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Qantas-Emirates link forces Cathay Pacific to rethink network strategy
The Hong Kong flag carrier could lose its 'kangaroo route' passengers to alliance that is offering more destinations in Europe from Dubai
The proposed alliance between Australian carrier Qantas Airways and Dubai's Emirates could lure so-called "kangaroo route" passengers away from Cathay Pacific Airways.
The move will force Hong Kong's flag carrier to rethink its network strategy as an increasing number of carriers form bilateral agreements to increase their competitiveness.
The Australian Competition and Consumer Commission last month released a draft ruling proposing to allow the airlines to co-operate on passenger and freight operations across their networks. But it plans to limit the deal to five years because of concerns about the impact of the alliance on airline competition between Australia and New Zealand.
Although the final decision will not be made until April 1, it is highly likely that Emirates and Qantas could win approval and proceed to a comprehensive alignment on their schedules, air fares and products, so as to increase traffic between Australia and Europe through Dubai.
The so-called kangaroo route is an important revenue source for Cathay, which uses Hong Kong as a hub to transit passengers between the two continents.
The airline carried more than 120,000 passengers between Europe and Australasia last year, said Rupert Hogg, the director of sales and marketing at Cathay.
"The kangaroo route has always been an important component of Cathay's network," Hogg told the South China Morning Post.
"Cathay pioneered long-haul non-stop flights from Hong Kong to Europe in the late 1980s and this, combined with the attractiveness of Hong Kong as a stopover and our extensive network into Australasia, ensured that we were a key player in this market from its inception."
But the marketing niche offered by Emirates exposes a weakness in Cathay's network. That is because Emirates can offer 33 destinations in Europe from Dubai while Cathay flies to only seven European cities now.
"The points beyond Dubai are of interest to many Australians," said Tim Clark, the chief executive of Emirates. "Working together with Qantas, we have the prospect of having a strong relationship."
"Cathay should ask itself how to add more destinations to Europe through its own network or through partnership," said Will Horton, a senior analyst at CAPA, a Sydney-based airlines think tank.
"Airlines cannot operate by themselves any more and need to build deeper partnerships through bilateral agreements."
Clark said the proposed tie-up with Emirates would see Qantas reconsidering its Oneworld alliance, to which Cathay also belongs.
"The world of alliance is changing. We will see major realignments in the next three to five years since they are not delivering the value that certain carriers thought they were going to get," Clark said.
Bilateral agreements between airlines had been in place for a long time and Cathay had been involved in a code-sharing agreement with American Airlines for several years, Hogg said.
The Qantas-Emirates tie-up would pose a competitive threat for Cathay, he added, but neither partners were "based in our backyard and sitting on all of our major traffic flows". Aside from the kangaroo market, there was strong and reciprocated demand for flights from Hong Kong and mainland China to Europe and Australia.
Transiting passengers contributed half of the passenger volume to Cathay, Hogg said.
"We are fortunate to have a strong and dynamic underlying market, where half of the world's population is within a five-hour flight from Hong Kong, while [mainland] China is the next big destination with huge traffic."
Although Cathay is well-located on the doorstep of mainland China, a neighbouring "crouching tiger" - Guangzhou-based China Southern Airlines - is gearing up its international services. Last year, it introduced a service to Australia, using Guangzhou as a transiting hub for European destinations.
Using Airbus 380 and other widebodied aircraft, China Southern has opened six destinations in Australia. Although it is still dwarfed by Cathay's 78 weekly services to Australia, the mainland carrier is mulling increasing the frequency of flights significantly.
In terms of product, Cathay is the only operator offering premium economy class to Australia. There are nine seats per row in the economy class in the Boeing 777-300ER aircraft operated by Cathay, versus 10 in the Emirates planes.
But in terms of networking, Gulf carriers enjoyed a comparative advantage and Hogg said Cathay would need to partner with a Middle East carrier in the long run.
The Hong Kong flag carrier could lose its 'kangaroo route' passengers to alliance that is offering more destinations in Europe from Dubai
The proposed alliance between Australian carrier Qantas Airways and Dubai's Emirates could lure so-called "kangaroo route" passengers away from Cathay Pacific Airways.
