Qantas Expands International Routes

[PPRuNeUser0198]

Aircraft-even the B777LR can do Perth-Europe WITHOUT restrictions.

I understood that one way requires a stop with full payload needs. Is this not the case? I also think that the fact Qantas cannot purchase B777's now as the B787 is the focus (primarily due to fuel benefit) - there isn't a point talking to point-to-point for Qantas now, as it is not possible with existing and future fleet type. Qantas also doesn't need to. It has its partnership. The partnership is 'good for the punter'. It offers a lot of benefits for the customer, and airline. This is why so many airlines do it, case-in-point - Virgin.

Jetstar has delivered profitability. Maybe not as a Group, but certainly Australia has delivered year-on-year profit. The Asian businesses - well. There is more to it than just EBIT performance. There are synergies the benefit the Group as a whole. Subsequently, of the Group underlying results deliver sustainable returns, than this is what is fundamental. From the financial results of Jetstar for this fiscal, Singapore and Australia are in the black. Japan is still in start-up, but improving, and Vietnam is still in early start-up. Whilst this is the market commentary, from Jetstar, you have to take this on good faith. The results will prevail eventually.

Air New Zealand is PROFITABLE (sustainably so and not because of write downs).

We must remember you're also talking about an airline that had to be bailed out by their Government. Air NZ would have collapsed many years ago, in an operating environment that was even more favourable for the airline. But I will again position Air NZ as operating in a favourable environment. Yes, they are a great airline. Yes, they have a good strategy and team (now). But I still argue they are in an advantageous position, thanks to many factors, not available to the likes of Australian carriers.

in long-haul flying the Front pays for the Back

That I know very well. But you need the end-to-end 'offering' to attract the consumer who is prepared to spend on the front-end. Qantas suffered many challenges to do that, in competition with other carriers, especially the irrational carriers that put an 'agenda' ahead of sustainable operations.

Jetscar is not the answer.

It absolutely is. Otherwise someone else will. It can work. It needs a number of factors to favour it. I think it can happen. I think the market is trending the right way. Capacity has rationalised. Growth has slowed, including organic. This is needed. I think we will see things improve over the coming few years. Let's hope this occurs for the sake of the industry.

We need a 330 to compete with SQ

When Qantas previously operated this market, yield was mostly not covering operating costs. There isn't more Qantas can do here. Yes, it can increase fares. Most people seem to see that as the answer. It does not work. Qantas operates on a higher cost base than its competitors. Some 40% against Singapore . Singapore enjoys centralised operations from their hub. They can leverage assets to deliver cost benefits. Hypothetical example: SQ requires 1 x catering truck to support x services in SIN. This truck can cover a large proportion of aircraft in he hub. This delivers significant cost spread. Qantas on the other hand, needs a truck just in Perth, to service much less. This means the operating profit on Qantas operations, needs to be higher, to support the costlier truck. Put on top of that, higher operating costs in Australia (so we can enjoy being one of the most expensive countries in the world), and you see very quickly the disadvantage.

Qantas has to install infrastructure is so many geographical ports, due to end-of-line operations. That means kitchen in each port, fleet presentation in each port. Engineering in each port etc. This is costly. Especially for narrow, thin operations.

Singapore doesn't. It has it in one port - Singapore. All other ports are subcontracted via very aggressive tenders, driving absolute benefit in unit cost to Singapore airlines.

The economics will never be simpler for hub carriers entering into AUS, and QF (or any Australian carrier) exiting AUS. This is why Virgin mostly operates all airline operations via sub-contractor e.g. catering, cleaning etc. It has the ability to tender, and driver cost improvement. Qantas has established, legacy operations. This is costly and hard to change.

Many airlines are prepared to take the hit on one market, due to strong margins on the other. SQ could in fact be doing this. But you won't know this. It is unfair to make a claim, when you do not have any insight into SQ's operating economics on this market. Most people seem to think simply because there is a service, it must be making money. Rome for QF did not make money for more than 12 years. But Qantas continued to operate, simply to avoid losing the FCO slots, since once released, they are typically impossible to recover in the future, at slot constrained ports.

SQ is carrying primarily through-traffic. Through-traffic doesn't travel on QF. The options to Europe, on 'same carrier' were limited, or don't exist. Remember that you also had to go to London or Frankfurt, versus direct. Unless price was significantly better, you'll go SQ to get to ZRH with one stop. And you maintain the same metal all the way. It is also an easier sell for travel agents.