Wirraway
8th May 2003, 22:12
Thurs "The Australian"
Qantas poised to dominate air
Robert Gottliebsen
May 08, 2003
SARS might be slashing Qantas earnings, but it is also presenting the airline with a unique opportunity to achieve regional dominance.
And nothing shows the enormous power of Qantas better than its decision, in the middle of the crisis, to lift a range of international fares this month, including those for flights to Europe via Singapore.
To underline its power in the regional market, Qantas lifted those prices even though on routes I checked Singapore Airlines fares were more than 10 per cent cheaper.
At the moment, that power is of no value to shareholders but if and when SARS is contained then Qantas will be well-placed to make big profits.
If SARS is not contained then its effect will be far more widespread than regional airlines and tourist operations.
Qantas is close to being the largest airline in the world in terms of market capitalisation. Most of its global rivals are reeling from a series of disasters over the past three years. These include overcapacity, high costs, excess debt, September 11, the Iraq war and now SARS.
The survivors must tackle the enormous task of rebuilding their balance sheets. There is a simple formula – cut costs, tailor capacity to demand and lift fares, particularly in markets where discount operators such as Virgin are not strong.
The Qantas fare hike was a clear signal of what is ahead, even if the increases will not be as severe as the premium rises imposed by insurance companies to repair their balance sheets.
Qantas chief Geoff Dixon is trying to use the airline crisis to forge equity links so there will be no challenges to Qantas's business market dominance for the foreseeable future. He will duplicate internationally what has happened in Australia.
Dixon emerged from September 11 and the Ansett collapse with an effective monopoly control over a big chunk of the business market in Australia and around 70 per cent of the total local market. Control over so much Australian domestic and business travel is an enormous Qantas advantage over Air New Zealand and Singapore Airlines on international routes.
With SARS affecting both companies, now is the time to try and tie them up. The ACCC's outgoing chief, Alan Fels, is trying to block Qantas coming together with Air New Zealand. Normally, United Airlines or Singapore Airlines would stop Qantas from taking Air New Zealand into its fold because the Kiwi carrier could be used as an important force in the region to offset the power of Qantas. But United is broke and Singapore Airlines, without a domestic base, is reeling from the SARS disaster.
Qantas is in a good position to snap up Air NZ because transport minister John Anderson is one of Dixon's greatest supporters and Fels is retiring next month.
Anderson supported Qantas in its negotiations with Air New Zealand before the Ansett collapse. Singapore Airlines was privately scathing of Anderson's role in the destruction of Ansett.
With Anderson in tow, Dixon is pushing ahead with the Air Zealand proposal. But he has also begun talks with Singapore Airlines. Dixon has the key card in those talks – control over the Australian business market.
When Singapore Airlines did not take the chance to buy into Ansett when it was in receivership, it meant that in due course it would have to work with Qantas if it wanted a good slice of Australia's international business travellers at reasonable prices.
Singapore Airlines was bitterly disappointed when British Airways took the 25 per cent of Qantas that was made available by the Government before the float. It may now have another chance, although these days Qantas holds the cards.
The theoretical Qantas-Air NZ-Singapore tie-up plus the international airline balance sheet repair operation means that, potentially, Qantas could make a lot of money.
When your opponents are in trouble is the time to cement your dominance.
Robert Gottliebsen writes four columns a week for The Australian and broadcasts each night on ABC Asia Pacific TV.
[email protected]
Qantas poised to dominate air
Robert Gottliebsen
May 08, 2003
SARS might be slashing Qantas earnings, but it is also presenting the airline with a unique opportunity to achieve regional dominance.
And nothing shows the enormous power of Qantas better than its decision, in the middle of the crisis, to lift a range of international fares this month, including those for flights to Europe via Singapore.
To underline its power in the regional market, Qantas lifted those prices even though on routes I checked Singapore Airlines fares were more than 10 per cent cheaper.
At the moment, that power is of no value to shareholders but if and when SARS is contained then Qantas will be well-placed to make big profits.
If SARS is not contained then its effect will be far more widespread than regional airlines and tourist operations.
Qantas is close to being the largest airline in the world in terms of market capitalisation. Most of its global rivals are reeling from a series of disasters over the past three years. These include overcapacity, high costs, excess debt, September 11, the Iraq war and now SARS.
The survivors must tackle the enormous task of rebuilding their balance sheets. There is a simple formula – cut costs, tailor capacity to demand and lift fares, particularly in markets where discount operators such as Virgin are not strong.
The Qantas fare hike was a clear signal of what is ahead, even if the increases will not be as severe as the premium rises imposed by insurance companies to repair their balance sheets.
Qantas chief Geoff Dixon is trying to use the airline crisis to forge equity links so there will be no challenges to Qantas's business market dominance for the foreseeable future. He will duplicate internationally what has happened in Australia.
Dixon emerged from September 11 and the Ansett collapse with an effective monopoly control over a big chunk of the business market in Australia and around 70 per cent of the total local market. Control over so much Australian domestic and business travel is an enormous Qantas advantage over Air New Zealand and Singapore Airlines on international routes.
With SARS affecting both companies, now is the time to try and tie them up. The ACCC's outgoing chief, Alan Fels, is trying to block Qantas coming together with Air New Zealand. Normally, United Airlines or Singapore Airlines would stop Qantas from taking Air New Zealand into its fold because the Kiwi carrier could be used as an important force in the region to offset the power of Qantas. But United is broke and Singapore Airlines, without a domestic base, is reeling from the SARS disaster.
Qantas is in a good position to snap up Air NZ because transport minister John Anderson is one of Dixon's greatest supporters and Fels is retiring next month.
Anderson supported Qantas in its negotiations with Air New Zealand before the Ansett collapse. Singapore Airlines was privately scathing of Anderson's role in the destruction of Ansett.
With Anderson in tow, Dixon is pushing ahead with the Air Zealand proposal. But he has also begun talks with Singapore Airlines. Dixon has the key card in those talks – control over the Australian business market.
When Singapore Airlines did not take the chance to buy into Ansett when it was in receivership, it meant that in due course it would have to work with Qantas if it wanted a good slice of Australia's international business travellers at reasonable prices.
Singapore Airlines was bitterly disappointed when British Airways took the 25 per cent of Qantas that was made available by the Government before the float. It may now have another chance, although these days Qantas holds the cards.
The theoretical Qantas-Air NZ-Singapore tie-up plus the international airline balance sheet repair operation means that, potentially, Qantas could make a lot of money.
When your opponents are in trouble is the time to cement your dominance.
Robert Gottliebsen writes four columns a week for The Australian and broadcasts each night on ABC Asia Pacific TV.
[email protected]