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Old 27th Dec 2012, 20:19
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Qantas frustrated in search for Asian alliance partner

December 28, 2012


China Eastern is firming as the airline's passport into the region, writes Matt O'Sullivan


After a torrid year, Alan Joyce can finally take a break on the Gold Coast with family from Ireland. But amid trips to amusement parks, the Qantas chief executive will know that in the volatile world of aviation, such downtime is usually the calm before another storm.


Following the competition regulator's nod of approval to Qantas's alliance with Emirates, the 46-year-old Irishman will have to oversee a complex shift of his airline's hub in Singapore to Dubai, and an alignment of systems and products with its new Middle Eastern bedfellow.


With the Emirates deal almost in the bag, attention is set to turn quickly to Qantas's plans for Asia.


The region has not been a happy hunting ground for the Flying Kangaroo in recent years. Remember Qantas's ambitious plans for RedQ, the start-up premium airline to be based in Singapore and later Kuala Lumpur? Those plans have been shelved indefinitely.


Qantas will unveil more details about its Asian strategy in the coming weeks. It will centre on better timing of Qantas flights to Hong Kong and Singapore, which has been made possible by the Emirates deal.


But the pressing issue remains finding a suitable dance partner in Asia, which is vital to Qantas grabbing a bigger slice of the world's fastest-growing travel market. Emirates is under-represented in Asia compared with regional powerhouses Singapore Airlines and Cathay Pacific.


As Qantas prepares to shift its hub for European flights from Singapore to Dubai, Singapore Airlines is already rushing to boost flights on routes to Australia. By July, Virgin Australia's alliance partner will be operating 121 flights a week to Australia - up from 104 a year ago - including four daily flights to both Sydney and Melbourne.


For Qantas, the dilemma is a lack of suitable Asian bedfellows.
Virgin has stitched up a code-share alliance and equity ties with Singapore Airlines.
While Cathay Pacific is considered an ideal bride in north Asia, Qantas executives concede privately that the airlines' long history of rivalry is unlikely to allow the pair's loose ties to become more extensive. Qantas's plans to launch Jetstar Hong Kong in Cathay's backyard makes a full embrace even less likely.


It leaves China Eastern as one of the few candidates for a deeper alliance. Qantas has a code-share agreement with China's third-largest airline, and the pair are joint partners in Jetstar Hong Kong, which is awaiting regulatory approval to begin flights in the middle of next year.


Joyce has emphasised that their Hong Kong venture will help deepen the relationship with China Eastern.


At a Australia-China business function in Canberra in this month, China Eastern's Australian manager, Kathy Zhang, was bullish about the airline's growth plans for flights to Australia next year.
According to people who attended the closed gathering, she indicated that China Eastern planned to boost flights to Sydney, Melbourne and Brisbane. China Eastern is playing catch-up with rival China Southern, which has been aggressively targeting Australia over the past year.


Although easily able to fill seats with Chinese tourists, China Eastern lacks Australian bums on seats on flights out of this country. Likewise, Qantas faces the same challenge on its one flight a day to China between Sydney and Shanghai: while it can attract Australian business people, it is a bigger challenge convincing Chinese tourists to book seats.
In what has been coined the ''Asian Century'', Qantas is not alone in wanting to push northwards.


With economies in European and the US in a pickle, airlines around the world are rushing to try to tap untold riches in Asia, and particularly China. One of those is Air Canada, which will boost flights significantly to China next year. But Air Canada's chief executive, Calin Rovinescu, concedes that tapping a country of more than 1.3 billion people cannot be done simply by flying his airline's planes to Shanghai and Beijing, or to secondary cities in China.


