Qantas in Emirates' flight path

[Buster Hyman]

By Stephen Dabkowski and Rod Myer

DUBAI-based airline Emirates has asked the Federal Government for the right to double flights in and out of Australia from 42 to 84 as part of a plan to continue the airline's aggressive growth.

That number of flights would mean the airline would have to run three flights a day out of Melbourne, Sydney, Perth and Brisbane. If the Federal Government and international airline regulators approve the plan, Qantas' lucrative position on the Australia-Britain route would come under severe pressure.

Emirates president Tim Clark, in Australia for the Melbourne Cup, said the airline had asked for permission to expand its Australian operations.

"Australia is a very strong market for us," he said. "In fact, in terms of income generation Australia is now No. 3 in the world for Emirates, which is quite amazing given that many other foreign carriers have backed away from the market."

Emirates' request for further access to the Australian market comes at a sensitive time. The Government is expected soon to release its review of international airline regulation, which could result in protection for Australian airlines being wound back.

Mr Clark said he believed the review was likely to result in greater competition as more foreign airlines would be given landing rights in Australia.

He said Emirates' attempt to boost its Australian access did not mean the airline would try to muscle in on the Australia-to-Los Angeles route, believed to be Qantas' single most important revenue earner, providing 18 per cent of its profit. Singapore Airlines is trying to lever that route open.

"The trans-Pacific route doesn't suit our strategy just yet," Mr Clark said. "Contrary to reports, we have not asked for access to that route."

He said the jump in crude oil prices would add between $US350 million ($A470 million) and $US400 million to Emirates' costs this year, but despite that impost, the company's half-year results, to be released in mid-November, would be an improvement on the the $US350 million profit for the corresponding period.

He said increased profit growth had been achieved by cutting costs in other areas of the airline as well as revenue growth exceeding expectations.

Emirates' profits are a sore point in the airline industry, with Qantas and several analysts saying the company is subsidised by its parents, the Government of the United Arab Emirates and Dubai's royal family. BBY airline analyst John Veldhuizen said Emirates was "considered to be subsidised" and its aggressive growth plans could harm Qantas. However, "Qantas has dealt with Emirates' competition very well in the past", he said.

Yet another reason to trim the "fat" at the rat! :suspect:

[Going Boeing]

Buster, I know that your views are as an outsider who has never worked for the "rat", however, if you go through the posts on PPRuNe that criticise Qantas most of them refer to service. The decrease in service can be directly attributable to the reduction in staff. Compared with most Asian carriers we do the same job with less staff ie cabin crew on B744 aircraft 15 (3 class) or 14 (2 class) wheras most Asian carriers have 22. Similarly, the QF ground staff have suffered very significant cuts over the last 12 years and their duties are far more expansive than their competitors staff. To say, "Yet another reason to trim the "fat" at the rat!" is naive and shows that you have swallowed all the crap that that Dixon (and consequently the media) have been shovelling out in truckloads to support their goals - move jobs offshore to pay lower salaries and thus evade the work conditions that protect us from abuse as well as removing the foreign ownership cap.

BA management admitted a few months ago that they had laid off too many workers and consequently had to reduce services - Qantas is rapidly approaching this situation and I firmly believe (contrary to your opinion) that their is no "fat" at the "rat" (except senior management).

[Capt Claret]

GB

Me thinks you have taken Buster's words too literally and have failed to note the signifficance of :suspect: .

[ftrplt]

Its not all rosey in Emirates world anymore, their pilot resignation rate is picking up and there are already concerns they wont be able to crew their planned expansion as it stands.

Take a visit to the Mid East forum, have friends over there who confirm.

[Buster Hyman]

Thank you Capt Clarrie, methinks the smilies are not expressive enough.

GB You are quite correct that I have never worked for the Rat however, I was using irony in my little comment there. It is fair to say that I don't have a lot of love for the Rat & "some" of it's employees, but regardless of my opinion of the one's I have little time for, I have even less of an opinion on the general attitude of airline management in this country.

