Focus On Asia

Contentious is the decision to abandon the three times weekly Adelaide-Singapore service and the four times weekly Perth- Hong Kong flights.

The stark reality is, however, that in today’s airline world offering anything less than a daily service is not viable unless you have support from the business community, something you only get with daily services.

Qantas’s four times weekly Perth- Hong Kong operation was never a match for Cathay Pacific’s 10 times weekly service and competition law regrettably does not allow the two airlines to co-operate and offer double-daily services. Cathay will almost certainly move to double-daily flights from Perth and Qantas may then codeshare on all those flights.

Likewise the three times weekly Adelaide-Singapore services, exiting from Adelaide direct international flights altogether, is even less viable given Singapore Airlines’ daily flights.

And while independent Senator Nick Xenophon has claimed the cancellation of the Adelaide-Singapore service is not in the South Australian public interest, Qantas is not a government airline at the whim of politicians.

Qantas has couched the revamp as “a series of improvements to its international network, as part of a phased approach aimed at delivering the best offering of any airline flying between Australia and Asia. ” The improvements, the first of which take effect from March 31 2013, will be rolled out in four phases and go towards the Qantas Group strategy of ‘growing with Asia’.

The planned phases are: Stronger links to the key hubs of Singapore and Hong Kong with better frequency and timings as well as increased dedicated capacity.

Some argue that flying to these destinations much earlier would have sped the turnaround.

>>Enhanced customer experience with improvements to cabin, inflight entertainment, and lounges.

>>Expanded network within Asia through local partners such as Japan Airlines, China Eastern, Jet Airways, Cathay Pacific and Malaysia Airlines.

>>Investigating an increase in destinations to Asia using the Qantas Group’s 787-9 options from 2016, coinciding with the turnaround of Qantas International. These destinations under consideration include Beijing, Seoul, Mumbai, Delhi and Tokyo- Haneda.

Of course there are those who would argue strongly that flying to these destinations much earlier would have sped the turnaround.

But the stark financial reality is that when the airline’s stock price was struggling to get above one dollar, 787 firm orders had to go. And even at $1. 50, 787s are off the agenda until some solid financial gains can be proven with dividends resumed.

The here and now has to rely on the appeal of new lounges, revamped inflight product and codeshares.

Qantas opens a new lounge complex this month and a new Hong Kong First lounge is scheduled for September. A total of $9 million has been invested in the upgrades according to Qantas.

The airline says it’s examining a refresh of its international A330 fleet to include a lie-flat bed in business class.

CEO of Qantas International Simon Hickey said Asia remained a key pillar of the goal to be the best for global travellers.

“Through a combination of Qantas, Jetstar and our partners we aim to provide the best travel options between Australia and Asia, all linked to one of the world’s leading frequent flyer programs,” said Hickey.

“Our first step has been to restructure existing services to Asia now that they are no longer tied to onward links to Europe. The number of dedicated seats on Qantas services to Hong Kong and Singapore is increasing significantly, because capacity previously set aside for customers going to Europe via these hubs can be freed up.

“The joint Qantas-Emirates network into Asia gives our customers a fresh set of options, including double-daily services to Singapore from Melbourne, Sydney and Brisbane. The maturing Jetstar network gives travellers another set of alternatives once they land in Asia,” Hickey added.

Key changes in the first phase of the Asia network, for travel after March 31, are:

• Better access to the key Asian hubs of Hong Kong and Singapore, with a dedicated capacity increase of around 10 per cent and 40 per cent respectively on the Qantas network plus extended capacity on the Qantas-Emirates network.
• Earlier arrival times into Hong Kong, Bangkok and Singapore, with flights brought forward by up to three hours to increase the number of onward connections.
• A new destination – Kuala Lumpur – available to Qantas customers via the combined Qantas-Emirates network.

While Qantas is reducing its Perth-Singapore services to once a day it will increase its Brisbane-Hong Kong service from four per week to seven and add four additional Sydney- Singapore services a week (increasing to daily from June).

Stephen Bartholomeusz writing for Business Spectator said the changes were “one of the undervalued benefits of the Qantas alliance with Emirates. ” “Until the alliance with Emirates (still awaiting final approval from the Australian Competition and Consumer Commission) was struck, Asia was regarded as simply a transit region for flights to Europe and the Qantas schedules reflected that, with flights tailored to the convenience of travellers going to Europe producing inconvenient schedules for business travellers into Asia. ” Bartholomeusz said: “The added capacity and the consideration Qantas is giving to adding new destinations to its Asian coverage provides a glimpse of a more rational strategy for Qantas within an overcrowded international industry, as far more of a regional carrier than it is today. ” “That would move it beyond its existing, vulnerable position as an end-of-the-line carrier trying to compete with newer, bigger, lower-cost carriers operating from natural hubs between the Australian market and Europe,” added Bartholomeusz.

“The reorientation of the Qantas network away from Europe and towards Asia gives it some prospect of an international future that leverages off its core assets and competitive advantage within the region, the strength of its domestic franchise, its brand and its frequent flyer program.

The alternative, with or without the Emirates alliance, would almost inevitably be a virtual Qantas

The reorientation of the Qantas network . . . gives it some prospect of an international future. BARTHOLOMEUSZ

International on all but the trans-Pacific routes and, perhaps, a slimmed down presence on the Kangaroo route. ” While Qantas has strong onward connection possibilities in Hong Kong via oneworld partners Cathay and Dragonair plus Jetstar Hong Kong, its Singapore hub looks weak for those demanding premium service.

