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Nov 28, 2011

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Updated after Qantas says Asia based premium carrier still alive

Are claims by Qantas CEO Alan Joyce that it has not dropped its Red Q Asia based carrier credible?

It appears to be like the parrot in the Monty Python sketch, not dead, just not talking.

This might be a timely moment in which to reflect on what the planned Asia based, minority owned super de luxe narrow body premium airline was supposed to do, and before the end of this financial year.

For a start, CEO Alan Joyce said it would save Qantas international from going broke, by being so profitable that it would allow Qantas to resume investing in and expanding the long haul services it has already started to cut back, including halving through services to London from early next year.

Those claims were full of absurdities that were repeated parrot fashion by a range of analysts who now have about as much credibility as a Qantas ‘death threat’ and an abandoned but costly NSW police inquiry into what smells like a grubby media stunt.

Let’s start with the notion that Qantas would be allowed to become the minority equity yet controlling party in a airline given flag carrier privileges and obligations in Malaysia or Singapore.

Then continue on to the notion that it would win market share from such incumbents as Singapore Airlines or Malaysia Airlines, the latter now said to be close to announcing a new partnership with Qantas that has been mentioned by Joyce since May 2010, just as Virgin Australia did a deal in principle with Singapore Airlines.

Travelling up the incredulity scale, we then get to a place where a Malaysia or Singapore board say ‘there you go Alan, here’s enough money from our profits to save Qantas.’

Joyce said on multiple occasions that the airline, which had variously been ascribed such names as Red Q or One Asia, or Red One, and so forth, making it sound like a spy thriller, a sushi franchise or a dating agency, would use Airbus A320s with bigger sleeper seats than those in Qantas A380s.

It was also variously going to open new routes to Europe (which an A320 can’t reach non-stop from just about anywhere east of  Jordan) new routes to Australia (where it can’t fly to the eastern capitals non stop from Singapore or Kuala Lumpur), or new routes within Asia.

This was like a quiz show, only the last mentioned option being technically true, while choosing either of the other answers  meant you got thrown out of the studio.

While there are routes in Asia where sleeper seats are sold by the established carriers on shorter routes, such as Cathay Pacific subsidiary Dragonair in its intra-China A330s, or by Singapore Airlines, Korean Airlines and Thai International, predominantly on services that are landing somewhere else in Asia before flying across the  Pacific to North America,  it should be obvious installing such seats in an A320 was going to be ludicrous.

The bottom line is that Joyce chose to pin the very survival of Qantas long haul on an Asian venture that now isn’t dead, just resting.

So, what does he do now?

The rumor most emphasized as of today is that there will be an enhanced relationship with Malaysia Airlines, which has a premium product and service standards throughout its cabins, whether costly or cheap, that command considerable loyalty and respect in Asia. It  has however been in a lot of trouble holding its own against other Asia competitors, including when it comes to making money for its shareholders.

Qantas doesn’t currently fly to Kuala Lumpur, and without prejudice to a beautiful land, hospitable people, and a modern economy with a lot of potential and vision, it doesn’t come remotely close to Singapore or Hong Kong as a power house centre for economic activity generating a strong demand for higher yielding air fares.

If Joyce sees a Malaysia solution to the needs that were going to be met by ‘Dead‘ Q the board, the investors and business travellers in general need to ask for a very detailed business case which can be used to measure its effectiveness.

Similarly, if as he said several times this year, there would be no more capital investment in Qantas long haul until its starts to pay for itself, what is Joyce going to do to comprehensively fix the problems, other than maybe flog it to a syndicate headed by, let’s guess here, Geoff Dixon or other shrewd main chancers?

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