This article is just the tonic for the "Doom n Gloom" merchants to roll out the rhetoric & begin culling in new & interesting ways. I think that they are playing a dangerous game anyway. Not because of safety (which is a legitimate but separate issue) or any of the other previously discussed issues, but they risk reducing the "Oz" content to a point where there can be no legitimate argument for Govt. protection of the company's revenue stream. Imagine if a mob like EK decide to start a domestic carrier here? What right would they have in protecting that lucrative LAX route?

For the staff at the Rat that I do have time for, I hope some common sense prevails in the near future...:sad:

[MarkD]

no chance QF will start shooting back by operating to DXB? EI start there in March (and eliminating a stop en route Oz would be dead popular) and BA could send some pax that way too just for fun, and Royal Jordanian operate there too and will soon be oneworlders.

[wayne_krr]

IMHO QF will not operate flights to DXB for a number of reasons.
Primarily they couldn't make money competing with EK's low cost structure, specifically the labour costs of the DXB hub. This is exacerbated by QF's lack of oncarriage from DXB. They would actually be helping EK by providing more customers to their hub for distribution on the network.
As well as this EK could then use the argument that they had offered QF all the fifth freedom rights in the world and surely Australia should reciprocate not to mention the fact that EK sponsor horse races, footy teams, arts festivals and so on.
On the other hand if Jetstar International could lower it's labour cost base in general and specifically by basing crew in Dubai, using DNATA or a competing handling company, setting up an offshore company based tax-free in Jebel Ali, tying it to the Oz network by operating A330s from SIN to DXB and then operating into Europe and India, they might be able to really change the nature of the SQ, QF, EK dynamic.

[Buster Hyman]

wayne I agree that they could compete & perhaps cause some disturbance in DXB with Jet* INTL, but who would want to fly the Roo route on an LCC ex Oz? I know that BY did it the other way, but I'd love to see their return customer figures. It's a long way in a teeny little space. (assuming that Jet* INTL doesn't change it's equipment/config drastically):ok:

[wayne_krr]

Buster, offer two class with the same seat pitch as EK. What they offer isn't really that flash in terms of space and seat quality.

[Calligula]

G'day Wayne.

EK pilot costs are higher than QF's - this is not to take a pot shot at the EK drivers, good on them for being able to be on a better wicket. But they get housing, medical and education built in to their package.

I think you will find that EK's competitive advantage comes from more favourable tax regimes, the regulator being the owner of the airline and not paying for fuel out of DXB.

Borgetti recently said that JQ Int would probably not be flying to europe. This is because QF / JQ Int cannot make money on the oncarriage to other european ports due to the massive prices charged by other carriers on the last leg of a multi stage ticket.

The solution would be for the QF group to fly to more ports in europe and take some risks, but the current board and senior management only care about cost and not about revenue growth.

[Vorsicht]

I doubt very much that EK pilot costs are higher than Qantas. QF basic salary is spectacularly higher than EK, it is just that the Government takes a lot in tax. Then you have to add workers compensation, payroll tax, super etc and i think you will find that the cost to QF for a pilot is probably more than EK. At EK housing is capped at a max of 115,000dhs which is about 41000, education is 26000dhs per child up to 3 children in primary and 42000dhs per child in secondary, so taking the worst case of 3 kids in secondary (which is rare) the max cost of education is 45000, medical is covered, but that equates to the value of your medical insurance at home which is a couple of grand.

So an EK skipper on an average of 30000dhs/mth runs at around $120 grand plus 12% for provident fund 42 for housing plus 45 (worst case) for education and we have around 220k. How many QF skippers are costing less than that?

Then take into account the pilots without families who cost nothing for education or medical and you get the picture. Certainly at best it would be line ball.

