Wirraway
20th Jan 2005, 04:13
Australian Broadcasting Corporation
TV PROGRAM TRANSCRIPT "7.30 Report"
LOCATION: http://www.abc.net.au/7.30/content/2005/s1285329.htm
Broadcast: 19/01/2005
Australia's airline industry heads into another turbulent year
Reporter: Tim Lester
MAXINE McKEW: Australia's airline industry looks like it's heading into another turbulent year. Domestically, fierce competition between rival budget operators Virgin Blue and Jetstar has turned into a race to the bottom, with fares being offered for as little as a dollar in an effort to fill seats. The scramble for market share comes as Virgin Blue announced a cut in its profit forecast for the year by up to 15 per cent. Internationally, Qantas Chief Executive Geoff Dixon has flagged that more jobs will be moved offshore to keep costs down in the face of tough competition. On top of all that, the marketplace is about to get even tougher, as Transport Minister John Anderson revealed to the 7.30 Report today that the government is likely to open the lucrative trans-Pacific route to Singapore Airlines. That dogfight will probably be fought with the gargantuan Airbus 380, launched today in France. Business and economics editor Tim Lester reports.
TIM LESTER: It's one thing in France, another in the markets where it will fly.
TONY BLAIR (BRITISH PRIME MINISTER): The most exciting new aircraft in the world.
TIM LESTER: At its launch in Toulouse, the A-380 shone, both as aviation history and a transatlantic trump for European aircraft maker Airbus against American rival Boeing.
PETER HARBISON (AVIATION ANALYST): It is really the first of a whole new generation.
TIM LESTER: But in Australia, the giant new jet could be a mixed blessing. Beyond the high-tech hype, Airbus might deliver more turbulence for a high-stakes industry already stressed by change.
PETER HARBISON: It actually is potentially a very significant aircraft in terms of aircraft economics.
TIM LESTER: Significant certainly for Qantas, as an opportunity and a threat. It's an enormous machine: a 90m wingspan, its tail the height of a seven-storey building and half as much space again as a 747. How will the 14 airlines with orders already in use that space? Sydney-based aviation analyst Peter Harbison isn't swallowing the PR notion of a virtual flying resort.
PETER HARBISON: The likelihood of swimming pools and saunas and extensive bars and hairdressing salons is a little bit remote.
TIM LESTER: More likely, says Peter Harbison, airlines will use the 380's lower fuel costs and economies of scale to offer cheaper fares.
PETER HARBISON: At the sort of conventional configuration that they're talking about of 550-odd seats, it's already probably 20 per cent cheaper per seat than, say, a 747. If then they start cranking up the potential load, which can go right up to round about 800 seats - God forbid, with all those cattle in there - but then you're really talking some very, very substantially lower cost numbers, and at that stage, it's very hard to compete with by the older, more conventional type aircraft.
GEOFF DIXON (QANTAS CEO): We have decided that we'll configure it with 501 seats, which will give us a new first-class, much more spacious than the previous one.
TIM LESTER: In France for the airliner's first public outing, Qantas Chief Geoff Dixon spoke to us late today. Qantas has ordered 12 of the superjumbos with an option to buy a further 10. The first is due for delivery in October.
GEOFF DIXON: It may enable the airlines to be able to make more money so that they can continue to invest in products like this. I mean, there's very, very few airlines around the world that are profitable at the moment.
TIM LESTER: If these new giants of the sky really do give their owners a big economic advantage, you'd think Qantas would be well placed. It's a big early buyer, while others, including British Airways and all the cash-strapped American carriers, are sitting on the sidelines with no orders. The problem is, two fierce competitors to Qantas are also big early buyers. Singapore Airlines will be the first carrier to fly the 380. The destination: Sydney, a point it trumpets in a birth notice-style press ad today. More intimidating, though, is the Middle East-based Emirates. It's buying 45 of the jets, almost four times the Qantas order.
PETER HARBISON: It will be up against I think particularly that Middle East competition, which is going to be very strenuous.