In a speech to the Tourism and Transport Forum Qantas CEO Alan Joyce focused on the success of Jetstar in Asia.

“This year Jetstar comes of age. Two numbers tell the story. Jetstar has now passed the milestone of 100 million passengers and it will shortly celebrate flying 100 aircraft,” said Joyce.

“These are quite amazing outcomes given the business started less than ten years ago. ” Joyce told his audience that “Jetstar is a pan-Asian airline group operating more than 3,000 flights per week, providing employment to over 7,000 people, with a network of close to 60 destinations across 16 countries. ” “Our priority for Jetstar in 2013 will be strengthening the airline in all its existing markets, continuing the momentum of Jetstar Japan and getting ready to launch Jetstar Hong Kong. ” Joyce said: “Domestic operations in Japan commenced in July last year with five destinations, and the reception so far has been outstanding.

“Before launching, Jetstar Japan took more than 100,000 bookings, and we have just announced three new domestic destinations.

“The airline is leading its low cost carrier competitors, with the largest number of aircraft, higher load factors out of Narita, and the strongest perceptions of brand value.

“We forecast that Jetstar Japan will carry more than 1. 5 million passengers in its first year of operations. ” He added the success of Jetstar means it has reached a turning point for the business in terms of scale.

“There is now a solid platform from which to accelerate growth and tap into the fastest growing aviation market in the world. In fact, as all the Jetstar businesses grow, the network benefits of the portfolio will become more visible and very significant. We are positioning ourselves, phase-by-phase, in Asia. ” While the expansion of the Jetstar brand through Asia is an excellent strategy for low cost travellers, it does not address the premium market and Qantas is going to continue to struggle against the likes of Singapore Airlines.

And it’s in Singapore that Qantas has the biggest problem for premium travellers with no immediate options save for Jetstar into north Asia. Jet Airways, one of India’s best airlines, covers that expanding market.

Qantas has stayed with Singapore as its major hub in South-East Asia, despite Malaysia Airlines joining oneworld. In fact the only Qantas option to Kuala Lumpur is an Emirates codeshare on that airline’s daily service from Melbourne.

Hong Kong and Shanghai in China are however a different matter with many low-cost and premium options available.

In Hong Kong, Qantas passengers will be able to use Dragonair and Cathay flights into China and in Shanghai, China Eastern.

Joyce said Qantas is the first international airline to enter a joint venture with a Chinese carrier, China Eastern, noting that: “While the partnership with China Eastern is in very early days, there is great potential there. ” And passengers chasing a bargain will have Jetstar Hong Kong.

In Japan both low-cost and premium options are covered with Jetstar Japan and Japan Air Lines.

But while questions linger over elements of the Asian strategy, particularly in the near term, the Pacific routes appear robust.

The airline now offers a fleet of 12 A380s and nine “young”, refurbished 747s – mostly GE-powered 747-400ERs.

In fact the refurbished 747-400ERs are more popular with business class passengers than the A380 according to the airline.

Joyce told the TTF: “We keep improving the details, from stylish new amenity kits, to an outstanding sleep service for business travellers, to chauffeur services for First and Business passengers, to even better in-flight entertainment and meal options. ” “Our First lounge in Los Angeles will be double in size when it re-opens next year, with all the acclaimed First features, including a 70-seat restaurant with Neil Perry menus. ” “Our refurbished LA Business Lounge will nearly treble in capacity, with phase one due to open this October. ” Los Angeles airport has opened the first stage of the Bradley Terminal makeover – almost eliminating the need for bussing.

Joyce said the airline’s service continues to get better.

“We’ve equipped our cabin crew with the tools to give each customer a more personalised experience. And it is paying off, as customer satisfaction with the Qantas International experience has never been higher. ” Joyce said the airline is reaping rewards in domestic operations.

“We are seeing the rewards of targeted investments in our people, fleet, product and service. We are achieving:

• The highest domestic customer satisfaction levels ever, and significantly above our previous best.
• The best check-in results in five years.
• The highest baggage delivery satisfaction levels since 2004.
• Last year, for the fourth straight year, Qantas flights departed and arrived on time far more often than any other domestic airline.
• Our people are well-supported, engaged and doing great work, and in 2012 our domestic cabin crew recorded their strongest levels of employee satisfaction since records began 10 years ago. ”

The Emirates deal and the Asian strategy may not strike a chord with some devoted Qantas passengers.

“For us it is all about staying in the number one position by investing for our customers and in particular staying ‘best for business’; driving out unnecessary costs; and working with our people. ”

The Emirates deal and the Asian strategy with greater emphasis on Jetstar may not strike a chord with some devoted Qantas passengers, but they are inevitable if the airline is to match the market.

Some still want Qantas to fly to Zurich, Amsterdam, Paris and Vienna via Tehran and Bahrain or the Fiesta Route to London via Nadi, Tahiti, Acapulco, Mexico City, Nassau and Bermuda.

Another popular route was the Southern Cross Route from Vancouver, San Francisco, Honolulu, Nadi to Sydney.

But that was 1970 when there was no competition law and the timetable was a joint Qantas, Air New Zealand and BOAC offering with 707s, DC-8s and VC-10s.

And the return fare to London was $1,240 when the average weekly was earnings $75. Today that fare is $1,793 and the average weekly earnings are around $1,450.

Qantas faces a plethora of challenges – high labour cost relative to competitors, increased lower cost competition, late aircraft deliveries and depressed share price.

The responses over the last year are realistically the only responses possible.