The move will force Hong Kong's flag carrier to rethink its network strategy as an increasing number of carriers form bilateral agreements to increase their competitiveness.
The Australian Competition and Consumer Commission last month released a draft ruling proposing to allow the airlines to co-operate on passenger and freight operations across their networks. But it plans to limit the deal to five years because of concerns about the impact of the alliance on airline competition between Australia and New Zealand.
Although the final decision will not be made until April 1, it is highly likely that Emirates and Qantas could win approval and proceed to a comprehensive alignment on their schedules, air fares and products, so as to increase traffic between Australia and Europe through Dubai.
The so-called kangaroo route is an important revenue source for Cathay, which uses Hong Kong as a hub to transit passengers between the two continents.
The airline carried more than 120,000 passengers between Europe and Australasia last year, said Rupert Hogg, the director of sales and marketing at Cathay.
"The kangaroo route has always been an important component of Cathay's network," Hogg told the South China Morning Post.
"Cathay pioneered long-haul non-stop flights from Hong Kong to Europe in the late 1980s and this, combined with the attractiveness of Hong Kong as a stopover and our extensive network into Australasia, ensured that we were a key player in this market from its inception."
But the marketing niche offered by Emirates exposes a weakness in Cathay's network. That is because Emirates can offer 33 destinations in Europe from Dubai while Cathay flies to only seven European cities now.
"The points beyond Dubai are of interest to many Australians," said Tim Clark, the chief executive of Emirates. "Working together with Qantas, we have the prospect of having a strong relationship."
"Cathay should ask itself how to add more destinations to Europe through its own network or through partnership," said Will Horton, a senior analyst at CAPA, a Sydney-based airlines think tank.
"Airlines cannot operate by themselves any more and need to build deeper partnerships through bilateral agreements."
Clark said the proposed tie-up with Emirates would see Qantas reconsidering its Oneworld alliance, to which Cathay also belongs.
"The world of alliance is changing. We will see major realignments in the next three to five years since they are not delivering the value that certain carriers thought they were going to get," Clark said.
Bilateral agreements between airlines had been in place for a long time and Cathay had been involved in a code-sharing agreement with American Airlines for several years, Hogg said.
The Qantas-Emirates tie-up would pose a competitive threat for Cathay, he added, but neither partners were "based in our backyard and sitting on all of our major traffic flows". Aside from the kangaroo market, there was strong and reciprocated demand for flights from Hong Kong and mainland China to Europe and Australia.
Transiting passengers contributed half of the passenger volume to Cathay, Hogg said.
"We are fortunate to have a strong and dynamic underlying market, where half of the world's population is within a five-hour flight from Hong Kong, while [mainland] China is the next big destination with huge traffic."
Although Cathay is well-located on the doorstep of mainland China, a neighbouring "crouching tiger" - Guangzhou-based China Southern Airlines - is gearing up its international services. Last year, it introduced a service to Australia, using Guangzhou as a transiting hub for European destinations.
Using Airbus 380 and other widebodied aircraft, China Southern has opened six destinations in Australia. Although it is still dwarfed by Cathay's 78 weekly services to Australia, the mainland carrier is mulling increasing the frequency of flights significantly.
In terms of product, Cathay is the only operator offering premium economy class to Australia. There are nine seats per row in the economy class in the Boeing 777-300ER aircraft operated by Cathay, versus 10 in the Emirates planes.
But in terms of networking, Gulf carriers enjoyed a comparative advantage and Hogg said Cathay would need to partner with a Middle East carrier in the long run.
Its almost as if Tim Clark is now Qantas CEO... Non-equity takeover complete. Alan Joyce looks like he is now the district level administrative unit functionary for Emirates.
Thanks to the individual who PM'ed me with this insight.
Cathay should market their flights now as the 'Fastest way to Europe' since it will be much quicker than going via DXB and the subsequent time wasting at the airport.
Emirates won't re painting anything that's for sure. Emirates is about Arab pride and providing employment for their local economy.
