5th September QF Announcement

[TIMA9X]

In response to Capt Gidday's post on the 7th...

Qantas deal a short-term winner but long-term outlook problematic

September 06, 2012 1:05PM
QANTAS will face a tough battle to win Australian Competition and Consumer Commission (ACCC) approval of its Emirates joint venture, which will control over 50 per cent of traffic between Australia and Europe and effectively take one competitor out of the market.

ACCC chief Rod Sims told The Australian that it was early days yet in the regulator’s consideration but “obviously we will look very closely at any deal which sees Emirates fares move closer to the higher Qantas fares”.

Tim,

That actually is a very interesting statement from the ACCC chief. Note he does not appear interested in the competition aspects of the deal. Only that the little Aussie battlers, out there in the Labor heartland, can still get cheap fares to Europe. A much easier thing to reassure the regulator about, I would think. As in "of course this new alliance will actually lower Qantas' cost base and allow us to be more competitive, hence lowering our fares". [Well, maybe, fingers crossed].

AJ's blustering all this year can now be seen in a new light. Talking up the supposed losses in longhaul, which have magically risen from $100M, to $240M to $420M to whatever number you want to pluck, has been solely to soften up the ACCC to make the case that this deal must go ahead.

Similarly, the 'falling overseas market share' argument is also all about priming the ACCC case, to make it easier to argue that Qantas must have this alliance, or very bad things will happen to politician's perks. The 'longhaul is a basket case' spruiking is all about that, nothing more.

Given the PR spin that will now gush forth, sounding just like the above [watch the weekend papers] , it will be a done deal. Olivia's no doubt already onto it. Get that rubber stamp ready.

today

Qantas Airways says its international operations are in ‘‘terminal decline’’ and unable to go it alone, given the disadvantages of geography, high cost base and fierce competition.

The airline told the Australian Competition and Consumer Commission (ACCC) its proposed 10-year partnership with Dubai-headquartered Emirates was an urgent strategic imperative.
Qantas and Emirates today lodged their application with the ACCC to approve the alliance.In their submission, they said the tie-up would improve the international competitiveness of a key Australian business and iconic brand, Qantas.

‘‘A strong and efficient Qantas is in the long-term national interest,’’ the submission said. ‘‘The proposed conduct is essential to underwrite the sustainability of Qantas international and to continue to provide substantial benefits to Australia and Australians.’’

Last Thursday, Qantas chief executive Alan Joyce and Emirates president Tim Clark unveiled plans for an extensive codesharing arrangement, reciprocal frequent-flyer benefits and joint marketing, pricing and coordination on certain routes.

The alliance was regarded as a key plank to turn around Qantas’s struggling international operations, which Mr Joyce said lost $216 million in 2010-11 and $450 million in 2011-12.
‘‘The growing magnitude of losses cannot continue,’’ the submission said. ‘‘The proposed conduct will arrest the terminal decline of the international operation of Qantas.

‘‘It is clear that it is no longer possible for Qantas international to sustainably ‘go it alone’ as an international network carrier.’’
The submission said Qantas did not have the ability to compete effectively with ‘‘mid-point carriers’’ based in Asia or the Middle East, given their geographic and economic advantages.

Meanwhile, Emirates operates a number of flights between Australia and New Zealand and that the two airlines offered to formally commit to maintain capacity across the Tasman.

‘‘The commitment only relates to total trans-Tasman capacity, rather than specific city pair routes,’’ the submission said.
Qantas closed up two cents at $1.28.

Read more: Qantas paints grave picture of global arm

AJ, cap in hand crying poor again..... it never ends...

Capt Gidday your comment, spot on the money..

by TWE
Mr Joyce : There is no prohibition in the act against all of our international routes being replaced by Emirates or United one day. The market will dictate who flies internationally and who will survive. I will tell you our intentions. I hope that someday Jetstar can be very big, because that would be great for Australia and the group, because these aircraft would be flying all over Asia. We want Qantas to be in the same position. I want to turn around the international business so that Qantas can have the same growth opportunities that Jetstar has. I absolutely believe that you cannot lock into legislation restrictions on Qantas to somehow ensure that Qantas stays in the race, because it will not happen. If you put those restrictions in place, Senator, all you will be ensuring is the absolute demise of Qantas. It has to be commercial, it has to be flexible and it has to adapt. That is the only way you can ensure what you are saying never happens and it is not our intention. We absolutely want to scrape around to be flying to every continent around the world, but we have to have a commercial entity.

great digging!

ps, sorry for the double up post of the same story... I believe there is a lot in this piece, off the top of my head I can think of many things said at the two senate inquires that may conflict with where things stand today....

off to review the video tape.... chuckle...