GEOFF DIXON: There's not a level playing field. I mean, both the airlines you just mentioned have substantial government ownership in them, and that does make things a little bit easier for them than I believe it does for us.
TIM LESTER: Of course, Geoff Dixon enjoys highlighting stiff competition; it's the evidence he needs to justify cost-saving plans like the one he foreshadowed this week, which would potentially shift thousands of Qantas jobs overseas.
GEOFF DIXON: We also have to be able to source some jobs and services overseas to be able to compete with the likes of the Emirates and the Singapore Airlines, who spread their costs much more widely than we do.
MICHAEL MIJATOV (FLIGHT ATTENDANTS' ASSOCIATION): This latest announcement of 7,000 people is just way beyond all acceptable levels.
TIM LESTER: Flight attendants had just given Qantas an increase in the cap on crews based abroad. Their union is in no mood to go further.
MICHAEL MIJATOV: Qantas is one of the most profitable airlines in the world. It's one of a very small handful of profitable airlines, and last year, for example, Qantas announced a record profit, and this year it's on course to actually announce an even greater profit.
JOHN ANDERSON (FEDERAL TRANSPORT MINISTER): Everybody's talking about the profits it's making. Well, that's all well and good, but it's got a massive investment project coming up. We've just said they're buying 12 380s.
TIM LESTER: The Federal Transport Minister defends Qantas seeking the added flexibility with its staff.
JOHN ANDERSON: Some jobs overseas, I don't think that's necessarily a bad thing, if they're employed by an Australian company overseas.
TIM LESTER: And Peter Harbison argues that Qantas must look at overseas markets for opportunities.
PETER HARBISON: For an airline like Qantas, based in Australia, a lot of its profits have come out of the domestic market, which is not going to grow in future at much more than sort of 4 or 5 per cent generally, compared with Asia, which is going to be growing at probably 10, even more percentage points than that per annum. You have to be in those markets if you want to have a future.
TIM LESTER: It's a point underlined by Virgin Blue today. The low-cost carrier has issued a profit warning, conceding that passenger numbers for the year to March could be down 2.5 per cent, and its after-tax profit might fall 10 to 15 per cent. But for Qantas, the jewel in profit terms is the lucrative Pacific route, connecting Melbourne, Sydney and Brisbane with Los Angeles - 37 services a week.
PETER HARBISON: Qantas is extraordinarily dominant on what is a large route.
TIM LESTER: For years, Singapore Airlines has wanted a piece of the Pacific action - Australian permission to carry passengers on from here to the US. Next month, Singapore's government will meet Australian officials to push the case.
MICHAEL MIJATOV: The Federal Government should not allow Singapore Airlines to come in here.
TIM LESTER: Qantas is fighting to protect the patch, but as you'll see, comments today suggest it's a losing battle.
PETER HARBISON: Right or wrong, I think it's going to occur probably in the next six months, and we'll probably see Singapore Airlines operating that route some time in 2006.
TIM LESTER: We put that time line to Transport Minister John Anderson.
JOHN ANDERSON: It's not unreasonable.
TIM LESTER: The minister gave us his strongest indication yet that Qantas will face more competition over the Pacific.
JOHN ANDERSON: It would be my view that government would be of a mind, I think, to look seriously at some access.
GEOFF DIXON: I think there's a lot of things before that probably happens, but obviously, the minister knows more about what Cabinet might do than I would.
MICHAEL MIJATOV: Singapore Airlines, which is heavily - well, it's owned by the Singapore Government and has huge concessions from the Singapore Government. It could damage Qantas substantially, and the worst-case scenario could be, for example, say, a sort of a similar outcome for Qantas as occurred with Ansett Airlines.
TIM LESTER: John Anderson insists that won't happen, and with Qantas so profitable, the ignominy of Ansett seems a long way off. But aviation's economics are changing - a new jet, new markets, new competition on old routes - and for Qantas, all of it will affect the bottom line.
MAXINE McKEW: Tim Lester reporting there on the tough business fight ahead.