''We can't access the Chinese market unless we have access through our partners to the traffic that comes from outside the places like Shanghai and Beijing,'' he says.
It is why airlines are treating global marketing alliances such as Star Alliance, oneworld and SkyTeam as inferior to strong bilateral relationships with other carriers in Asia.
''The real revenue opportunities come when we have targeted, focused code-share relationships, joint-venture relationships, revenue-sharing relationships, potentially profit-sharing relationships,'' Rovinescu says. ''Asia is a huge opportunity.''
Virgin is also open to finding a partner in north Asia and speculation has centred on Cathay and China Southern. The latter has expressed interest in building closer ties with an Australian airline.


In Qantas's case, Joyce and senior executives have invested considerable time in strengthening their relationships with their counterparts at China Eastern. It has the potential to be a frustrating exercise: connections can be created only to find executives move to other parts of China Inc.
Asia is also fraught with political and cultural hurdles for airlines.


That is before taking into account that the Chinese airlines' in-flight products are still not in the same league as those of Cathay and Singapore Airlines, which can command a fare premium.


''There is scope for Qantas to deepen its relationship with China Eastern over Shanghai,'' Macquarie Equities says. ''[But] China Eastern is the smaller of the 'big three' Chinese carriers in Australian capacity terms, and has arguably an inferior product to Cathay, making a Qantas-China Eastern connection less attractive to a corporate traveller than a Cathay or Singapore connection.''


Macquarie Equities also believes south-east Asia will remain a weak spot for Qantas because of a lack of a partner to connect to via Singapore's Changi Airport.


China-based executives say Qantas has to do more to build its brand in Asia, particularly in China. ''You talk to the well-heeled in China and they will have no idea who Qantas is. If you don't have a brand identity, how can you expect to command a premium for your airfares?'' one asks.


Before it steps up efforts to reel in an alliance partner, Qantas will release details in the coming weeks about a rejig of its network schedule into Asia. It is aimed at better timing flights to Hong Kong and Singapore so as to allow passengers to more easily catch connecting regional services, or attend business meetings.
A release of details about substantial improvements to Qantas's on-board products, including business class, is still months away.
The plan for Asia is also about better connecting Qantas flights to Jetstar's growing network. However, hopping from a Qantas flight in Singapore or Tokyo on to a connecting Jetstar flight to a regional destination will certainly not be to every passenger's liking.


"We have four Jetstar-branded airlines and a range of full-service partners in Asia. We'll be leveraging all these links as we improve our connections into key Asian hubs, particularly Hong Kong and Singapore,'' a Qantas spokesman says. ''Our relationship with China Eastern is longstanding and our current focus is getting Jetstar Hong Kong off the ground by mid-2013."
As part of the tie-up with Emirates, Qantas will take a slice of the tickets for the Middle Eastern airline's flights from Australia to Singapore, Kuala Lumpur and Bangkok. In return, Emirates will code-share on Qantas flights to Asia, and on Jetstar services within Asia.


Qantas has estimated that the Emirates deal could increase capacity on flights from Australia to Asia by about 40 per cent, while lifting the amount of connections from Singapore by a quarter as a result of re-timing flights.
The deal also allows Qantas to redeploy under-utilised planes to Asian routes.


Without doubt, Qantas will have its hands full over the coming months. The complexity involved in shifting the hub for European flights from Singapore to Dubai is staggering.
But the need for deeper ties with an Asian dance partner will not go away.
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Old 27th Dec 2012, 21:22
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ACCC gives provisional approval for the EK deal and miraculously the international business begins to turn the corner, rather than facing a "terminal decline" (ACCC submission 7 Sep 2012, p 13 )

Qantas load factors increase as international unit improves

  • by: Ross Kelly
  • From: Dow Jones Newswires
  • December 21, 2012 3:00PM

QANTAS Airways said today its load factors -- a measure of the proportion of seats filled on its planes and a key profit driver -- increased in November in a faint sign a turnaround strategy for its international unit is taking effect.

