Qantas braces as Singapore eyes break into US route
Fri "Sydney Morning Herald"
Qantas braces as Singapore eyes break into US route
By Scott Rochfort
August 1 2003
Having barely recovered from the impact of the SARS epidemic and Iraq war, Qantas could face its next major threat within weeks if Singapore Airlines pushes to break into the lucrative Australia-US route.
With the signing of the Singapore-Australia Free Trade Agreement on Monday, the open skies agreement between Australia and Singapore again is back on the agenda.
Singapore cannot fly to the US from Australia under an agreement signed in the late 1980s. But talks between the Singapore and Australian governments are expected to take place within the next two months.
"As part of reaching a more liberal arrangement, there are numerous considerations and developments that need to be taken into account, such as the views of the aviation industry and tourism," a Department of Transport and Regional Services spokesperson said.
It is estimated Qantas makes as much as one-third of its profits on its US routes, due to a lack of competition and the high percentage of business travel between Australia and the US.
Qantas is set to increase services to the US from 28 to 30 flights a week from August 30. After Air New Zealand cancelled its services between Australia and Los Angeles two years ago, and with United Airlines - still in Chapter 11 - having major capacity constraints to service the route fully, Qantas's yields to the US are understood to be 15 per cent higher than last year.
With five Singapore Airlines Boeing 747s lying idle on the tarmac at Changi Airport, there is no doubt the airline is keen to break into a route where Qantas reportedly achieves load factors close to 90 per cent.
"Qantas only makes money on the US route so they are clearly vulnerable to increased competition across the Pacific," one analyst said.
But given the open skies agreement has been mooted for several years, Macquarie Equities analyst Ian Myles was less confident any agreement would be signed soon. He said another impediment was the lack of any other airline in Australia to champion an open skies deal.
"People think about Australia and Singapore but they forget about the US which is one of the most protectionist countries in the world," said one analyst, commenting on the threat Singapore posed to United Airlines.
Meanwhile, Air New Zealand yesterday upgraded its full-year profit forecast from "around $NZ200 million" ($180 million) to "comfortably on the positive side of $NZ200 million".
This came after Singapore Airlines posted its first-ever quarterly operating loss of $S377 million ($328 million) and British Airways posted a pre-tax loss of £45 million ($111.7 million) in the three months to June 30.
Blaming the sluggish global economy and fewer business travellers, BA said this month's staff strikes could cost it up to £40 million.
=====================================