Menu lock

alliances

Aug 31, 2017

5 comments

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).

airports

Mar 6, 2017

5 comments

An Emirates A380 no doubt full of Qantas customers, at Sydney Airport

Opinion Calling the world’s greatest Federal Treasurer, Peter Costello. Hello Mr Costello. Your greatest ever deal has just run over the toes of Sydney airport users again. What do you have to say Mr Costello?

It’s that time of year of course when the ACCC annual report into the performance of Australia’s four largest privately owned airports reminds us of the absolute genius of politicians selling a publicly owned asset into the hands of private monopoly owners so that they can screw everyone who uses them because there is no competitive alternative.

The only thorough report into the ACCC’s findings in the media as of this hour is in the Sydney Morning Herald and it concentrates on car parking, since everyone who uses the privately owned rail stations under its terminals pays a gate fee equal to many of the one way bargains offered to Australian cities by Jetstar or Tiger.

You can read the original ACCC report here, but Granny has done the hard work for the time poor in its coverage. This is not just about Sydney, Melbourne and Brisbane airports, but the mindset shared by the Coalition and Labor parties when it comes to short term privatisation profits versus the economic future of Australia.

In a tragic sort of way, its the same mindset that totally gutted the national benefit from the development of liquified natural gas and mishandled the privatisation of the the Telecom monopoly and contributed to crippling access to cheaper, and faster, broadband as well as telephony.

We don’t do competition very well. And some of our highest profile supposedly red blooded proponents of business competition, like Dick Smith, want the country to shut itself off in dark room anyhow and revert to the economic primitivism of the Menzies and Fadden era, which was briefly of use to the national interest in the early to mid-1950s.

Today’s news is also a reminder that the owners of Sydney Airport want ‘us’, including the victims of their charging regimes, to subsidise through public funds their exercising a first right of refusal to own and operate a 99 year lease on the only other jet airport greater Sydney is likely to ever get, at the Badgerys Creek site.

This would be an intolerably stupid business plan in most of the free world. But not in ‘oi oi oi’ land. There is a good chance they will get every dollar they want, and we can enjoy being robbed blind at whatever Sydney airport we use in future.

loyalty programs

Nov 18, 2015

5 comments

airports

Jun 23, 2014

5 comments

Sydney Airport, just the eastern part of a two airport monopoly? Commons photo

The damage that could be done to the NSW economy by allowing the new 2nd airport to be built at Badgerys Creek to be owned by the interests that own the existing Sydney Airport have been emphasised by the Australian Competition and Consumer Commission chairman Rod Sims at a conference today Monday. Continue reading “Sydney’s 2nd airport ownership raises competition concerns”

competition issues

Jun 20, 2014

5 comments

routes

Mar 5, 2014

5 comments

competition issues

Oct 5, 2013

5 comments

When Qantas conspired with a range of other airlines to rob its freight customers through illegal cartel like behaviour involving price fixing between 2000 and 2007 it clearly didn’t expect to be faced with the risk of damages and compensation payments in 2013 and perhaps beyond.

But that’s part of the painful lesson in crime and punishment being delivered to the Australian carrier, and others, as a class action looms in the Federal Court from 27 October, in a trial that has been set down for 26 weeks.  Continue reading “Qantas faces further freight fixing penalty payments”

aviation

Jul 10, 2013

5 comments

airports

Apr 30, 2013

5 comments

The competition authority the ACCC says the five biggest airports in Australia are failing their customers to an unprecedented degree and has called for increased infrastructure investment to overcome congestion and dissatisfaction with their performance.

ABC News 24 has already blitzed the airports with live vox pops with travellers this morning, with apologists outnumbered about three to one by furious passengers if the current on going coverage is a guide to sentiment. Continue reading “ACCC damns major airports, urges more investment”

aviation

Apr 17, 2013

5 comments

competition issues

Apr 16, 2013

5 comments

Australia’s competition authority the ACCC has restarted the countdown on the Virgin Australia-Tiger Australia deal, setting 24 April as decision day.

It is also dealing with calls by Emirates and Qantas for what could be summarised as fairness and consistency in relation to approvals for multi airline marketing deals on the Australia-New Zealand market. Continue reading “ACCC resets the clock on Virgin-Tiger deal”

aviation

Apr 4, 2013

5 comments

aviation

Apr 3, 2013

5 comments

Although the dogs have barked and the Qantas-Emirates caravan has moved on, as it would have inevitably in one form or another, questions remain as to what persuaded the ACCC to reject claims Qantas advanced as to its international operations being a ‘failing business’  and related claims about cost disadvantages forcing it off various routes.

Part of the reasons may be found in the submission by the ALAEA the Qantas licensed aircraft engineers association.

It argued, no doubt to the astonishment of some of its members who might have read the submission, that Qantas is in fact a world beating carrier, or up with the best, in terms of key efficiency metrics.

For example, by passengers per aircraft per year, Qantas financial filings show it carried over 200,000 passengers per hull in 2011 exceeded only by Emirates, which has an all wide body fleet including the world’s largest fleets of A380s and 777s.  For Qantas, with dozens of turbo-props, and single aisle jets, that was quite a performance.

The figures are also reformatted to show that Qantas carried more passengers per employee than the benchmarked carriers that are active on the long haul routes between Europe and the Asia Pacific.

And that it had less employees per jet than its peers apart from Cathay Pacific.

The submission argued that unless labor productivity was considered by these criteria a simplistic per employee cost did not reveal the full picture.

However none of the above explains why the declining Qantas share of international traffic nor its claimed financial under performance has come about if as the figures seek to demonstrate, the airline is by global standards highly efficient.

Those factors would presumably include the liberalised state of access to the Australian market, and the fact that in any contested market, unless fares are regulated not even efficient carriers will command pricing power.

But that also opens a number of circular lines of debate. It could be argued that Qantas is forced to be as efficient as it is because it hasn’t the pricing power it enjoyed in the smaller much more regulated, and much less consumer friendly markets of the past.

And in terms of liberalised access, what Australia gains through its free trade friendliness produces economic benefits to the national economy that are far more valuable than policy settings that would lock everything down to suit Qantas, or another Australian flag carrier.

It is the argument that says a protected Qantas is a poorer Australia. In fact when Qantas was ‘protected’ and skies were largely closed rather than open, Qantas was hopelessly unviable and propped up by taxpayer fundings justified as being in ‘the national interest’, which was the same argument used by all the major economies to justify their state protected and often state owned carriers.

The ALAEA submission was quite late in reaching the ACCC and does not therefore on its own explain why it made the findings it did. Yet it must have played a role.

If the Qantas licensed engineers association hadn’t unwisely sent its  ACCC submission exclusively to The Australian, a union hostile publication where it was put behind a paywall and given cursory treatment anyhow, some of the points it sought to make might have seen daylight before the competition commission made its ruling.

aviation

Mar 27, 2013

5 comments

aviation

Mar 27, 2013

5 comments

Dubai's newly opened exclusive A380 concourse

It seems fair to suggest that the ACCC conditional authorisation of the Qantas-Emirates deal contains some observations that could cause Qantas grief in the future.

The decision rejects the arguments Qantas made that the long haul business was in ‘terminal decline’ or ‘failing’ or that the Emirates alliance was essential for its survival.

“The ACCC has assessed the public benefits and detriments of the alliance on the basis that the scope of Qantas’ international operations in the likely future without the alliance is not materially different to the likely future with the alliance. In particular, the ACCC does not accept or rely on the claim that Qantas International is in “terminal decline” and unable to compete effectively or operate profitably absent the alliance,” Mr Sims said.

It also reaffirms the ACCC’s initial view that while it offers some net benefits to consumers they aren’t exceptional.

“In particular, the alliance is likely to provide Qantas and Emirates customers with increased access to a large number of existing frequencies and destinations under a single airline code, improved connectivity and scheduling, and access to each alliance partner’s frequent flyer programs. The alliance is also likely to provide the airlines with increased flexibility to manage their fleet.”

“Taking all of this together, the ACCC is satisfied that the alliance is likely to result in material, but not substantial, public benefits.” Emphasis added.

But this is a deal which means that from Sunday Australians who used to choose Qantas to fly to London from Brisbane, Adelaide and Perth by changing between Qantas flights at Singapore’s Changi Airport are now being ‘expected’ to fly Emirates all the way.

This is a huge giveaway by Qantas, and may be seen as a slap in the face for loyal customers not readily served by the remaining Qantas flights to London via Dubai from Sydney or Melbourne, which will both have a daily QF A380 each way.

As the ACCC has noted on several occasions since the deal was proposed, there are amply competitive alternatives to Qantas and Emirates on the routes to London and Europe, and, to summarise, it is a competition authority, not a Qantas preservation agency.

Those familiar with ACCC determinations down the years, and well before the appointment of the current chairman Rod Sims, will know that it was not set up to prevent companies doing silly things, but to ensure that whatever they do there is no material injury to competitive benefit to the Australian economy.

Which raises the expectations of Qantas from the Emirates partnership, in that they obviously expect that existing Qantas customers will dutifully accept flying in Emirates jets. As in Qantas, We are the reason you fly Emirates. 

The fact is that Emirates has already won very strong customer loyalty in Australia, and in its A380s, has product that makes the Qantas A380 alternative look unexceptional.  The Emirates 777s are another matter, being great aircraft rather tightly configured, although Emirates may revise those configurations and has already let slip that it will improve its 777 business class offering.

The risk is that those Qantas customers that haven’t already defected to Emirates are probably not going to revisit their choices once Qantas dumps them if they fly to Europe from Brisbane, Perth or Adelaide, but will take their business somewhere else, such as  to Singapore Airlines, Etihad or Cathay Pacific.

Those Qantas customers that are exposed to an Emirates A380 may well choose Emirates over Qantas in the future, given that both frequent flyer programs are very good, and have good crossovers.  Those Qantas customers who change flights to an Emirates service to say, Manchester or Hamburg, in Dubai, would have an incentive to choose to fly all the way on Emirates the next time, since it will be more convenient to do so in most circumstances.

These risks or considerations are reason to query just where the Qantas-Emirates partnership will take Qantas, but as the ACCC determination makes clear, these were not matters it had to consider under its charter.

It is there to make sure Australians enjoy competitive choice. It isn’t there to stop Qantas imploding on routes to the UK and Europe.

aviation

Mar 27, 2013

5 comments

As widely anticipated, the Qantas-Emirates business partnership has been granted conditional authorisation, with both carriers required to maintain rather than reduce their services and capacity  between Australia and New Zealand, at least for the time being.

The detailed statement can be read here.

The ACCCs decision on those routes is unlikely to be internally welcomed by the main competitors Air New Zealand and Virgin Australia, since they have taken the view for some time that there is excess capacity across the Tasman.

The determination by the competition regulator says:

“The ACCC considers that the alliance is likely to result in public benefits through enhanced products and service offerings by the airlines, and improved operating efficiency,” ACCC Chairman Rod Sims said.

“In particular, the alliance is likely to provide Qantas and Emirates customers with increased access to a large number of existing frequencies and destinations under a single airline code, improved connectivity and scheduling, and access to each alliance partner’s frequent flyer programs. The alliance is also likely to provide the airlines with increased flexibility to manage their fleet.”

“Taking all of this together, the ACCC is satisfied that the alliance is likely to result in material, but not substantial, public benefits.”

“The ACCC considers that the alliance is likely to result in detriments through its effect on competition in regions where Qantas and Emirates currently offer competing air passenger and cargo transport services. However, in most of these regions, the ACCC has identified competitive constraints which mean that these detriments are likely to be minimal,” Mr Sims said.

“The one exception is the trans-Tasman where Qantas and Emirates compete on four routes which accounted for around 65% of total passenger capacity between Australia and New Zealand in the year to 30 June 2012. On these routes, the ACCC is concerned that Qantas and Emirates will have the ability and incentive to reduce or limit growth in capacity in order to raise airfares.”

In order to address this concern, the ACCC has imposed a condition of authorisation which requires the airlines to maintain at least their pre-alliance aggregate capacity on the four overlapping trans-Tasman routes, subject to a review to consider whether increases in the minimum required capacity are warranted.

However the ACCC rejected the official Qantas line that its international operations were in terminal decline.

“The ACCC has assessed the public benefits and detriments of the alliance on the basis that the scope of Qantas’ international operations in the likely future without the alliance is not materially different to the likely future with the alliance. In particular, the ACCC does not accept or rely on the claim that Qantas International is in “terminal decline” and unable to compete effectively or operate profitably absent the alliance,” Mr Sims said.

That is a finding that could cause the current Qantas management some grief if it were to continue with plans to downsize its international operations, and might leave those passengers who Qantas now expects to use Emirates flights to get to London wondering why the ACCC has allowed the carrier to drop those service from Perth, Adelaide and Brisbane that previously involved connections between Qantas flights in Singapore.

 

aviation

Mar 26, 2013

5 comments

aviation

Mar 22, 2013

5 comments