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Qantas drops Jetstar code shares on domestic flights

Qantas purged Jetstar code shares from its domestic flights booking site today, only a few days after it began applying Emirates code shares to its international booking site. Rumours, and half baked explanations abound.

It looks like Virgin Australia CEO John Borghetti continues to influence Qantas policy, after it abruptly removed its QF code from Jetstar or JQ coded domestic flights on Qantas.com

Borghetti has said in various places that if the deal by which Virgin Australia buys a 60% and controlling interest in Tiger Australia is approved by the ACCC Tiger flights will never be involved in a code share with his airline because of the confusion, and anger, this often caused in Qantas customers in relation to Jetstar flights.

One of the strong selling points of Virgin Australia is that it doesn’t have a so called dual brand strategy in place, which to consumers often seemed to have been devised by Qantas to annoy the hell out of them when they found themselves punted into a Jetstar cabin.

In this report in Travel Weekly Qantas is quoted as saying that the move, effective immediately, would remove ‘confusion’.

What took Qantas so long? And why are there still Jetstar flights displayed, but without the joint QF code, on Qantas.com anyhow? It is not as though people who want to fly Jetstar will go to Qantas.com to find its flights when it has its own, very easy to use site that shows all JQ flights.

Other rumours continue to swirl around Jetstar and Tiger. One is that Jetstar is no longer getting the benefit of certain costs being carried by Qantas, but Qantas has always maintained this was untrue anyhow.

The other is that some Tiger staff have been told in no uncertain terms that if the ACCC refuses to approve the deal for control to pass to Virgin Australia, its Singaporean owners which include Singapore Airlines will shut the Australian operation down.

Comment was sought from Tiger Australia. Frame it:

As we are still waiting for the ACCC’s review, it is too preliminary for us to comment on this matter.

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  • 1
    timjack Elton
    Posted January 25, 2013 at 6:28 pm | Permalink

    It’s clear to me now, the Australian market has no room for three separate airline identities if the Virgin/Tiger merger is not allowed to proceed…. similar to where we all at with Compass MK 1, MK 2 and OZ Jet.

    I agree Ben, what was the real reason for QF to take so long to announce the dropping of the JQ domestic code share?

    Could it be, we may see a sudden upsurge in Qantas profits when the half yearly results are announced by AJ next month?

    If so, I can’t help thinking that it may reveal possible cost shifting between QF in favour of Jetstar Asia setup costs in Asia putting pressure on the ACCC regarding approval of the EK/QF partnership?

    Other words, was the ACCC fed the correct information when the partnership was first submitted?

    The plot thickens.

  • 2
    discus
    Posted January 25, 2013 at 8:25 pm | Permalink

    It’s pretty clear who is pulling the levers at QF these days and I don’t think it is any one of the 4 ceo’s QF currently employ. When you bed down with the 800 pound gorilla you better do exactly as you are told. Whatever the reason it is about time.

  • 3
    comet
    Posted January 25, 2013 at 9:58 pm | Permalink

    Australia has room for two premium airlines (Virgin and Qantas), and two budget airlines (Tiger and Jetstar).

    The problem is that Qantas has been using its dominance like a bully and a thug, in a way that the ACCC should investigate.

    Qantas has been deeply discounting fares in order to hurt Tiger. There is nowhere for Tiger to move, fare wise (it can’t lower fares and be profitable). As soon as Tiger has been finished off, Qantas will raise its fares again.

    CASA has also been complicit in assisting Qantas’ anti-Tiger conspiracy.

  • 4
    moa999
    Posted January 25, 2013 at 10:23 pm | Permalink

    Much like $1 milk, the average consumer is quite happy for low fares…

    IMHO Tiger is its own worst enemy… It has a poor reputation for service that doesn’t appear to be improving and it recklessly issues clearly loss leading fares (eg. the $9 fares) that perpetuate its position (and generally aren’t matched unlike the $1 milk by the competition) (ignoring the Price Beat Guarantee that needs some effort to take advantage of).

    As for the cost shifting timjack Elton – In the context of Qantas, Jetstar Asia is still a pimple. It has 16 A320s, 2 A330s — all leased – the capital invested in it probably wouldn’t buy a 747, outsourced everything and cheap staff. While like any company Qantas has to allocate costs and there is some flexibility in doing so, the Asian operations just aren’t big enough to make Qantas International look that bad…

    Qantas International is simply a dog because every one of its competitors has lower pay rates for tech and crew, higher flexibilities and lower pay for ground staff, more favourable government taxation policies and don’t operate from hubs controlled by profit making monopoly entities

  • 5
    Mark Skinner
    Posted January 26, 2013 at 11:37 am | Permalink

    Moa, and don’t forget that other airlines such as Singapore are operating the 777 and have either completely or are moving toward elimination of the 747 and 767.

    While Qantas may have to pay more for cabin staff, ground staff overseas should cost no more to Qantas than its competitors.