The group's load factor for the month, which also includes distances flown by passengers, rose 0.5 percentage points from a year earlier to 80 per cent, the airline said in a statement. Financial year-to-date load factors, however, are down 1 percentage points.
The rest of the article is behind the paywall if someone wants to post it: The Australian: Qantas load factors increase as international unit improves
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Old 28th Dec 2012, 09:09
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Here You Go

QANTAS Airways said today its load factors -- a measure of the proportion of seats filled on its planes and a key profit driver -- increased in November in a faint sign a turnaround strategy for its international unit is taking effect.

The group's load factor for the month, which also includes distances flown by passengers, rose 0.5 percentage points from a year earlier to 80 per cent, the airline said in a statement. Financial year-to-date load factors, however, are down 1 percentage points.

Australia's flag carrier has been shrinking the size of its international unit to combat soaring jet fuel costs most harmful to airlines with bases in far flung locations such as Australia. Routes cut by Qantas since last August include Singapore-Mumbai, Auckland-Los Angeles and Sydney-San Francisco.

November load factors in the carrier's domestic unit were hurt as Qantas continued to engage in a battle for market share with Virgin Australia by expanding flying capacity. The fall was offset, however, by an improvement at its international division.

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Although the route closures translated into a 3.1 per cent fall in international passengers, the fall was accompanied by a deeper 7.1 per cent decline in flight capacity. The lower availability of seats pushed up the division's load factor by 2.4 percentage points.

Total passengers across the entire Qantas business in November jumped 6.4 per cent from a year earlier, when the airline was reactivating its fleet following the grounding of some of its planes to ward off industrial action.

Its shares rose 1.9 per cent by midday in Sydney, outperforming a 0.3 per cent rise in the broader Australian stockmarket as investors digested the figures.

The airline also hopes to save costs by forging alliances with rivals and this week received provisional regulatory approval for a proposed tie-up with Emirates Airline.

Standard & Poor's said Qantas's BBB- credit rating was unaffected by the regulatory decision.

"The wide-ranging agreement substantially addresses the declining market share and profitability of Qantas' European network and allows Qantas to more appropriately service its Asian network," S&P Credit analyst Anthony Flintoff said in a statement today.

"Nevertheless, we do not view the partnership as a panacea," he said.

Qantas's November update also displayed continued rapid growth at low-cost offshoot Jetstar, home for much of the airline's new jet deliveries.

Flight capacity at Jetstar domestic in November jumped 18.2 per cent amid a 14.9 per cent rise in passengers, while capacity at Jetstar international rose 10.5 per cent amid a 17.1 per cent jump in passengers.




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Old 29th Dec 2012, 04:21
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With the EU getting political with the gulf carriers and possibly restricting their capacity into their markets we now see the real interest of Emirates in Qantas.

Qantas will not have those capacity restrictions imposed on it and Emirates has probably locked in very favourable terms on the code share agreement.

All Qantas need is capacity out of Dubai in something larger with two engines than what they have or are ever dream of getting.

Interesting times.
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Old 31st Dec 2012, 21:41
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we have all seen this before...it's was called the GFC and the "Assets go private and the debt goes public" and Swanny wonders where his surplus went....duh!
and

You do touch on a point bus driver wrt to Mr swan. ......but what about loss of tax revenues? Unfortunately, the penny will never drop with the clowns in Canberra either. Qantas's position of outsource everything that's not nailed down, preferably to an overseas provider, will also add to the dint in the tax revenue can that the pollies in Canberra receive. However, until the chairmans lounge is outsourced, they simply won't give a toss. Somebody else's problem.
Just like US debt.
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Old 2nd Jan 2013, 01:35
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End of S/Os to Europe?

I suppose the present critical shortage of S/Os on the A380 will only last until March when the DXB flights begin??? This, obviously owing to the fact that S/Os will no longer be required beyond DXB, given that DXB-LHR is only a 6hr flight, thereby a two crew operation. The plus side being the end of double shuttles, and most DXB patterns being ~4 days for S/Os?

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Old 2nd Jan 2013, 02:04
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Word in the playground is 3 to DBX, 48 hours, 2 LHR 24h, DBX 48h, 3 home.....fun.

