How about double daily Etihad A380s for Sydney and Melbourne?

Commentary With airline activity continuing to surge in China and the Middle East it might be time to replace the tyranny of distance arguments about Qantas ‘protection’ with a discussion about the tyranny of growth.

And with Qantas possibly outlining firm plans to begin expanding its fleet at its first half year financial results briefings this Thursday, the major Australian flag carrier may have better news for those concerned that it is being swamped by foreign airline activity.

The key to that good news could be a decision to exercise some of the bargain priced options it has held since late 2005, when it first ordered or optioned up to 115 Boeing 787 Dreamliners.

(That deal has been much modified since then, but it remains substantial, and the only deliveries from it have been eight 787-8s for its low fare brand Jetstar.)

The point is that in a world that has been delivering around six percent growth annually in international traffic through the major Australian gateway airports for years, the until recent Qantas policy of standing still against the tsunami to reorganise the businesses translates into plummeting market share.

The problem, if it is a problem, is compounded by the clearest of signals that most of the growth in coming decades will comes from China, the rest of eastern and northern Asia, the Middle East, central Asia, eastern Europe, and Africa, the Africa that contains massive largely unrealised mineral and energy resources.

As a ‘mature’ market, Australian demand for overseas flights will grow, but at nowhere near the rate of increase from rapidly emerging markets that want to fly here, and buy more of what we grow or mine.

At the moment one of the key disadvantages for a “little” or “cautious” Qantas, no matter the quality of those arguments, is that Qantas is seen in trade and tourism quarters as attempting to stand in the way of this growth, saying “Not until I’m ready”.

But if fuel costs have really come down in a lasting manner, and if Qantas has finally shrunk itself into a fighting fit midget, maybe the pivotal moment is nigh, rather than ‘nay’.

There are difficulties. The original excitement about the 787 Dreamliner was ‘route fragmentation’ as well as the replacement of the 767 and younger A330 fleet, and the accelerated departure of aging 747s on those routes where frequency could be increased freely, rather than run into problems arising from major airport congestion, such as in Sydney, or London Heathrow, or Los Angeles or Hong Kong.

However Qantas since 2005 has radically shrunk its reach so that its major lift is to the US, followed by token daily returns to London from Sydney and Melbourne via Dubai, with much of the flying to and from the European sphere from cities other than Sydney and Melbourne being given away to Emirates.

If Qantas were to adhere to that focus, it needs more A380s, not 787-9s, because slots at the major middle east, European, and American and Japan and China airports are at prevailing growth rates, totally wasted on smaller jets.

However, if, as Qantas group CEO Alan Joyce has on rare occasions hinted, it wanted to re-open some abandoned routes (like Manchester or Amsterdam) or take on new routes, the 787-9 might be the starting point, although the pace of growth is such that maybe the much larger Airbus A350s 0r Boeing 777-X series would be more effective in the long run. The Dreamliners looked like giant killers ten years ago. Now they look like toys.

This Thursday’s first half FY15 results will be good for Qantas. (Or else.) The guidance has been very good. But whether the fleet news is good is open to conjecture, with most analysts cautiously anticipating some movement to exercise some of the Dreamliner options, which will, thanks to the Dixon era, produce what may be the cheapest 787s for any airline taking delivery of this type.

By coincidence the three leading Middle East carriers, Emirates (way out in front) followed by Etihad and Qatar Airways, have been submitting growth scenarios to Canberra that are opposed by Qantas. Last week the Trade and Investment minister Andrew Robb, was even turned into chief spruiker for more capacity for Qatar Airways by one report, and this morning it is Etihad’s turn to seek more capacity on Australia routes.

This polarising debate, about ‘throwing open’ Australia to foreign carriers that are too cheap, too successful, too well run, too supported by their investors, and too ‘not like us’ needs to be much more sophisticated than it is.

It’s also a debate that rages in America and Europe, and not just against Middle East carriers, but low cost giants like Ryanair and the astonishing rise of Norwegian, which has the legacy carriers of Europe and America in a frenzy of hate because it is perceived as being potentially far more effective than say Emirates or Etihad.

Norway, as one of the most costly, and it might be argued, entitled states when it comes to high costs of doing business, now has a flag carrier that is massively outsourcing its employment base to Ireland, a low cost Euro zone economy in terms of labour, as well as Thailand, just for starters.

It has always been tempting to think of Norwegian as achieving what Jetstar had hoped to do with an arc of offshore Asia bases for its operations, except that it hasn’t as yet come anywhere near achieving such an outcome, and seems bogged down in high cost locations like Japan and Hong Kong, while pausing its activities in Singapore.

But back to the Australian situation. The value of free or ‘freer’ trade to Australia is said to vastly outweigh the value of Qantas to the national economy, the more so if the former was cut back as a consequence of waiting for Qantas to get comfortable with the twenty first century.

Special pleading from Qantas is unlikely to gain much traction. As the aviation growth switches to offshore sources like China, so the relevance of national Australian brands to those newly enriched and motivated travellers falls toward zero.

Fairness in outcomes in traffic access to Australia is vital. But so is the need for Qantas, or Virgin Australia, to continue to build fair and profitable partnerships that will keep their brands alive in massive new markets like China so that they can swim with the flow, rather than get smashed trying to resist it.

This Thursday might see Qantas tell us more about how it might grow with the flow.

(Visited 80 times, 1 visits today)