[Jetsbest]

Calligula, I can't say you're wrong, but I recently ran into a long-lost pal who's currently an EK Airbus Captain who disputes the QF argument (at least about free fuel anyway). His logic is that IF the fuel were free out of DXB they would be tankering EVERYWHERE to max landing weight where possible ie minimum fuel uplift outside DXB; he claimed they DON'T do that. It sounds plausible to me. What do you think?

[Calligula]

vosict.

How do your number stack up when the AUD is back at 55 US ?

Jetsbest.

I agree it doesnt make sense, but people very, very high up in QF have told me they are certain that fuel is subsidised or free from DXB and some other ports.

Anyhow, good luck to them if they can operate in this fashion

[HI'er]

very high up in QF have told me they are certain that fuel is subsidised or free from DXB and some other ports.And if you live in America, Boeing aircraft are free if you live in Seattle or some other ports.

[wayne_krr]

Calligula,
Respectfully you are clutching at straws. The petrol isn't free and it's not the pilot's costs I'm talking about. You are however, correct about several of their competitive positions, such as no personal or company tax.
I think one of the previous respondents mounted a pretty good case as to why EK pilot costs are at least no higher than QFs. There are 30 000 workers give or take in the emirates group. of these I would guess that the average wage is $1 000 a month with little or no super costs. That is the advantage. No unions, no negotiations, take it or leave it.
Unfortunately that's why QF can't compete unless it modifies it's cost base .

[Calligula]

QF is one of the worlds most profitable airlines - this being achieved given the current cost structures.

Dixon is on $22,600 AUD per day

I am tired of people on this forum who do not have business quals, nor have significant airline operational experience making judgements about QF workers based on dribble written by tame journalists in tabloid newspapers.

QF has too many managers and blunts in the office who do nothing but make work for themselves.

That is where the real cost savings are to be made

[Max Tow]

W_K raises an interesting point. Defence of an industry against foreign competition solely by matching costs has to be questionable, particularly in a business such as air transport where the "factory door" for what is produced is the same (i.e. in this case,the boarding gate at SYD or MEL). If labour costs were to be the sole arbiter, hypothetically and in extremis, an enslaved dictatorship could be the world's greatest producer of everything (or at least of all labour intensive services) unless the rest of the planet introduced similar work practices. I hasten to add that I'm not suggesting that the UAE or China or anywhere else currently operates in this way, but there is nevertheless a strong argument to say that whether it's motor cars or call centres, the genie of an allegedly free market can produce some interesting consequences.
To return to W_K's example, if Australia wishes to continue with a relatively high standard of living (pensions, healthcare, housing etc), just cutting real salaries or increasing hours clearly won't wash. Cutting waste rather than wages is a far better tack, but efficient working practices can soon be copied (e.g by giving a PC and training to a call centre wallah in Bangalore), so even that has limits.
In the UK, successive governments have taken a free market approach and "let it happen", hence there's no longer any significant shipbuilding,coal mining or home owned car making. The idea has been to spend the money encouraging new industry rather than pouring good after bad in propping up old ones. The French have taken the opposite approach, and defined "core" industries which are to be subsidised and maintained free from foreign competition or even foreign ownership. On balance, the former seems to produce the better performing economy, and in relative terms, the so called third world outsourcees will get richer as business is transferred to them. Maybe that is how it should be, as turning the Indian and Chinese masses into well paid, well educated and healthy consumers must be good for all of us. It will ultimately bring wage levels there closer to those we enjoy and perhaps even reduce the "poorer" countries' competitive edge (as has happened elsewhere to the formerly low wage Ireland). The challenge is to encourage their advancement without it being at the expense of economic havoc at home.
In this case, I would argue most strongly that Australia's particular geography and economic well being require a strong and locally committed long haul airline industry, and if that point is accepted, due allowance must be made for the tremendous competitive disadvantage of being at the end of the line and "hubless" like no other. The latter point fundamentally differentiates QF from the likes of BA in its ability to compete. I would also argue that competition with EK and SQ is NOT the operation of the free market, as it is to a significant degree distorted by the intertwining of state and industry and the linkage of supposedly independent suppliers in the latter two's home economies.
Aviation in Australia is not an industry past its sell-by date. It's something the country is good at and something the country needs.So don't allow it to be chiselled away without considering where it is that you wish the deregulation road to lead, and in the medium term, find an aircraft which will make the DXB and SIN stopovers as obsolete as Shannon and Wake Island.

