Qantas poised to dominate air (Robert Gottliebsen)
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Qantas poised to dominate air (Robert Gottliebsen)
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]
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SQ Continues to Eye Australian Domestic Market
Australian & NZ Travelnews- April 2003
Singapore Airlines sees the Australian domestic aviation as "viable and do-able".In a briefing in Singapore,company spokesman Innes Willox (a former media advisor to Alexander Downer) said current international tensions meant expansion plans were on hold,but the airline was still interested in the Australian Market.
"We are currently working towards a new bi-lateral aviation agreement with Australia and have a proposal to grant Singapore Airlines the right to fly Australian passengers to third countries. We're talking to the tourist industry and other interested parties and see distinct possibilities of operating flights from Australia to the United States. It would be a clear winner for the Australian inbound market and increase competition on the transPacific route.
"Naturally there would be significant advantages for the Qantas operations re in Asia,but there is still plenty of discussion required."
Singapore Airlines sees the Australian domestic aviation as "viable and do-able".In a briefing in Singapore,company spokesman Innes Willox (a former media advisor to Alexander Downer) said current international tensions meant expansion plans were on hold,but the airline was still interested in the Australian Market.
"We are currently working towards a new bi-lateral aviation agreement with Australia and have a proposal to grant Singapore Airlines the right to fly Australian passengers to third countries. We're talking to the tourist industry and other interested parties and see distinct possibilities of operating flights from Australia to the United States. It would be a clear winner for the Australian inbound market and increase competition on the transPacific route.
"Naturally there would be significant advantages for the Qantas operations re in Asia,but there is still plenty of discussion required."
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GO HOME SINGAPORE!
If SAL want to start up another Oz airline employing and run by Ozzies that is fine. However the concept of a foreign operator running domestic competition is just deplorable. Nowhere else in the world would other governments stand for it so why on earth should we.
I would like them to start looking at domestic operations in places like France or Italy.... Then you would see what true nationalism is. Both countries have in effect no competition from other operators to the national airlines. Singapore or anyone else would be laughed out of town, and the respective governments would provide little co-operation to anyone who might hinder the progress of the established locals.
If SAL want to start up another Oz airline employing and run by Ozzies that is fine. However the concept of a foreign operator running domestic competition is just deplorable. Nowhere else in the world would other governments stand for it so why on earth should we.
I would like them to start looking at domestic operations in places like France or Italy.... Then you would see what true nationalism is. Both countries have in effect no competition from other operators to the national airlines. Singapore or anyone else would be laughed out of town, and the respective governments would provide little co-operation to anyone who might hinder the progress of the established locals.
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There would be no way that the minister for Qantas would let in an entrant to compete with QF. Note that VB and QF do not compete head to head as they offer totally different products. They compete in different segments of the same market. This is not true competition. I do agree with you Sperm Bank, air service rights are fundamentally trade agreements and should be negotiated as such. Any SQ start in Oz (never happen..) should employ aussies based in Oz
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This could be in Qantas' favour. QF is currently in the ACCC's badbooks because of market dominance. if they could show that there is a likelihood that SQ will come on the scene, esp on trans-pacific which may well see UA withdraw soon, it may be a leverage point to get the alliance with NZ through
Evertonian
Don't forget, Spermie , DJ was 100% British owned when it started. The precedent has been set.
SQ is reaping what it has sown, I suppose. The opportunity to get into the Oz market again came when ANZ "begged" them to take Ansett. Regardless of how much it would've cost them at the time, one can only wonder how much better off, if at all, they would be right now?. Especially with an established local operator that they could redeploy some idle equipment to.
SQ is reaping what it has sown, I suppose. The opportunity to get into the Oz market again came when ANZ "begged" them to take Ansett. Regardless of how much it would've cost them at the time, one can only wonder how much better off, if at all, they would be right now?. Especially with an established local operator that they could redeploy some idle equipment to.
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I agree with apacau ,SQ operating on Trans Pacific, would allow UA the ability to code share ,then redeploy their equipment to other areas for a more cost effective operation.
As far as a 'domestic operation' all SQ would have to do is join their existing Australian destinations together with just a couple of connections in line with their existing timetable and you would have the fabled 'SQ Domestic Network'. Admittedly, a limited network, but was it going to be anything else in the first place ?
