More than fuel behind the Qantas capacity cuts
Ben Sandilands @ Crikey writes:
The screwing has only just begun for Australian air travellers.
The Qantas decision to cut capacity by around 5% is nothing compared to 10-11% groundings announced by carriers like American and Air France/KLM, and confirmations that major reductions will be made by the three biggest low cost carriers of all, Southwest, Ryanair and easyJet.
But the oil screen that Qantas was surprisingly slow to erect, and Virgin Blue might copy any moment, hides other developments.
Qantas is out to bust the backside off its pilot and maintenance unions much faster and harder than ever before, helped at least so far by the Rudd government’s quick compliance with a demand that it approve 457 visas to import foreign pilots for it’s Jetstar subsidiary rather than transfer pilots from its own operations.
This strategy is stressing the relationship between the Australian Federation of Air Pilots which covers significant numbers of Jetstar and Virgin Blue pilots and the Australian and International Pilots Association, the Qantas union, which is held in condescending contempt by the carrier’s management.
Of course this divide and destroy approach, under the cover of an oil price emergency, might fail. Jetstar isn’t in the game when it comes to competing in the global pilot market against Emirates, Etihad or even Singapore Airlines.
And the Qantas fleet groundings are not news. They include three aged and chronically unreliable Boeing 747-300s that ground themselves as soon as they are towed toward a passenger gate, and have individually and collectively paralysed the transcontinental schedules to Perth for hours at a time, and even more than a day, throughout this year.
Qantas and Virgin Blue are sitting on a mountain of cash capable of covering their operating costs for months on end if the guidance they gave in their last financial reports is holding true, and killing off older jets, returning expiring leases and forcing passengers into fewer and, if humanly possible, fuller jets at much higher fares all makes perfect sense for shareholders.
The six jets to be deferred or grounded by Qantas represent around 1650 seats in domestic service, or more than twice the 720 seats offered by the token Tiger Airways fleet of four, but going on five, A320s.
Tiger counts for nothing in the current situation. It has no useful frequencies, it doesn’t fly to Sydney at all, and it has the most punitive check-in and baggage rules. It will fly for just as long as its 49% owner Singapore Airlines can stand the pain.
It’s declared target market for ultra-cheapies comprises people who can no longer afford to drive to an airport to use a $29 fare and get shafted for all the "extras".
The fuel shock dynamics for Qantas/Jetstar and Virgin Blue are more uncertain. It could be that Virgin Blue’s being in the middle, between the expensive Qantas product, and the crammed in Jetstar experience, is also where the higher yielding frequent fliers might migrate faced with constantly rising fares and fewer and in some case no Qantas seats.
Then again, Virgin Blue’s trolley snacks from hell and satellite news by Foxtel can make what’s left of the Qantas Cityflyer timetable look really good.
There is going to be a lot more screwing before any winners emerge from behind the oil screens.