Long reach

At the time, cutting Frankfurt, among other network and organisational changes, was seen as an attempt from Qantas to contract its way back to profitability through getting Emirates to do the heavy lifting in transporting the Flying Kangaroo’s passengers to Continental Europe.

Fast forward to the present day and the move to drop Dubai, alongside plans to mount nonstop flights from Sydney to London and New York and the upcoming start of Perth-London Heathrow service with Boeing 787-9s, highlights a confident airline seizing opportunities for growth and reasserting itself on the international stage.

Qantas has reached this point through the technological advancements in aircraft technology, leveraging the power of its frequent flyer membership and feeding off the dominant position it holds in the domestic market.

QANTAS-EMIRATES ALLIANCE TO BE RESTRUCTURED

In late August, Qantas and Emirates announced they would submit an application to the Australian Competition and Consumer Commission (ACCC) to renew a global alliance that was first struck in 2013 for a further five years.

As part of the announcement, Qantas said it would drop flights Dubai and bring back a Singapore stopover for travel to London under a new flight schedule that will begin on March 25 2018.

From that date, Qantas will offer those in the five mainland capitals three options to get to London – on Qantas via Singapore, on Qantas via Perth and on Emirates via Dubai.

In a case of what is old is new again, Qantas will operate a daily Sydney-Singapore-London Heathrow rotation with Airbus A380s, upgauge one two daily Melbourne-Singapore flights from an A330 to the A380.

The diminished significance of the Dubai hub first became apparent earlier in 2016, when Qantas said it would end Melbourne-Dubai-London Heathrow flights in favour of Melbourne-Perth-London Heathrow flights with Boeing 787-9s from March 2018, linking the continents of Europe and Australia with regularly scheduled flights or the first time.

Qantas chief executive Alan Joyce described the network changes as an evolution of the partnership with Emirates.

“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,” Joyce said.

“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.”

The significance of Joyce’s comment about Qantas no longer needing to fly its own aircraft to Dubai cannot be overstated.

These network changes underscore Qantas’s efforts to reshape its overseas flying in recent years around a strong position in the Americas, where it has partnerships with American Airlines and LATAM, as well as a growing focus on Asia where it has opened new routes such as Sydney-Beijing and Melbourne-Tokyo Narita with its own aircraft and forged closer ties with the likes of China Eastern.

The changes underscore Qantas’s efforts to reshape its overseas flying.

Then there is the Emirates alliance for Europe.

Although refuted at the time, Qantas’s decision five years ago to pursue an alliance with Emirates was seen as a big, if not final, roll of the dice to stem the bleeding on its international operations. Qantas has certainly put bums on Emirates’ seats, with the airline saying the number of passengers travelling to Europe on the airline’s QF airline code had risen to 1.2 million a year since the Emirates partnership started, compared with 400,000 passengers a year previously.

The reciprocal hasn’t been as pronounced, with an average of 10,000 Emirates passengers flying on Qantas domestic and regional services within Australia each month, which is about 120,000 a year or a tenth of what it was receiving from the Australian carrier.

And over the course of the past five years, Joyce said a couple of trends emerged.

“Our relationship with Emirates has evolved to a point where our customers are perfectly comfortable booking Qantas code on Emirates aircraft to access the 40 one-stop destinations in Europe,” Joyce said.

“This reduces our need to fly through Dubai.

“The reality is the majority of Qantas customers travelling to London fly out of Australia on Qantas metal and the majority of Qantas customers flying elsewhere in Europe fly out of Australia on Emirates metal. This is how the partnership has evolved and we are very happy with that.”

ULTRA-LONG HAUL PAVES THE WAY FOR REALIGNMENT OF QANTAS-EMIRATES ALLIANCE

In August, Qantas put down a marker of 2022 to achieve the so-called “Holy Grail” of nonstop flights from Australia’s east coast to London and New York.

It called on Airbus and Boeing to come up with an aircraft that had the ability to fly these two ultra-long-haul routes at a commercially acceptable payload, noting the two most likely candidates currently in development – Boeing’s 777-8X and the Airbus A350-900ULR – get close.

In still air Sydney-London Heathrow is 9,188nm and 20 hours and 20 minutes’ travel time, while Sydney-New York JFK is 8,646nm and about 18 hours. Currently, the world’s longest route by distance is Qatar Airways’ Doha-Auckland service at 7,848nm.

The Boeing website lists the 777-8X as having a range of 8,700nm and a passenger capacity of 350-375 passengers. The aircraft is expected to enter service in 2022.

However, the final specifications will only be known after further development of the aircraft design and an analysis of the General Electric GE9X engines.

Boeing told Australian Aviation in a statement it “continues to work with our customers to understand their fleet requirements and market demands”.

“While we don’t share details of our discussions with customers, we are confident the 777X will advance the world’s most efficient twin-aisle family by providing the best payload, operating economics and range combination in the market,” the company said.

Meanwhile, Airbus has not published specific technical data on the A350-900ULR, stating only the long-range variant was capable of flying 19 hours and carry up to 165,000 litres of fuel.

By comparison, the standard A350-900 had a range of 8,100nm and could take on 141,000 litres of fuel.

Singapore Airlines (SIA), which is the launch customer for the A350-900ULR, plans to use the aircraft to operate nonstop from Singapore to Los Angeles (7,621nm) and New York (8,288nm to JFK) in 2018. It is reported SIA plans to configure the aircraft with 160-170 seats.

Airbus too said it was up to the challenge of meeting Qantas’s requirements.

“We’ll have the A350-900 ULR in service next year for ultra-long range flights of up to 20 hours and we look forward to working with Qantas to see how we can meet its requirements for Sydney-London non-stop,” Airbus told Australian Aviation in a statement.