Emirates won't re painting anything that's for sure. Emirates is about Arab pride and providing employment for their local economy.
Last edited by neville_nobody; 14th Jan 2013 at 22:31.
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Aircraft will be painted if they can make money, service destinations where EK capacity may be constrained & as an added bonus also allow them to code share on the service.
Recall Virgins A330-200 are leased from EK.
Recall Virgins A330-200 are leased from EK.
Two are ex EK, not leased from EK.
The Don
The Don
Alan Joyce looks like he is now the district level administrative unit functionary for Emirates.
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I stand corrected if the circumstances did change.
However media reports were advising at the time EK were leasing the earlier A330 to VB as per the below article.
Virgin Blue Evaluating Additional Widebody Options - Wings Down Under
However media reports were advising at the time EK were leasing the earlier A330 to VB as per the below article.
Virgin Blue Evaluating Additional Widebody Options - Wings Down Under
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The 777 s will be in QF colors with Emirates crew operating to save on wages and training costs.
I think we can forget about our international careers, the future is SYD-MEL-SYD-MEL-PER etc etc. Emirates are now officially our international arm (or we are their domestic arm more to the point!
).
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Chuboy:
So Qantas colours with A6 or VH rego?
So Qantas colours with A6 or VH rego?
Which ever suits the little leprechaun on the day is what will happen. AIPA has allowed so many precedents that it doesn't matter what he decides to do.
Nunc est bibendum
AIPA are happy to allow VH rego'd QANTAS coloured planes to be flown by contract pilots. (AO).
AIPA also happy for foreign rego'd (ZK) QANTAS coloured planes to be flown by contract pilots.
AIPA has allowed so many precedents that it doesn't matter what he decides to do.
WIthin Two years Qantas will be run from Dubai.
Right now, Qantas is in a state where any strategic decision will require consideration of its effect on the Emirates tie up. The first Qantas staff will know about it is when they question a seemingly sub optimal change of procedures only to be told "thats because Emirates wants it that way/does it that way/makes it easier for Emirates" (insert reason of choice).
I would expect that chunks of Qantas planning and any other infrastructure that doesn't require to be in Australia for operational reasons will move offshore shortly.
In Two years the Government will be presented with a Fait Accompli. All core Qantas competencies are outsourced or based overseas - Engineering has already vanished. I don't know which area will follow, but they will. Emirates will move one of its activities here - (perhaps training?), this will be accompanied by a huge Qantas PR fanfare about how the relationship is a Two way thing, and Australia gains jobs that offset any Qantas job losses - except that it won't.
So by then Qantas is a virtual airline. Everything is contracted out. There is no longer any "Schwerpunkt" - military point of concentration or centre of gravity. Staff get their schedules and rosters from the internet. There is a training school somewhere which staff attend from time to time. There are hangars where contractors perform daily maintenance. There is a PR office in Canberra, a sales office in Sydney, and that is all. The decisions are made in Dubai and transmitted to offices in Australia for execution.
There is no head office any more except a Boardroom and entertainment facility somewhere, maybe located at the sales office.
At that point Emirates approaches the Government about the removal of the Qantas Sale Act since there is nothing left to protect. A "friendly" on market takeover follows.
Right now, Qantas is in a state where any strategic decision will require consideration of its effect on the Emirates tie up. The first Qantas staff will know about it is when they question a seemingly sub optimal change of procedures only to be told "thats because Emirates wants it that way/does it that way/makes it easier for Emirates" (insert reason of choice).
I would expect that chunks of Qantas planning and any other infrastructure that doesn't require to be in Australia for operational reasons will move offshore shortly.
In Two years the Government will be presented with a Fait Accompli. All core Qantas competencies are outsourced or based overseas - Engineering has already vanished. I don't know which area will follow, but they will. Emirates will move one of its activities here - (perhaps training?), this will be accompanied by a huge Qantas PR fanfare about how the relationship is a Two way thing, and Australia gains jobs that offset any Qantas job losses - except that it won't.
