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Qantas left friendless in Asia, and Oneworld doubts rise

Qantas is becoming not only less of an airline for all of Australia, but one that has not yet lived up to any of the hype about Asia whether through a low cost franchise in Asia, or a new premium franchise in Asia.

Missing as yet from the Qantas announcements yesterday that it was doing really very little about better services to Asia, apart from cutting Perth and Adelaide loose, is exactly how business travellers to Singapore or Bangkok or Kuala Lumpur, including Emirates code shares, are going to connect for onward destinations deeper into China, India, Thailand and the Mekong delta nations.

Does it seriously think a change of gauge to a Jetstar franchise flight is going to compete with what Singapore Airlines and Virgin Australia can offer over Changi for example?

And apart from gee whiz reporting about hypothetical 787-9 Dreamliner services non-stop to everything on the Asia map sometime after 2016, and possibly on Jetstar tight pack 787-8s before then, what exactly will its business travellers get this year, which is what counts?

Simon Hickey, the CEO of the newly separating loss making Qantas international business, even cast doubts on the previously firm commitment by group CEO Alan Joyce, to take a flat bed in business class in long haul A330-200s to the board for approval, which isn’t a doubt loyal premium customers would wish to entertain.

And as exclusively reported in the AFR, British Airways is planning to sever all of its code shares with Qantas from 1 April, when the not yet completely finally approved Emirates-Qantas master-servant relationship kicks in, or not.

This has implications for Qantas continuing in the Oneworld marketing alliance in which it was a foundation member alongside British Airways and American Airlines in 1998. Part of the Oneworld model, apart from its contempt for the rules of grammar by insisting on the use of a lower case ‘o’, is that members code share on each others networks because, duh, it is an alliance.

And Emirates doesn’t think global alliances work as intended, has always stayed out of them, even when it was just a small Arab world airline going nowhere, and almost certainly made the right call. Global alliances may please some travellers, but by and large they mean sod all when airlines like Qantas and more recently Virgin Australia have made the call that the important deals are route specific deals, like the soon to be discarded joint services agreement Qantas had BE, before Emirates, with BA, British Airways.

The BA action in cutting off Qantas will however alienate those Qantas customers who don’t want to fly Emirates, having believed no doubt all of the anti-Emirates lobbying that Qantas carried on with right up until early June last year when all of a sudden the Emirates deal came through.

And those who claimed that Malaysia Airlines would on joining Oneworld, provide alternative succor for Qantas customers who could instead use its services to Europe and the other parts of Asia via Kuala Lumpur, now have to deal with shock of finding that they will be discriminated against in their points earnings on the Malaysia flag carriers flights.

Which means two things have gone down in flames over the Qantas Asia ‘expansion’. One is the utility of the onward connections provided by Qantas, since they are inferior in quality or frequency or non-existent except over Hong Kong through the indulgence of Cathay Pacific. And the other is that Oneworld is about to become Noworld as far as most of Asia and Europe is concerned for whatever loyal customers Qantas is able to hang onto.

Qantas doesn’t get several really important things. It doesn’t get Jetstar being unacceptable to Qantas full service customers, especially mid-trip, in a connecting airport in Asia. And it doesn’t get people being promised, many times, a premium Qantas minority yet Qantas controlled version of Jetstar, an absolute anti-Jetstar, based in Kuala Lumpur, Singapore, or anywhere Qantas could put it, which Joyce had promised would be flying by the end of last year.

This is a very sad state of affairs.  Qantas is becoming not only less of an airline for all of Australia, but one that has not yet lived up to any of the hype about Asia whether through a low cost franchise in Asia, or a new premium franchise in Asia.

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  • 1
    patrick kilby
    Posted February 5, 2013 at 7:43 am | Permalink

    ‘…will however alienate those Qantas customers who don’t want to fly Emirates’ and presumably prefer BA instead with its backtracks from dysfunctional Heathrow. Hmmm I can’t see too many in that category, but there may be some.