It was understood Qantas was seeking an aircraft capable of carrying 300 passengers in both directions on both the New York and London routes.

A research note from aviation thinktank CAPA – Centre for Aviation dated on September 10 said the strength of the Qantas brand, the airline’s 12 million frequent flyers and its dominant position in the Australian domestic market would support the proposed ultra-long-haul flights.

“Qantas has a promising recipe with its trifecta of strength in brand, loyalty and its home domestic market. These are interwoven to create a customer loyalty base that should support the new flights,” CAPA said.

“Combined, those characteristics give Qantas significant pull with passengers but in return demand strong differentiation for the loyalty and high yields they deliver to Qantas.

“While Qantas is embarking on a new journey, largely untested to date, its goals are not as fanciful as it might seem for others. Qantas’ powerful domestic position cannot be replicated by foreign airlines, allowing it to innovate on what was considered an end-of-the-line geographical position, with advantages that make its proposition compelling.”

Qantas’s powerful domestic position cannot be replicated by foreign airlines.

Qantas is lifting the number of premium seats on its Airbus A380 fleet to a similar level as will be seen on its soon-to-be-delivered Boeing 787-9s, which is expected to support the airline’s push to target high-yielding passengers.

The reconfiguration program of its 12 A380s, to be conducted in 2019 and 2020, will feature new business class and premium economy seats, a refreshed first class cabin and new cushions and fabrics in economy.

While the total number of seats is being increased by one to 485, the split between the four cabin classes is changing.

First class stays the same at 14 seats, while the business cabin will expand to 70 seats, from 64 currently and feature a variant of the seat being installed on the 787-9.

There is a big increase in premium economy from 35 to 60 seats, while the economy cabin is being cut by 30 seats to 341 seats.

Giving Qantas passengers a choice of Dubai (on Emirates equipment) or Singapore (on Qantas aircraft) for a stopover to London mirrors what Virgin Australia already offers travellers through its partnership with Singapore Airlines (SIA) and Etihad Airways for a number of European destinations.

Although Virgin Australia has never flown to Europe, it too ended flights to its alliance partner Etihad’s Abu Dhabi hub in February 2017.

Asked whether there was a preference for transiting through Singapore versus Emirates’ Dubai hub, Joyce said: “Customers love Dubai. Dubai is a fantastic hub.”

S&P Global Ratings credit analyst Graeme Ferguson said in a research note dated August 25 Qantas’s international business stood to benefit from the proposed ultra-long-haul routes.

Further, Ferguson said the Perth-London service “should indicate whether the airline is able to achieve the necessary revenue premium to underwrite the economics of this strategy for future routes from the east coast of Australia to London and New York”.

Perth-London should indicate whether Qantas can achieve the necessary revenue premium.

“In our opinion, the successful execution of Qantas’ ultra-long-haul strategy, which bypasses traditional hubs, has the potential to offset the airline’s geographic disadvantage in the international market,” Ferguson said.

WHAT DOES THIS MEAN FOR EMIRATES?

Figures from Australia’s Bureau of Infrastructure, Transport and Regional Economics (BITRE) show Emirates carried 1.609 million passengers on its flights to and from Australia in the six months to June 2017, the latest month for which figures are available, down slightly from 1.612 million in the prior corresponding period.

Further, average load factors have fallen on a year-on-year basis both on its inbound and outbound flights for each of the six months to June.

And its share of all Australian international passengers had fallen to 8.4 per cent at June 2017, compared with 8.8 per cent in June 2016.

Emirates has tweaked parts of its Australasian network in recent times. It dropped Melbourne-Kuala Lumpur and Sydney-Auckland and introduced Dubai-Auckland and Sydney-Christchurch in addition to changes to frequency and aircraft type of some routes.

The airline was conspicuously absent from a conference call with journalists regarding the Qantas network changes and intention to apply for an extension to the existing alliance, with only Joyce and Evans on the line to take questions.

Instead, the only official comment from Emirates president Sir Tim Clark was included as part of the Qantas statement, where the aviation veteran stated his airline remained committed to the partnership and was part of the discussions regarding Qantas’s network changes.

“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,” Sir Tim said in the statement.

“We will announce updates in the coming weeks. Customers of both airlines will continue to benefit from the power of our joint network, from our respective products, and reciprocal frequent flyer benefits.”

Australian Aviation’s request for an interview with Sir Tim or Emirates divisional vice president for Australasia Barry Brown were declined.

Qantas’s airline’s withdrawal of two daily A380 services to Dubai, representing 968 one-way seats a day or 6,776 seats a week, might help support Emirates’ Australian services and prove to be a “win-win” for both carriers.

“By moving the flights there will be certain passengers and certain revenue, particularly the revenue going today on Qantas up to Dubai out of Sydney connecting onto Europe will transfer over to Emirates,” Qantas International chief executive Gareth Evans said.

“We will then be operating out of Asia and we will be participating in a new revenue flow: O&D between Singapore and London and between London and other Asian destinations over Singapore.”

It certainly is a tricky time for Emirates and the other Gulf-based carriers, given the slowdown in the region amid difficult trading conditions and overcapacity.

This was highlighted in the Emirates group’s recent financial results, which showed its airline operations suffered an 82.5 per cent drop in full year profit for the 12 months to March 31 2017.

The airline has sought to cut costs, defer some aircraft deliveries and pushed plans for an order of medium widebodies of 787s or A350-900s.

While Qantas too reported a lower profit for 2016/17 compared with the prior year (see separate story), and its international business suffered a 36 per cent decline in underlying earnings, the airline appears in far better health given its domestic operations remain an earnings powerhouse and its frequent flyer, or loyalty, unit’s ability to produce double-digit improvement in earnings.