So by then Qantas is a virtual airline. Everything is contracted out. There is no longer any "Schwerpunkt" - military point of concentration or centre of gravity. Staff get their schedules and rosters from the internet. There is a training school somewhere which staff attend from time to time. There are hangars where contractors perform daily maintenance. There is a PR office in Canberra, a sales office in Sydney, and that is all. The decisions are made in Dubai and transmitted to offices in Australia for execution.
There is no head office any more except a Boardroom and entertainment facility somewhere, maybe located at the sales office.
At that point Emirates approaches the Government about the removal of the Qantas Sale Act since there is nothing left to protect. A "friendly" on market takeover follows.
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When they changed back to QF aircraft I thought they changed back to Qantas award?!?!
Allowed?
What legal actions were available to prevent any of these things? When possible AIPA went to court over the issues.
Would interested to know what Emirates outsources. Could be a case of all these airline functions are move to Dubai but reality they're move to a third world dictatorship somewhere.
From Emirates themselves:
Gotta love outsourcing
Other than breaking the law or going broke in court what did you have in mind exactly?
From Emirates themselves:
In the course of undertaking the activities specified in this privacy statement, we may need to transfer personal information to countries which do not have data protection laws or to countries where your privacy and other fundamental rights will not be protected as extensively
Yes allowed. By not fighting hard enough to secure the jobs for mainline pilots, at whatever rate was necessary.
As the QF/EK 777s will never set foot in Australia ie they will be for EMIRATES EXPANSION they will no doubt be A 6 registered. They will require crews based in Dubai only. Funnily enough there is probably enough crew ex Qantas already working for EK to show the union the numbers are covered.
It's all good news ,the flying was never available to QF, now it is and it will guarantee a good future for QF group. Still no growth , but there never was any .
It's all good news ,the flying was never available to QF, now it is and it will guarantee a good future for QF group. Still no growth , but there never was any .
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The competition regulator will allow Qantas and Emirates to start working together on their alliance because of what it describes as the ‘‘long lead time’’ needed to market and sell tickets.
In a decision released this morning, the Australian Competition and Consumer Commission’s chairman, Rod Sims, said he would grant ‘‘interim authorisation’’ for the airlines’ tie-up.
But the regulator has not allowed Qantas and Emirates to begin early preparations on the trans-Tasman route, after it raised concerns last month about the impact on flights between Australia and New Zealand.
In a decision released this morning, the Australian Competition and Consumer Commission’s chairman, Rod Sims, said he would grant ‘‘interim authorisation’’ for the airlines’ tie-up.
But the regulator has not allowed Qantas and Emirates to begin early preparations on the trans-Tasman route, after it raised concerns last month about the impact on flights between Australia and New Zealand.
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When I think about it, the pilots got it right way back with the PA's and they didn't disrupt one flight with industrial action making their point, .... Just who is our national carrier these days......?
Good question ahhh Mr Sims...? In my view, another one heading a government commission that simply doesn't get it....
Last edited by TIMA9X; 23rd Jan 2013 at 16:27.
Neville N:
Re Emirates:
Just so you know, all the privacy law in Astralia is easily circumvented,
For example, a Dow Jones report on an Australian will show very little if ordered from Dow Jones Australia.
..Order the same report from Dow Jones via America and it will everything right down to condom size.
Re Emirates:
In the course of undertaking the activities specified in this privacy statement, we may need to transfer personal information to countries which do not have data protection laws or to countries where your privacy and other fundamental rights will not be protected as extensively
For example, a Dow Jones report on an Australian will show very little if ordered from Dow Jones Australia.
..Order the same report from Dow Jones via America and it will everything right down to condom size.
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Qantas barred from Emirates Tasman deal
11:50 AM Friday Jan 18, 2013
Emirates and Qantas have been allowed by Australian competitor regulators to start preparing for an alliance - but not on the Tasman.
Qantas has been barred from preparing for a transtasman alliance with Emirates due to concerns the deal would lead to inflated airfares between Australia and New Zealand.