  • 2
    Ben Sandilands
    Posted February 5, 2013 at 7:59 am | Permalink

    Patrick,

    Did you not suggest earlier that Qantas customers could still connect to BA flights in Asia to reach London and earn points?

    They can’t.

  • 3
    patrick kilby
    Posted February 5, 2013 at 9:32 am | Permalink

    Just checked the BA website for May and the connection are still there (Sin is still okay timewise) and by virtue of One World the FF benefits are there as well for those who love BA planes.

  • 4
    Dan
    Posted February 5, 2013 at 10:18 am | Permalink

    This is a Qantas issue, but also a broader oneworld and alliance issue.

    The three alliances haven’t proved to be the answer to what ails the airline industry and airlines are clearly looking at other options. oneworld is the weakest of the three alliances (e.g. it is the only one which as I understand it doesn’t charge member airlines an exit fee when they leave or penalise them too severely for not cooperating.

    Qantas (OW) ditching BA (OW) for Emirates (non-aligned) while BA invites Qatar to join OW, Air Berlin (OW) partnering with Etihad (non-aligned) and Air France-KLM (SkyTeam), Qantas sponsoring in Malaysian but then gutting earn on most of their flights, Cathay’s frosty relations with pretty much most OW members (try getting a credit to your American Airlines frequent flyer account for most Cathay economy fares!), Qantas setting up an LCC with China Eastern (SkyTeam) in Cathay’s home airport, Cathay starting a partnership with Air New Zealand (Star Alliance), the list goes on.

  • 5
    FlyLo
    Posted February 5, 2013 at 12:31 pm | Permalink

    Patrick,

    I obviously read the AFR article differently from you.

    It is no surprise to me that your check for flights in May on the BA website still shows the code-share flights.

    It is only once the agreement expires on 31st March 2013 (if the AFR article is correct and the agreement is not reinstated) that BA code sharing on Qantas flights will not be visible on the BA website.

    To test whether the AFR report is correct, you will need to log onto the BA website on 1st April 2013 and tell us if it still shows the BA code share flights on Qantas aircraft.

    While the code-share agreement remains on foot (as the existing agreement does until 31st March 2013) the BA website will continue to include the BA code shares on Qantas flights and accept bookings on Qantas flights using BA code shares.

    It is the agreement which expires on 31st March 2013. Until it does, bookings can be accepted using the code-share agreement for any flights whether taken before or after 31st March 2013.

  • 6
    patrick kilby
    Posted February 5, 2013 at 12:56 pm | Permalink

    Flylo just to be clear I said the connections were still there but NOT code share they are all with the relevant BA or QF codes. The advantage of the Oneworld is that not only are FF benefits shared but also they tend to show the other Oneworld alternatives whether there is a code share agreement in place or not (am gong to Lisbon in July: no code share on Emirates or BA but the QF site shows both). The BA site does not show the QF code shares after March 31, like the QF site does not either, but they do show OW alternatives.

  • 7
    Ben Sandilands
    Posted February 5, 2013 at 1:08 pm | Permalink

    Unless I have first hand knowledge to the contrary, that is, I knew that the AFR or anyone else had misheard something said in a briefing to a number of reporters, I don’t try to check for errors, because such publications will correct their errors and then that correction can be run.

    The reason for drawing reader attention to the AFR report is that it is a significant and interesting report, and by way of context, there is no doubt from the Malaysia Airline reaction to the Emirates-Qantas deal that Qantas customers will not get much joy from its joining Oneworld, even if they chose to fly it all the way to London, other than of course benefiting from the very high service reputation MH enjoys.

    The global alliances are in my opinion demonstrably failing to do what they originally set out to do, and have been shaded over time by joint service agreements and similar.

  • 8
    madge
    Posted February 5, 2013 at 1:19 pm | Permalink

    As far as I can see the QF website will not show BA codeshares after March 31. However BA still offers QF codeshares after this date. One random flight check shows that the cheapest option is indeed a codeshare SYD-BKK-LHR.

  • 9
    patrick kilby
    Posted February 5, 2013 at 4:18 pm | Permalink

    I am on a flight QF/BA to Lisbon in July (via LHR) and it is still showing on the QF website, as well as a EK option (QF/BA better because of more status credits but alittle longer and a LHR change). The reason is there are no code shares to Lisbon on either BA or EK for QF passengers. There is a difference beween code shares and One World partner flights being offered with a through fare. CX flights come up from time to time as well. But the precedent of MH getting the same credits (which personally I look for) but not the same points may be a pointer to the end of the alliances or at least their devaluing

  • 10
    John Turner
    Posted February 5, 2013 at 5:23 pm | Permalink

    The Qantas website
    http://www.qantas.com.au/travel/airlines/qantas-and-emirates-partnership/global/en states re Qantas Club members:

    “If you are travelling on Qantas, your lounge access will remain unchanged. If you are flying with Emirates you will have access to the Emirates lounge in Dubai.” ie with Qantas withdrawing its connecting services from Perth & Adelaide Qantas Club members outside Sydney & Melbourne who wish to travel direct to Dubai and them onto Europe will not have QC access in Australia unless they travel Business Class or have a high FF status (or are Emeriates Lounge members).

  • 11
    FlyLo
    Posted February 5, 2013 at 6:30 pm | Permalink

    Patrick, do you include yourself in the category of “those Qantas customers who don’t want to fly Emirates’ and presumably prefer [connecting to] BA instead with its backtracks from dysfunctional Heathrow”(your expression) as it seems that you are deliberately choosing to fly through Heathrow, connect to BA and add another stop to your journey all in the name of a few more status credits.

  • 12
    Geoff
    Posted February 5, 2013 at 7:56 pm | Permalink

    Patrick – I have no knowledge of how these things work but I am booked QF (with FF points) to Heathrow in September and because the FF site did not offer a suitable flight to Edinburgh I booked on the BA website and paid for the tickets. This BA booking shows up on “my bookings” on the Qantas web site, however I can’t get Qantas to do anything to help me with BA schedule changes. I have to wait for the BA call centre in India to reply.

    All I’m saying is that there is a great deal of automation out there that is doing stuff without human intervention. It will be interesting to see if my BA booking disappears from the Qantas site after the 1st April.

  • 13
    michael r james
    Posted February 5, 2013 at 8:02 pm | Permalink

    AFR wrote:
    “Qantas estimates the percentage of passengers flying to London who made a stopover in Singapore, Hong Kong or Bangkok was less than 5 per cent.”

    Can it possibly be that low? And does it mean those who want to break their journey in Asia, mostly use the Asian airlines instead? (And is it because, as the afr suggests, because booking a mixed-carrier Oneworld ticket is too much hassle, and in fact cannot be done on the Qantas website?)

    If 95% of Qantas fliers just want to get to LHR a.s.a.p. then I suppose the Emirates/Dubai hub makes sense. I wonder if the same applies to other European destinations.

  • 14
    Flyer Solo
    Posted February 5, 2013 at 10:41 pm | Permalink

    Hold up, hold up! Like most Qantas announcements, the real story is not the one first apparent. Most people are focussed on the cuts to PER and cessation of ADE services. I agree these are very disappointing decisions, but let’s think a little more deeply for a moment.

    By my outsiders estimate, cutting ADE-SIN (3x weekly), PER-HKG (3x weekly), SYD-HKG (11x to 7x weekly) and reducing PER-SIN (double daily to daily) will save QF 2 x A330 airframes. That estimate is in consideration of BNE-HKG going daily and QF81/82 becoming daily non-stop SYD-SIN — both to be served with A330s. QF seems to be keeping MEL-SIN, BNE-SIN and SYD-TOK with non-upgraded 744s at least for next northern summer schedule period.

    So, what’s Qantas doing with the spare A330 international-configured capacity?

    I think this potentially shows QF has made a decision on upgrading its tired and old A330 international cabins. Cutting two aircraft from the next two or so schedule periods give QF room to undertake the work. It can’t afford to remove any A330s from domestic flying (based on VA competition and recent SYD/MEL-PER scheduling commitments), so cutting international flying is the only plausible way to update the aircraft at a rate faster than scheduled heavy maintenance windows would allow.

    Further, I think this shows that QF has chosen an ‘off-the-shelf’ new interior product for the A330s. That’s surely a quicker and cheaper outlay than a Marc Newson-commissioned interior based on remaining service life? Surely QF would get more bang-for-buck focussing Newson on designing an 787-9 interior? Also fits current limited investment strategy.

    Note in QF’s media release the announcement was described as a “first step” in a revised Asia strategy. I agree QF can be very heavy on spin, smoke and mirrors with some of its media engagement. Here, I think they’re being very specific. 

    Watch out for a big ‘second step’ announcement ahead of the northern winter schedule. It’ll be: (1) rollout of new A330 interiors, including lie-flat in J and possibly some Premium Economy seats; (2) a few new intra-Asia codeshares; and (3) a few small frequency increases to one or two existing routes (eg. return some lost PER-SIN capacity, say 3 or 4, and anchor with 2 or 3 extra MEL-SIN flights. Good balance to double dailies from SYD). Known ‘second step’ measures are the new SIN lounge which will open by April and the new HKG First Lounge will be complete by September.

    If QF didn’t have any more good news to come in coming months, it wouldn’t keep talking potential measures up. QF knows it desperately needs to buck the bad PR rut it’s been in for past few years.

  • 15
    grubbidok
    Posted February 5, 2013 at 11:16 pm | Permalink

    @michael r james AFR wrote:
    “Qantas estimates the percentage of passengers flying to London who made a stopover in Singapore, Hong Kong or Bangkok was less than 5 per cent.”

    Can it possibly be that low?

    I would suspect that in the case of Hong Kong and Singapore at least, this is because a stopover is a very loose concept. A couple of hours layover is often enough to allow you to get into town and do some exploring, and this is a draw enough for some people.

    In Dubai (and most other airports) you’re essentially stuck in an over-rated shopping mall. Sure, there are some touristy things to do on a layover (though of the ME route Abu Dhabi airport is better with whiling away some hours between flights at the spectacular Sheikh Zayed mosque), but they are often glitzy, revolve around shopping or once-offs. In HK and Singapore you can venture into the living, breathing city and *experience* the place.

    Airports are a big part of how I choose flights – and no doubt many others. I have no interest in Dubai (which I believe is vastly over-rated, as is the Emirates service), no matter how nice the airline is, and will fly whoever routes me through Singapore. I can get into town if I want, but the airport is first class if I choose not to as well. There are options, which are important given the increasing frequency of long layovers (and I must admit, sometimes I choose long layovers just to be bale to get out and have a wander about! It breaks the trip up).

    Losing the Singapore and Hong Kong long haul routes – dear to the heart of many Australian travellers – was a dud move and I’m sure they’ll limp back to it soon enough (though too late and after everyone’s jumped on the services that kept it). Ditching the BKK layover probably wan’t a bad move, but ditching direct services on their own metal?

    In fact Singapore was a major factor of why I moved all my travel from from QF to VA (and their partners) for most of my travel, both domestically and internationally. Sure it doesn’t count domestically, until you factor in that I want to have status with both my international and domestic carriers, and they have to be related. If I’m not interested in the new QF international product, it makes no sense for me to build status on them domestically whilst building status on other airlines internationally.

    Now if only VA would hurry up and join Skyteam or *A. Losing Oneworld is the only regret I have about leaving Qantas, but this article makes it seem as though I needn’t be so worried about that anymore!

  • 16
    Flying High
    Posted February 6, 2013 at 12:15 am | Permalink

    True to form, dont let the facts get in the way of a good story:)

    “Responding to the claims, a BA spokesman commented that “We are currently transitioning our relationship with Qantas and it’s nonsense to suggest that we are cancelling all our codeshares.”

  • 17
    John Turner
    Posted February 6, 2013 at 1:06 am | Permalink

    Flyer Solo -it’s ADL, not ADE.

  • 18
    Ben Sandilands
    Posted February 6, 2013 at 6:17 am | Permalink

    Flying High,

    You may recall the outright lies from British Airways as to the future of its own frequent flyer members in Australia when reporters like myself pointed out early in the days of the JSA that it was going to compulsorily re-assign them to the QF scheme if they had an Australian domicile. Denied on a stack of holy books. Loyal members duly shafted. BA credibility reduced to zero.

    We may need to wait a little longer to find out the truth, but putting aside what the AFR reported, the global alliances are in a crisis of relevance, while route specific airline partnerships aren’t, at this stage.

  • 19
    patrick kilby
    Posted February 6, 2013 at 7:40 am | Permalink

    “Patrick, do you include yourself in the category of “those Qantas customers who don’t want to fly Emirates’ and presumably prefer [connecting to] BA instead with its backtracks from dysfunctional Heathrow”(your expression) as it seems that you are deliberately choosing to fly through Heathrow, connect to BA and add another stop to your journey all in the name of a few more status credits.” there is also the small matter of a premium economy seat.

  • 20
    michael r james
    Posted February 6, 2013 at 1:40 pm | Permalink

    @grubbidok at 11:16 pm

    Tx for reply.
    I am a bit of a bore on this blog with exactly the same strategy, in my case my preference is the CX flight that gets into HK before 6pm, spend >5 hours doing HK (ie. beyond airport), then midnight flight to Europe. Though I usually have a proper stopover on one of the in/return legs.

    My real query, since it is so long since I have used Qantas, is do they actively discourage this “dipping one’s toes in Asia” en route? By cost or timetabling or their partners? I am not even sure about the regulations–can Qantas pax stay in Singapore for a day or two and still catch a (Qantas) flight on to (LHR). Of course my brackets indicate the problem(s). QF don’t do it anymore (or only LHR) and flying with BA is not at the top of anyone’s list (I know they are not what they were back in the early 80s but their corporate DNA remains the same and people like me are loath to ever give them a third for fourth chance when there are much better options. Also see Ben’s post at 6:17 am.)

    Oh, and it is partly this market that Southern China are aiming for, I presume, with their current advertising blitz here. (They will get my interest when they offer an additional hop within China, say Guangzhou to Kunming, or say Chengdu then direct to Europe from there etc.) Or am I totally wrong and, according to QF, only 5% of the market is interested?

  • 21
    StickShaker
    Posted February 6, 2013 at 11:38 pm | Permalink

    @Flyer Solo – your optimism that Qantas will reinstate lost PER-SIN services and others is heavily outweighed by the cynicism of the rest of us. It will now only be a matter of time before the sole remaining PER-SIN service is cut placing Perth in the same category as Adelaide with no international services whatsoever – why base a single int 330 in Perth ? Hardly befitting for the resource capital of Australia and the engine room of the Australian economy.

    Qantas clearly don’t want anything to do with their international division and their strategy is to let it wither on the vine to the point where it is no longer such a drag on the rest of the organization. Qantas feel that labour laws/agreements and the Qantas sale act prevent the international division from competing successfully. They feel that the difficulty of dealing with those impediments is such that it is better to starve Qantas international of much needed capital and let it shrink and wither so that the focus (and funding) can be the expansion of Jetstar.

    It would be far too politically hot to simply shut down the international operations overnight so Qantas have chosen the next best option of letting it die a slow death.

    It is a ludicrous business model to starve such an entity as an international airline of capital, reduce its product offering, give market share to competitors on a silver plate and then expect it to compete successfully in such a voracious environment as the aviation industry.

    If you give away market share to competitors on a silver plate you are not going to get it given back to you on a silver plate – you will have to fight for it.
    I don’t buy a single word of Simon Hickey’s PR spin.

  • 22
    patrick kilby
    Posted February 7, 2013 at 7:11 pm | Permalink

    Stickshaker I find it hard to work out how 12 A380s, 16 or so 744s, and 10A330s (plus other assorted bits n pieces) plus two huge alliances (AA an EK) is starving QF international. There are not that many international airlines with that amount of kit to go beyond their respective continents and certainly not Virgin, which is very good at PR spin and dodgy numbers.

  • 23
    StickShaker
    Posted February 7, 2013 at 8:46 pm | Permalink

    @Patrick
    Qantas placed their original order for the A380 in 2001 at a time when its senior management still genuinely believed in a future for its international division (same goes for the 330’s). The gas guzzling 747’s are relics of a different age and contribute significantly to the groups’ high fuel costs – they are only there because Qantas refused to add 77W’s to their fleet and don’t exactly enhance the credibility of the fleet strategy.

    Fast forward to the present day and we find that the remaining 8 380’s on order have been deferred and the massive order of 50 787’s has been cancelled. At the same time Qantas has placed a firm order for 120 320’s with 194 options – most of which are destined for the various Jetstar franchises. The paltry remaining 14 788’s on firm order will also go to Jetstar – that says it all.

    There are no new aircraft on the horizon for international operations while there are plenty for Jetstar. There are countless other international airlines out there with far better “kit” than that possessed by Qantas and a well defined strategy to expand and update their fleets to maintain or increase their market share.

    Ben’s comments in the last paragraph of the “Qantas keeps giving” post about Qantas re-investing in long haul at a later date after sacrificing market share are particularly pertinent here.

  • 24
    patrick kilby
    Posted February 8, 2013 at 6:55 am | Permalink

    Hard to say how 8 more A380s and up to 50 789s amount to starvation on what they have. Note the cancellations was to securre $140m compensation for a measley 12 month delays which would have happend anyway (given the battery saga). That is smart accounting from my point of view not dumb traffic planning. Why would they order 773s insead of A380s (that indeed would be a dumb move) , which is what mots are suggesting. Note the 744s are not at ther dpreciation life yet, and everybody’s favorite CX will be running them. nearly as long as QF.

  • 25
    patrick kilby
    Posted February 8, 2013 at 6:55 am | Permalink

    Hard to say how 8 more A380s and up to 50 789s amount to starvation on what they have. Note the cancellations was to securre $140m compensation for a measley 12 month delays which would have happend anyway (given the battery saga). That is smart accounting from my point of view not dumb traffic planning. Why would they order 773s insead of A380s (that indeed would be a dumb move) , which is what mots are suggesting. Note the 744s are not at ther dpreciation life yet, and everybody’s favorite CX will be running them. nearly as long as QF.

  • 26
    StickShaker
    Posted February 8, 2013 at 9:00 pm | Permalink

    Patrick, we obviously have a different take on these issues.
    The compensation from Boeing plus deposit refunds for the 787 cancellations totalled $433 million. This might be smart accounting but it represents a triumph of short term planning over long term planning and common sense – cash in the bank but no capacity to expand into the much hyped Asian market. Compare this to Singapore Airlines who have just ordered another 5 380′s and 20 A350′s in addition to their original orders. Qantas are one of the few airlines left in the world that don’t have a long haul 300 seater and have no prospect of getting one until 2016.
    There is also no guarantee that QF’s outstanding orders for 380′s and 789′s will ever be delivered. Having 2 spare 330′s to execute any so called expansion into the Asian market is pathetic compared to what competitors are doing in the same space.
    The 744′s may not be fully depreciated but they belong in an era of $30/barrel for jet fuel. Neither can the 744ER adequately perform the DFW-SYD sector.

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