===========================================
TV PROGRAM TRANSCRIPT "7.30 Report"
LOCATION: http://www.abc.net.au/7.30/content/2005/s1285329.htm
Broadcast: 19/01/2005
Australia's airline industry heads into another turbulent year
Reporter: Tim Lester
MAXINE McKEW: Australia's airline industry looks like it's heading into another turbulent year. Domestically, fierce competition between rival budget operators Virgin Blue and Jetstar has turned into a race to the bottom, with fares being offered for as little as a dollar in an effort to fill seats. The scramble for market share comes as Virgin Blue announced a cut in its profit forecast for the year by up to 15 per cent. Internationally, Qantas Chief Executive Geoff Dixon has flagged that more jobs will be moved offshore to keep costs down in the face of tough competition. On top of all that, the marketplace is about to get even tougher, as Transport Minister John Anderson revealed to the 7.30 Report today that the government is likely to open the lucrative trans-Pacific route to Singapore Airlines. That dogfight will probably be fought with the gargantuan Airbus 380, launched today in France. Business and economics editor Tim Lester reports.
TIM LESTER: It's one thing in France, another in the markets where it will fly.
TONY BLAIR (BRITISH PRIME MINISTER): The most exciting new aircraft in the world.
TIM LESTER: At its launch in Toulouse, the A-380 shone, both as aviation history and a transatlantic trump for European aircraft maker Airbus against American rival Boeing.
PETER HARBISON (AVIATION ANALYST): It is really the first of a whole new generation.
TIM LESTER: But in Australia, the giant new jet could be a mixed blessing. Beyond the high-tech hype, Airbus might deliver more turbulence for a high-stakes industry already stressed by change.
PETER HARBISON: It actually is potentially a very significant aircraft in terms of aircraft economics.
TIM LESTER: Significant certainly for Qantas, as an opportunity and a threat. It's an enormous machine: a 90m wingspan, its tail the height of a seven-storey building and half as much space again as a 747. How will the 14 airlines with orders already in use that space? Sydney-based aviation analyst Peter Harbison isn't swallowing the PR notion of a virtual flying resort.
PETER HARBISON: The likelihood of swimming pools and saunas and extensive bars and hairdressing salons is a little bit remote.
TIM LESTER: More likely, says Peter Harbison, airlines will use the 380's lower fuel costs and economies of scale to offer cheaper fares.
PETER HARBISON: At the sort of conventional configuration that they're talking about of 550-odd seats, it's already probably 20 per cent cheaper per seat than, say, a 747. If then they start cranking up the potential load, which can go right up to round about 800 seats - God forbid, with all those cattle in there - but then you're really talking some very, very substantially lower cost numbers, and at that stage, it's very hard to compete with by the older, more conventional type aircraft.
GEOFF DIXON (QANTAS CEO): We have decided that we'll configure it with 501 seats, which will give us a new first-class, much more spacious than the previous one.
TIM LESTER: In France for the airliner's first public outing, Qantas Chief Geoff Dixon spoke to us late today. Qantas has ordered 12 of the superjumbos with an option to buy a further 10. The first is due for delivery in October.
GEOFF DIXON: It may enable the airlines to be able to make more money so that they can continue to invest in products like this. I mean, there's very, very few airlines around the world that are profitable at the moment.
TIM LESTER: If these new giants of the sky really do give their owners a big economic advantage, you'd think Qantas would be well placed. It's a big early buyer, while others, including British Airways and all the cash-strapped American carriers, are sitting on the sidelines with no orders. The problem is, two fierce competitors to Qantas are also big early buyers. Singapore Airlines will be the first carrier to fly the 380. The destination: Sydney, a point it trumpets in a birth notice-style press ad today. More intimidating, though, is the Middle East-based Emirates. It's buying 45 of the jets, almost four times the Qantas order.
PETER HARBISON: It will be up against I think particularly that Middle East competition, which is going to be very strenuous.