The Australian competition regulator yesterday granted interim approval for Qantas and Emirates to begin preparing for an alliance which would see the airlines cooperate on long-haul passenger and freight operations across their networks.
The interim decision allows for preparatory work only, with the Australian Competition and Consumer Commission (ACCC) expected to make a final decision on an alliance in March.
In a statement, the ACCC said the public benefits of the alliance, due to start in April if approved, were likely to outweigh concerns with the impact on competition.
But the regulator also blocked the airlines from preparing for a partnership on flights between Australia and New Zealand.
"The ACCC is concerned that the alliance may have an increased ability and incentive to reduce or limit growth in its capacity in order to raise airfares.
"Therefore, the ACCC is granting interim authorisation on the condition that the applicants do not engage in the conduct for which authorisation is sought in relation to services between Australia and New Zealand."
Qantas said the decision reflected the fact that New Zealand law did not provide for interim authorisation.
Chief executive Alan Joyce said the alliance would enable the two airlines to coordinate more closely and allow customers to book travel on most parts of the combined Qantas and Emirates network.
"This decision means we can determine pricing, capacity and scheduling with Emirates, in addition to the more logistical aspects of the partnership that we have been working through already," he said.
"For consumers, interim authorisation means we can provide details on fares and allow people to book one-stop destinations on most parts of the combined Emirates and Qantas network."
Fares on the combined network were expected to be announced in coming weeks once pricing discussions had taken place.
The services would remain subject to regulatory approval.
-
11:50 AM Friday Jan 18, 2013
Emirates and Qantas have been allowed by Australian competitor regulators to start preparing for an alliance - but not on the Tasman.
Qantas has been barred from preparing for a transtasman alliance with Emirates due to concerns the deal would lead to inflated airfares between Australia and New Zealand.
The Australian competition regulator yesterday granted interim approval for Qantas and Emirates to begin preparing for an alliance which would see the airlines cooperate on long-haul passenger and freight operations across their networks.
The interim decision allows for preparatory work only, with the Australian Competition and Consumer Commission (ACCC) expected to make a final decision on an alliance in March.
In a statement, the ACCC said the public benefits of the alliance, due to start in April if approved, were likely to outweigh concerns with the impact on competition.
But the regulator also blocked the airlines from preparing for a partnership on flights between Australia and New Zealand.
"The ACCC is concerned that the alliance may have an increased ability and incentive to reduce or limit growth in its capacity in order to raise airfares.
"Therefore, the ACCC is granting interim authorisation on the condition that the applicants do not engage in the conduct for which authorisation is sought in relation to services between Australia and New Zealand."
Qantas said the decision reflected the fact that New Zealand law did not provide for interim authorisation.
Chief executive Alan Joyce said the alliance would enable the two airlines to coordinate more closely and allow customers to book travel on most parts of the combined Qantas and Emirates network.
"This decision means we can determine pricing, capacity and scheduling with Emirates, in addition to the more logistical aspects of the partnership that we have been working through already," he said.
"For consumers, interim authorisation means we can provide details on fares and allow people to book one-stop destinations on most parts of the combined Emirates and Qantas network."
Fares on the combined network were expected to be announced in coming weeks once pricing discussions had taken place.
The services would remain subject to regulatory approval.
-
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In a statement, the ACCC said the public benefits of the alliance, due to start in April if approved, were likely to outweigh concerns with the impact on competition.
But the regulator also blocked the airlines from preparing for a partnership on flights between Australia and New Zealand.
But the regulator also blocked the airlines from preparing for a partnership on flights between Australia and New Zealand.
Qantas to cut jobs after contract loss
Qantas has called for voluntary redundancies among check-in and other ground staff at Sydney Airport’s international terminal following the loss of a multi-million-dollar contract with Air New Zealand.
Read more: Qantas to cut jobs after contract loss
Qantas has called for voluntary redundancies among check-in and other ground staff at Sydney Airport’s international terminal following the loss of a multi-million-dollar contract with Air New Zealand.
Read more: Qantas to cut jobs after contract loss
Who's Australia's National Airline? Support Australian Pilots Jobs - YouTube
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