This Qantas gamble on Singapore looks pretty safe

A strongly positive analyst response is apparent this morning to Qantas announcing it will resume daily rotations of an A380 to London Heathrow via Singapore from next March, as well as putting the big Airbus on daily connecting flights between Melbourne and Singapore to the same timetable.

The move is seen by one financial analyst as a ‘sharp response’ to the rewed Singapore Airlines’ push to make its Changi hub even more relevant to the Australian market with upgrades to its A350 and A380 flights to this country.

The elimination of any Qantas flights through Dubai from March next year is also a huge boost to Emirates, which has previously signaled that all of its Australian services to major gateways will become A380 operated, and will continue to offer the benefits of Qantas points. Emirates is about the release details of massive upgrades to the cabins on its Airbus flagship.

It also undercuts the argument that Qantas is too Sydney centric, in that the Melbourne A380 upgrade follows the forthcoming rendering of Brisbane as an equal 787-9 capacity base to Melbourne as the airline brings its first tranche of the Dreamliners into service

Qantas group CEO Alan Joyce sees the benefit of the changes to the company as $80 million a year, over the top it seems of retaining the importance and flexibility of the current soon to expire commercial relationship with Emirates.

Most of the official Qantas statement, minus those likely to cause sugar diabetes, is reproduced below.

  • Five year extension to landmark alliance deal
  • Evolution of joint network to offer customers more choice
  • Three options to get to UK/Europe – via Dubai, Perth and Singapore
  • Capacity shifted to fast-growing Asia market
  • Changes to deliver upside to both airlines; Qantas annualised net benefit estimated at more than $80 million from FY19

Qantas and Emirates will apply to extend their cornerstone partnership for another five years[1], making changes to reflect customer demand, new aircraft technology and each airline’s respective network strengths.

These changes will deliver additional benefits to the eight million passengers who have travelled more than 65 billion kilometres on the combined network since 2013, increasing customer choice as well as frequent flyer earn and redeem opportunities.

The adjustments announced today will also deliver financial upside to both airlines, with Qantas annualised net benefit estimated at more than $80 million from FY19 onwards.

Meeting in Sydney to finalise the extension, both airlines agreed the first five years of the partnership had lived up to the promise of serving their customers better, together. Changes to the joint network are designed to reinforce this for the next five years.

KEY CHANGES

The key change will see the airlines better leveraging each other’s networks, by providing three options to Europe – via Dubai, Perth and Singapore[2].

Qantas will re-route its daily Sydney-London A380 service via Singapore rather than Dubai and upgrade its existing daily Melbourne-Singapore flight from an A330 to an A380.  As previously announced, Qantas’ existing Melbourne-Dubai-London service will be replaced with its Dreamliner service flying Melbourne-Perth-London.

A detailed summary of the changes, including effective dates, is provided at the end of this release.

Customer demand for flights between Australia and Dubai will remain well served by the 77 weekly services that Emirates operates from five cities – Adelaide, Brisbane, Melbourne, Perth and Sydney – including seven daily A380 flights. Qantas passengers will still be able to fly on Emirates to Dubai, where they have access to over 60 onward connections on Emirates to Europe, the Middle East and Africa.

CEO COMMENTARY

Qantas Group CEO Alan Joyce said the changes represent an evolution of the partnership to deliver additional benefits for customers, including the millions of frequent flyer members of both airlines.

“The first five years of the Qantas-Emirates alliance has been a great success. Emirates has given Qantas customers an unbeatable network into Europe that is still growing. We want to keep leveraging this strength and offer additional travel options on Qantas, particularly through Asia.

“Our partnership has evolved to a point where Qantas no longer needs to fly its own aircraft through Dubai, and that means we can redirect some of our A380 flying into Singapore and meet the strong demand we’re seeing in Asia.

“Improvements in aircraft technology mean the Qantas network will eventually feature a handful of direct routes between Australia and Europe, but this will never overtake the sheer number of destinations served by Emirates and that’s why Dubai will remain an important hub for our customers.”

Sir Tim Clark, President Emirates Airline, said: “The Emirates-Qantas partnership has been, and continues to be, a success story. Together we deliver choice and value to consumers, mutual benefit to both businesses, and expanded tourism and trade opportunities for the markets served by both airlines. We remain committed to the partnership.

“Emirates has worked with Qantas on these network changes. We see an opportunity to offer customers an even stronger product proposition for travel to Dubai, and onward connectivity to our extensive network in Europe, Middle East and Africa. We will announce updates in the coming weeks.”

KEY CHANGES IN EFFECT FROM MARCH 2018:

  • The choice of three hub options between Australia and UK/Europe – Dubai, Perth and Singapore.
  • From 25 March 2018, QF 1/2 A380 service will operate Sydney – London via Singapore, replacing one of the existing Sydney – Singapore A330 services. The second Sydney – Singapore daily service will continue to be operated by an A330 aircraft.
  • From 25 March 2018, one daily Qantas Melbourne – Singapore service will be upgraded from an A330 to an A380 (QF35/36), with the second three per week service increased to a daily A330 service (QF37/38).
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