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Aug 19, 2012

Following AirAsia X announcing more A330s in the near term, the CAPA Centre for Aviation has published a detailed analysis of where the Malaysia founded wide-body low fare associate of Air Asia is headed, and it makes interesting reading in the run up to this Thursday’s announcement of the full year Qantas financials to 30 June.

The most important question arising is whether Qantas can afford to keep to a ‘capital light’ approach to further expansionary investment.

Keep in mind that immediately prior to announcing the termination of  negotiations with Malaysia Airlines and the Air Asia group about a premium single aisle carrier that would be based in Kuala Lumpur, Qantas reconfirmed that such a venture would have to be capital light.

This adds a dimension that isn’t really explored in the detailed and highly informative Centre for Aviation analysis, which is looking at a hemisphere wide panorama rather than a narrow Australian perspective. But if we take an Australia centric view, Qantas has now sent signals that it isn’t (or wasn’t) contemplating large capital heavy investments in anything until Qantas long haul is ‘fixed’, earns its costs of capital, and becomes a strong profit centre.

This ought to be a reminder to onlookers, and investors and staff, that while Qantas stands still or even shrinks in relation to aggregated international services, its competitors are continuing to exploit an unprecedented expansion taking place in the air travel markets relevant to Australia.

That doesn’t mean Qantas is wrong to be cautious and capital light. But if it is right in its caution, while its competitors are being less than cautious, they are nevertheless growing at its expense, and are taking away existing markets and expanding into new markets that the Australian flag carrier, and its trans border Jetstar franchise, may lose and never be able to recover.

A question I think readers of the Centre for Aviation report need to keep in mind is,”Can Qantas afford to wait three to five years for the Joyce plan to work for a resumption in Qantas international expansion to take place?”

I think the answer is ‘No.’ Let’s hope I’m wrong.

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3 comments

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3 thoughts on “AirAsia X aims to hit all the spots in major expansion

  1. patrick kilby

    I think Jetstar’s 787-8s will trump AirAsia-X’s A330s in the short to medium term as they will arrive to each at much the same time and the 787 (15 or so over a couple of years AisAsia-X a little faster – Jetstar plans 3 in 2013 year and 7 or so in 2014) has a little less than 20% cost advantage over the a330); but the real question is the delay in the 787-9 for mainline and whether 2015-016 is getting a bit late and of course the industrial relations issues of the new type (and therefore how many to whom) has not been touched yet.

  2. Ben Sandilands

    I wonder when it comes to comparing the two types. The AirAsia X A333 is configured for 377 seats, of which 365 are in the exquisitely uncomfortable 9 across format that ought to be banned under a humanitarian convention. (Or 8 across at the rear where everyone else has them 7 across.)

    The JQ 788 is a 313 seat configuration, with economy also 9 across but as a consequence of a wider cabin only (only!) as uncomfortable as domestic 737, with Ryanair seat pitch of 29 inches not counting or diluting the figure for the overwing exit rows which a favourite calculation used by many airlines to mislead consumers.

    Everything I’ve read in technical places so far has a 377 seat A330-300 flying a medium haul sector using less fuel per seat than a 313 seat 787-8, especially so in the new increased MTOW A333 due in service in 2014. Its this per seat per typical distance for the particular airline calculation that both Airbus and Boeing try to fudge, so exactly what the operational experience will be remains to be seen.

    ANA has reported a 21% lower fuel burn on the Narita-Frankfurt route using a comparatively civilised 158 seat layout including 8 across economy seating in its early example 787-8s, compared to the 216 seat 767-300ER it previously used on route, so we are seeing a Dreamliner with 78% of the capacity of a 763 burn 21% less fuel, which I think justifies airlines opting for the more capable higher capacity 787-9 which is yet to fly, who knows when, for delivery who knows when.

    However, we can anticipate much improved efficiencies in later build 787-8s, and this has become a religious article of faith for the 787-9.

    My hard bitten guess is that by the time JQ finishes getting 787-8s which don’t quite meet the efficiency levels of the latest A330-300s (240 tonne MTOW) AirAsia X will still be a year short of getting its first A350-900s, which will be a miserable 400 seat plus torture machine in the AirAsia X format because Fernandes told me he was putting those seats in 10 across, so that the misery would be equivalent to 9 across in the narrower A330-300.

    Everything read in technical places, as distinct from maker brochure stuff, points to the A350-900 being more economical at comparable loads and ranges to the 787-8 per seat with vigorous debate as to whether they will be competitive against the 787-9.

    Since we aren’t going to see either the 787-9 or A350-900 generate real figures for at least two years, and it looks like JQ isn’t getting the former anyhow, I think JQ is going to have an efficiency problem, but as far as my aged frame is concerned, I’d prefer the Dreamliner any day over a 9 across A330 or a 10 across A350.

  3. Krungthep Kris

    Going back to the original topic of whether Qantas can wait or not for internationa expansion? The clear answer is NOT. As some wiseman said – if you have your hand in a bucket of water and you take it out – can you see where you took your hand from – well no! so that is your relevance in the market. Others will move to fill the void!

    Joyce of “Aer Lingus” and his other diminutive buddy at BA from the same airline who obviously have been bitten by the Ryanair “dog” seem to be hell bent on making a self fulfilling prophecy come true – i.e. that low cost carriers with Zero service will rule the normal world. I and hundreds of thousands of other passengers don’t want that.

    Frankly once I put everything that my family and I need and want into a Low Cost ticket we are at the same price as a reasonable excursion economy fare – BUT there is no service available. In Mid-July it was impossible to get a ticket on QF, BA, TG, SQ, CX out of Bangkok to Sydney for up to 8 days – so what should we do? NO SERVICE AVAILABLE!

    Living in BKK, I think Qantas and BA and even Thai have totally forgotten the “normal” economy passenger as opposed to the low cost tourist. As regular travellers we just want to be able to get on a plane with reasonable notice and at a reasonable price, get some respect and service from the Airline AND THEIR STAFF for the loyalty we’ve shown the legacy carriers over the years. Instead all have cancelled frequencies to Syd, BNE and MEL. QF and BA have one 330 between them rather than 2 x 747’s (which for our convenience ran with 30 minutes of each other every day for 9 years WTH!)

    Joyce’s obsession with the “low cost” solution, means that he’s getting Qantas to give up without a fight on a battle ground they didn’t design and are not familiar with and WILL lose. They should stand-up and fight and demonstrate the “service” that they are providing and fight for the right to provide it – People WILL BUY! – they just don’t sell it, maybe they have forgotten.

    The problem is that the levels of “holistic” service the incumbent guys provide has declined and declined as their arrogance of incumbency increased, now they have done away with their “value added” and most consumers think there’s no value added with them and hence might as well pay the lowest they can.

    Borghetti on the other hand is taking their market share with what he learnt at Qantas – refreshing service attitude and reward for loyalty in the “full service” manner at a reasonable price.

    In my case, no flight from BKK-SYD for 10 days, so I tried a well priced on-line Business Class ticket from Vietnam Airlines and surprise surprise, had a nice couple of days in SGN and a VERY comfortable ride to Sydney at a price not much more than Thai, QF or BA economy (not even Emirates is cheap on this route and who would take 10 abreast in a 777).

    Get rid of the “low-cost” minded managers and put the man who should have had the job back in there – the “service” oriented man (but then why would he leave Virgin, he’s having fun making mincemeat of QF his employer of 25 years, with all the lessons he learnt there and he is not fighting with the psychological wounds of being taken apart by Ryanair).