GEOFF DIXON: There's not a level playing field. I mean, both the airlines you just mentioned have substantial government ownership in them, and that does make things a little bit easier for them than I believe it does for us.
TIM LESTER: Of course, Geoff Dixon enjoys highlighting stiff competition; it's the evidence he needs to justify cost-saving plans like the one he foreshadowed this week, which would potentially shift thousands of Qantas jobs overseas.
GEOFF DIXON: We also have to be able to source some jobs and services overseas to be able to compete with the likes of the Emirates and the Singapore Airlines, who spread their costs much more widely than we do.
MICHAEL MIJATOV (FLIGHT ATTENDANTS' ASSOCIATION): This latest announcement of 7,000 people is just way beyond all acceptable levels.
TIM LESTER: Flight attendants had just given Qantas an increase in the cap on crews based abroad. Their union is in no mood to go further.
MICHAEL MIJATOV: Qantas is one of the most profitable airlines in the world. It's one of a very small handful of profitable airlines, and last year, for example, Qantas announced a record profit, and this year it's on course to actually announce an even greater profit.
JOHN ANDERSON (FEDERAL TRANSPORT MINISTER): Everybody's talking about the profits it's making. Well, that's all well and good, but it's got a massive investment project coming up. We've just said they're buying 12 380s.
TIM LESTER: The Federal Transport Minister defends Qantas seeking the added flexibility with its staff.
JOHN ANDERSON: Some jobs overseas, I don't think that's necessarily a bad thing, if they're employed by an Australian company overseas.
TIM LESTER: And Peter Harbison argues that Qantas must look at overseas markets for opportunities.
PETER HARBISON: For an airline like Qantas, based in Australia, a lot of its profits have come out of the domestic market, which is not going to grow in future at much more than sort of 4 or 5 per cent generally, compared with Asia, which is going to be growing at probably 10, even more percentage points than that per annum. You have to be in those markets if you want to have a future.
TIM LESTER: It's a point underlined by Virgin Blue today. The low-cost carrier has issued a profit warning, conceding that passenger numbers for the year to March could be down 2.5 per cent, and its after-tax profit might fall 10 to 15 per cent. But for Qantas, the jewel in profit terms is the lucrative Pacific route, connecting Melbourne, Sydney and Brisbane with Los Angeles - 37 services a week.
PETER HARBISON: Qantas is extraordinarily dominant on what is a large route.
TIM LESTER: For years, Singapore Airlines has wanted a piece of the Pacific action - Australian permission to carry passengers on from here to the US. Next month, Singapore's government will meet Australian officials to push the case.
MICHAEL MIJATOV: The Federal Government should not allow Singapore Airlines to come in here.
TIM LESTER: Qantas is fighting to protect the patch, but as you'll see, comments today suggest it's a losing battle.
PETER HARBISON: Right or wrong, I think it's going to occur probably in the next six months, and we'll probably see Singapore Airlines operating that route some time in 2006.
TIM LESTER: We put that time line to Transport Minister John Anderson.
JOHN ANDERSON: It's not unreasonable.
TIM LESTER: The minister gave us his strongest indication yet that Qantas will face more competition over the Pacific.
JOHN ANDERSON: It would be my view that government would be of a mind, I think, to look seriously at some access.
GEOFF DIXON: I think there's a lot of things before that probably happens, but obviously, the minister knows more about what Cabinet might do than I would.
MICHAEL MIJATOV: Singapore Airlines, which is heavily - well, it's owned by the Singapore Government and has huge concessions from the Singapore Government. It could damage Qantas substantially, and the worst-case scenario could be, for example, say, a sort of a similar outcome for Qantas as occurred with Ansett Airlines.
TIM LESTER: John Anderson insists that won't happen, and with Qantas so profitable, the ignominy of Ansett seems a long way off. But aviation's economics are changing - a new jet, new markets, new competition on old routes - and for Qantas, all of it will affect the bottom line.
MAXINE McKEW: Tim Lester reporting there on the tough business fight ahead.
===========================================