Cheers.
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Old 2nd Jan 2013, 03:58
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Word in the playground is 3 to DBX, 48 hours, 2 LHR 24h, DBX 48h, 3 home.....fun.

Cheers.

Repeat after me..."hold at Desdi" "hold at Bubin" there you go..route check complete
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Old 2nd Jan 2013, 09:34
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14hrs with 3 pilots? And I thought EK worked their pilots hard,

the Don
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Old 2nd Jan 2013, 09:57
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Once you go two pilot the whole pattern is then limited by those limits which is 30 hrs in 7 days. QF does not have an exemption on this so it,will be 3 pilot to LHR.
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Old 2nd Jan 2013, 10:32
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Lightbulb

Not correct as far as I can tell. FAM 6.7.7.4. If the last flight is a three plus crew operation then 40:7 applies. If its an eight day trip it probably won't matter.
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Old 2nd Jan 2013, 10:38
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Could I be so bold as to suggest that it may not be the companies intention to use Qantas crews at all on these services.

Whats to stop them using an arrangement with Emirates crews?????

SO shortage solved. 2 crew vs 3 crew rostering problems solved. Excessive Australian tax arrangements solved. Hotel costs and layover allowances in DXB solved.

Relatives cost of pilots and cabin crew would be much less I would think under this kind of arrangement. ie cost savings and more management bonuses. Champagne all round!

Everyone happy except QF employees and it has already been proved that no one could care less about them.
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Old 2nd Jan 2013, 12:24
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Can you fly a VH- registered aircraft on a UAE licence?
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Old 2nd Jan 2013, 12:27
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Licence requirements could be an issue, amongst other things.
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Old 2nd Jan 2013, 12:31
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Yeah guess you are right. Qantas would never contemplate starting an offshore company and shuffling paperwork to get around such things. How silly of me.
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Old 2nd Jan 2013, 13:00
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Actually, good point, I never thought of it in that way. I conceded the point to you Vibe.
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Old 2nd Jan 2013, 17:40
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Aer Lingus, Open Skies(British Airways) all bloody disasters as the passengers left in droves. Other point is they have been doing it with Atlas Air for years, e.g. Qantas flight numbers, wet leased crew....Remember Australia has only one airline that conforms with the Civil Aviation Navigation Act as Virgin is a majority foreign owned airline...The end is near. The Australian airline industry is f#%^&#ked.....How stupid are the Aussies!

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Old 2nd Jan 2013, 21:47
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An interesting parallel perhaps?
Business-class socialist | The Economist

[QUOTE]Yet this youthful, left-leaning boss has hit BA like a whirlwind. Within weeks of his acceding to the throne in January 1996, management heads had rolled and a new structure was in place. By last autumn, he was unveiling his plan to cut £1 billion off BA's annual operating costs over three years. Service activities such as maintenance and catering would be outsourced, leaving only essential operations done in-house. That way BA could focus on running flights, filling them and serving customers in a streamlined “virtual airline”.[QUOTE]

British Airways: Care for a downgrade? | The Economist

Where does this former airlines ceo's grand plan stand these days?
The same will be said of Joyce and Cliffords.

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Old 3rd Jan 2013, 07:06
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Out of curiosity what is difference in fuel burn SYD-DXB-LHR vs SYD-SIN-LHR, My understanding is that in order to carry fuel you have to burn fuel and as DXB is further from the mid-point than SIN then going via DXB would use more fuel. (or is fuel cheaper in DXB!)
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Old 3rd Jan 2013, 08:01
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Run the sector same as EK do to Aus/NZ, 2 x Capt and 2 x F/O. No need for S/O (was there ever a need!!) Relief crew Aus-DXB operate the sectors ex DXB whilst operating crew rtn to Aus following night. Relief crew rtn as augment day after their LHR-DXB. That would be the most efficient way to do it.
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