    Qantas has quite a bit of protection built into domestic operations, so cannot be totally pointing fingers at overseas protections.

  • 6
    timjack Elton
    Posted January 26, 2013 at 3:01 pm | Permalink

    moa999, thanks for your post, you make some good points. (in fact all the posts interesting) I guess I’m one of those Australians who was brought up to respect Qantas, (now into my 50s) it was a true icon. Back then, the backpacking thingy to LHR/Europe was in the rules, aviation was a pup, and travel was an adventure, mainly due to our geographic location, we became well adjusted long haul travelers out of necessity.

    Today the romance is gone, things have moved on, more choice in a very price competitive market. At the end of the day we still only have two price categories, Premium and the LCC models, in marketing terms, pretty much the way it has always been, there were always someone willing to do it cheaper so I totally agree with you when you say “IMHO Tiger is its own worst enemy” Sure, the same could be said for Compass MK 1 and particularly MK 2.

    Tiger is still bleeding money probably because its backers has deep pockets and it is burdened with a “loss of face management culture” a problem which often raises its head in Asia. I think it is fair to say if Tiger was Australian owned it probably would have folded by now, hence why I still believe there is still no room for a third independent airline identity in the Australian market. Since this time, Australian ownership of the aviation industry has slipped dramatically with controlling interests moving off-shore, (Singapore to name one) a very sad reality for a once proud home grown Australian industry. These days we seem to be very good at “selling the farm,” it feels like a national pass time the last few years..

    If JB is successful with the takeover merger bid, I still believe it will be a hard slog running the two brand stratergy, something that is in my view why Qantas International is in so much bother. Qantas management confused the two brand strategy, (code sharing the Premium with the LCC product) putting too much energy in the Jetstar model taking their eye off the traditional LH operation. History shows when QF & TN merged the Q International was doing fine thank you very much, so the focus was put on the domestic side of the business competing with Ansett…. until the wheels fell off for AN. Qantas was on easy street until Virgin Blue stepped in the market.

    To be be fair, Alan Joyce did a good job with the set up of JQ here in Australia, no doubt about that, but his treatment of the mother ship, Qantas, brutally starving it of investment blaming the staff because it appears he was more interested in having his “big idea” in Asia (J*) funded by the Q group cash cow.. (hence my comment re cost shifting,) the problem, J* Asia took far too long to establish leading to what I see as desperate attempt to fix the decline in Q International by teaming up with EK.

    Suddenly, we are seeing lack of profitability issues in both J* Asia and Qantas International, double trouble… and I am not convinced the current management line up at Q have the talent to fix the problem, they have bumbled along from one crisis to the next taking far too long to do anything positive. They simply don’t understand airlines are a people business, motivate the staff and good things begin to happen. It is clear the Qantas chairman prefers to handle things the way he did at Rio Tinto, he appears to revel in it but look what happened there recently.

    “If I was Walsh, the first thing I would do is shut down Rio’s ivory tower in London and move it to Perth.”

    I fear chairman Clifford has similar plans to move the operational recruiting side of the business off-shore to circumnavigate the Qantas Sales act, which is the reason why the EK/QF tie up suits his vision. For me this vision is flawed if you compare what happened at Rio Tinto recently, they too took their eye off the ball losing track of why RT was so successful in the first place, the same applies to QF….

    Read more: http://www.smh.com.au/business/mining-and-resources/time-to-bring-rio-tinto-home-20130118-2cxf2.html#ixzz2J32o8uPv

    http://www.pprune.org/dg-p-reporting-points/466789-leigh-clifford-no-stranger-difficult-matters.html#post6760075

  • 7
    Bear
    Posted January 26, 2013 at 5:06 pm | Permalink

    I still believe that the AU domestic market can support at best, 2-and-a-half mainline carriers at any given time. So, we currently have QF/JQ (counts as 1, as far as im concerned…) VA and then that mangy feline, Tiger.

    Given Tiger’s continued financial performance, if I were Borghetti, I’d keep well away from it. He is being sold a pup (or should that be a cub?), so just let it meet its inevitable fate. I think that Tiger’s demise would be the best thing that could happen to the domestic market in terms of capacity and profits.

  • 8
    Alex
    Posted January 29, 2013 at 11:51 am | Permalink

    “too preliminary”?!?! Do you think Tiger may have hit the send button on that one prematurely? And not just a little too prematurely, but,a lot too prematurely?

  • 9
    grubbidok
    Posted February 3, 2013 at 6:06 pm | Permalink

    My guess is the real reason that JB is so keen on Tiger is that VA is trying to find somewhere to shuffle off the LCC customers that currently plague VA and make it harder to be get real ‘premium’ cred (its currently too much of a hybrid for the business pax it wants to court). In this sense I would say that Tiger is very important to the entire VA strategy. As Ben’s comments imply, the VA strategy seems to be separating the markets (and keeping them separate), whilst still retaining them both.

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