[OZcabincrew]

QF are cutting costs in the wrong areas. QF crew are the reason pax keep flying with them, yet they seem to keep getting rid of crew compared to the asian, government funded carriers. You should see all of the people wandering around QF head office, even the assistants have assistants! That's where they could be saving money and getting rid of people.

QF crew do try hard onboard, but you can only do as much as you can with the tools you have!

What's that? GD is on over 22K a day yet he won't give crew a 3% payrise! hahahaha, makes me sick really!

Oz

[wayne_krr]

Mr C you don't have any knowledge of my business knowledge or op experience.
I'm not claiming you guys aren't incredibly efficient. I'm saying one of the reasons QF will not compete on the OZ - DXB routes is that the labour costs of EK are low overall.
You're ex RAAF in any case, not much business there.

[Buster Hyman]

By Rod Myer
November 4, 2005

QANTAS has hit back at an Emirates request to authorities for permission to double its flight numbers to and from Australia, claiming the fast-growing Middle-Eastern airline does not operate on commercial terms.

Qantas chairman Margaret Jackson said there could be no level playing field in the international airline industry when commercial operators such as hers had to compete with state-subsidised airlines. "To suggest that Emirates is competing on similar terms … is, quite frankly, fiction," Ms Jackson said.

Emirates in little more than a decade has become a major force on the so-called Kangaroo route between Australia and Europe, using its home base of Dubai to gain access to more than 20 European ports.

Qantas has 28 services a week between Australia and Europe, with all but two arriving at Heathrow.

Emirates has 120 weekly services to Europe from Dubai as well as feeding a large number of flights into Dubai from Australia and Asia.

Worldwide, Emirates flies to 70 ports, with a heavy focus on Africa, Asia and the Middle East, as well as Europe and Britain.

Its Australian chief Eddy Lim said Ms Jackson's observations on its operations were "old news — they say those things all the time".

Ms Jackson said Emirates' status as a company fully owned by the Dubai Government gave it advantages in its cost of capital that no publicly listed airline such as Qantas could match. Government ownership meant Emirates had a sovereign-risk rating (delivering low interest rates) that allowed the airline to carry debt levels far higher than commercially run airlines such as Qantas could manage.

Emirates paid no company tax and chairman Sheikh Ahmed bin Saeed al-Maktoum, was a member of Dubai's ruling family and head of his country's Department of Civil Aviation, Ms Jackson said.

"Life must be wonderfully simple when the airline,

government and airport interests are all controlled and run by the same people," Ms Jackson said. While Emirates was undoubtedly a quality airline, "its remarkable growth reflects the aggressive and co-ordinated strategies of its owners … to build a world-class hub to grow tourism and business", she said.

Mr Lim said there was nothing unfair about Emirates' ownership arrangements.

"All I will say is that two of the world's most successful airlines, Emirates and Singapore, are government owned and are run on commercial lines.

"That says it all," he said.

One analyst said Emirates was a worry for Qantas because of its heavy focus on the Kangaroo route, Qantas' second-most important international route.

Not only was Emirates pressuring Qantas' overall operations on the route, it targeted the high-margin business market that provided the gravy on the long-haul run to Europe.

Qantas is believed to see itself as one of the few international airlines operating on a fully commercial basis.

Many of the European and Asian carriers are government owned and supported, while all but one of the major United States airlines are in Chapter 11 bankruptcy, meaning they don't have to pay the full cost of their debt.

The reporter owns Qantas shares.


Good heavens! Brett's had a sex change! Marge obviously has trouble remembering QF's past then...:hmm: