t be there in Tourism Australia from 1 July.

Or maybe it will. This is, like the death threats scare (which vanished), and the premium single aisle Asia based minority owned Qantas subsidising Red Q airline (which never happened), yet another headline generating tilt that has turned to nothing.

Qantas needs to get out of the situation it is in. It needs to rebuild its connections with national tourism.

This week the ACCC will indicate whether or not it proposes to anoint the proposed Qantas-Emirates business partnership in which Qantas gives all but the Sydney and Melbourne market to Europe to Emirates, and throws in part of its trade to both Asia and New Zealand into the biggest voluntary giveaway of one airline’s business to another airline in aviation history.

There is a degree of inescapable logic in Qantas severing its relationship with Tourism Australia. Under its announced plans with Emirates it won’t even fly between here and Germany from late in 2013, which is one of the most valuable markets for inbound tourism because of the German preference to spend a much longer time than most visitors in this country, travelling widely in the course of extensive itineraries.

With a footprint of only two A380s a day to London Heathrow airport under the proposed Emirates partnership from 1 April, and a Frankfurt flight in shut down mode, there is precious little relevance for Qantas in the Australia-Europe market.

All that it will get out of the partnership will be code-sharing deals, which may reduce the risks of being an international airline, but ultimately diminish the rewards by promoting the use by travellers and tour packaging companies of a different brand, in this case Emirates.

Not that Emirates isn’t enthusiastic in its support for Australian tourism. It even built a world class eco resort in the Wolgan Valley, on the western side of the Blue Mountains.

Singapore Airlines, Emirates, and now Etihad, are associating themselves with brand Australia by improving their co-operative agreements with Tourism Australia.  Qantas, by contrast, has made the mistake of being seen as a dummy spitter, even though the criticisms Joyce makes of Dixon’s involvement in a possible move to take control of its assets are matters of great concern that ought to be pursued and resolved elsewhere.

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  • 1
    patrick kilby
    Posted December 17, 2012 at 12:43 pm | Permalink

    Note though that Virgin flies directly to fewer places than Qantas, Qantas is still a larger supporter of Tourism in Australia than the others combined, and the replacement value still deos not add up to the $55m that is heading elsewhere i.e. to State bodies. Also neither Virgin or Etihad fly to the largests source of tourists and that is China. So all in all not as dire as suggested.

  • 2
    alangirvan01
    Posted December 17, 2012 at 12:59 pm | Permalink

    A deal between Qantas and Emirates can still be good for Australian Tourism out of Germany. Emirates serves more German cities than just Frankfurt (hopefully to include Berlin if they get in there). If Qantas focuses on State Tourism bodies like Queensland, well Queensland could be well promoted in Germany, perhaps to the point where Emirates would use the A380 on Brisbane services. The Qantas spend, if they keep it at current levels is still far higher than anything Etihad or Virgin is spending. Will Qantas/Emirates provide travel to State Tourism bodies on board Emirates operated flights to help promote to Australian regions? If it is business as usual, they will carry on .

  • 3
    Ben Sandilands
    Posted December 17, 2012 at 1:11 pm | Permalink

    Patrick,

    The report isn’t about the shortfall, which is a non shortfall since Qantas is spending that sum on state bodies.

    It is about how Joyce has failed to remove Dixon from his post. This tells us a number of things as previously discussed and it does keep the pressure on Qantas management, since it failed to move the Minister, his government, or the chairman he approved.

    Joyce us pulling levers that aren’t working. Not only is the airline losing market share and profitability, but its influence in Canberra.

  • 4
    discus
    Posted December 17, 2012 at 10:37 pm | Permalink

    Ben imho is correct. (replying to Patrick)This is about who is dictating terms to who. Joyce poleaxed the industry with his grounding. He put the govt offside and consequently forced them into stopping legitimate and legal industrial action. He again tried to be the tough guy by again trying to get his way in Canberra. Tourism Australia, and by implication the minister has flipped him the bird and said YOU are not calling the shots. Dixon likely has a conflict of interest but TA wont cop who being put over the barrel again.

  • 5
    Rufus
    Posted December 18, 2012 at 12:31 am | Permalink

    Off the topic, I once again had to organise urgent travel from Frankfurt to Australia over the weekend (second time in 6 weeks). Once again, Qantas had not a single seat in business class, only one available in premium economy and I think Y was sold out too. And that was for a Saturday night.

    How on earth is that flight not making money?

  • 6
    timjack Elton
    Posted December 18, 2012 at 2:03 am | Permalink

    Discus, Great post, I agree with you, and put so well with,

    “This is about who is dictating terms to who.”

    Got me thinking…. I found myself asking questions like,, “Has Mr. Joyce run out of friends and strategy time…?” “one drama too many, this time….?”

    “He put the govt offside and consequently forced them into stopping legitimate and legal industrial action.”

    With a election year rapidly descending on us all, the last thing the government needs is another high profile Qantas squabble, particularly now, as they (the government) still have to deal with the voter backlash from the Qantas job losses in Victoria, announced earlier this year . oh yes, and the year before, by Mr. Joyce.

    “Tourism Australia, and by implication the minister has flipped him the bird and said YOU are not calling the shots.”

    (note, no current IR issues, )

    Purely a Qantas management v Government Showdown, if you like… it’s that “Sol kinda, all over again, feeling,” nudge, nudge wink wink, say no more….

    When I think about it, tourism as an industry in Australia is important and needs some positive help and direction from above, so really isn’t it time we all started rowing in the same direction without the squabble Mr Joyce…?

    Ben is right when he says, “Not only is the airline losing market share and profitability, but its influence in Canberra.” good call Ben..

    For me, pretty much sums up 2010 – 2012 inclusive… one bad vibe after another coming from the Q management bunker, as time goes on, it appears a lot of the bad vibes self-inflicted,

    No doubt about it, the pressure clock is ticking for Mr Joyce.

  • 7
    Rufus
    Posted December 18, 2012 at 9:05 am | Permalink

    But speaking of influence in Canberra – if that had been worth a farthing, qantas would be neither shackled (20 years post float) with the Qantas Sale Act, nor facing an open-skies regime which has allowed a free-for-all with foreign carriers cutting the ground out from underneath it.

    The only substantial lobbying success it has achieved in recent years is keeping SQ off the Pacific.

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