They start it up using their existing aircraft , changing flight routes,cycle A/C to come down from SIN, a few domestic sectors, then either return to Asia or across the Pacific. The result:
Star Alliance patchs up the hole in their gobal network.
SQ gain oncarriage exAustralia to USA, and who knows where else
The QF/ANZ alliance could shake the ACCC off.
I admitt it is simple view, but could it be possible ?
The REAL prize here for SQ, is an expansion of their network across the Pacific, if to gain that ,they need to set up a 'domestic network' how badly do they want or 'need' this expansion ? How badly does QF need an alliance with ANZ ? Would QF stay in bed with ANZ and let SQ move into the Pacific market ?
As far as a 'domestic operation' all SQ would have to do is join their existing Australian destinations together with just a couple of connections in line with their existing timetable and you would have the fabled 'SQ Domestic Network'. Admittedly, a limited network, but was it going to be anything else in the first place ?
They start it up using their existing aircraft , changing flight routes,cycle A/C to come down from SIN, a few domestic sectors, then either return to Asia or across the Pacific. The result:
Star Alliance patchs up the hole in their gobal network.
SQ gain oncarriage exAustralia to USA, and who knows where else
The QF/ANZ alliance could shake the ACCC off.
I admitt it is simple view, but could it be possible ?
The REAL prize here for SQ, is an expansion of their network across the Pacific, if to gain that ,they need to set up a 'domestic network' how badly do they want or 'need' this expansion ? How badly does QF need an alliance with ANZ ? Would QF stay in bed with ANZ and let SQ move into the Pacific market ?
Last edited by Airtart; 9th May 2003 at 11:14.
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Buster your right in saying that VB started 100% British owned, but they did employ and still employing Aussies to staff their airline. Now they are 50% aussie owned let VB prosper and be Oz's number 2 airline.
SQ had their chance when Ansett fell over. They didn't want it then so too bad so sad....they can **** off and go find a market elsewhere or they can crawl up to VB for oncarriage if they want a foot in the door here. Australia is not that desperate for a third airline anymore.
Go Virgin you good thing and as much as some of us hate QF I would be happy to see them kicking SQ's butt just cause they are our Aussie airline.
SQ had their chance when Ansett fell over. They didn't want it then so too bad so sad....they can **** off and go find a market elsewhere or they can crawl up to VB for oncarriage if they want a foot in the door here. Australia is not that desperate for a third airline anymore.
Go Virgin you good thing and as much as some of us hate QF I would be happy to see them kicking SQ's butt just cause they are our Aussie airline.
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Is it just me or what but every time I see and hear Robert Gottliebsen giving a financial commentary I swear he is about to say "And then goldilocks fled the house in the woods from the three bears".
The guy (although astute) always sounds like he is about to break into nursery rhyme!
The guy (although astute) always sounds like he is about to break into nursery rhyme!
Evertonian
I used to laugh at Allan Fels too.....not anymore though!!! 
wot_tha....If SQ did come this way, I'm sure that locals would be employed by them, just as DJ did. In a perfect world, we would have a viable aviation industry with 3 or 4 carriers with jobs for all & sundry. We would see dogs & cats living together, the planets would align & the Dons would never lose a match!
Oh well, at least we can still dream....
wot_tha....If SQ did come this way, I'm sure that locals would be employed by them, just as DJ did. In a perfect world, we would have a viable aviation industry with 3 or 4 carriers with jobs for all & sundry. We would see dogs & cats living together, the planets would align & the Dons would never lose a match!
Oh well, at least we can still dream....
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Think before QF go dominating anything they look at fixing the rudder probs experienced in 300/400 series 737's,or even explaining why things miss the media like the engine disentigration on a 737-400 at 10,000 over Canberra about a month ago.
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Buster and Dogbreath - I hear you guys!!!
But then again I used to love listening to the deadpan dulcit tones of Mr Bernie Fraser - ex chairman of the Reserve Bank of Australia.
And then he appeared on TV and radio adverts for the government superannuation scheme!
Remember boys........"It's the Super, of the Future!!!"
Reackon you'd have to be a gutsy advertising exec to suggest Alan Fels for an advert though!
Later lads
But then again I used to love listening to the deadpan dulcit tones of Mr Bernie Fraser - ex chairman of the Reserve Bank of Australia.
And then he appeared on TV and radio adverts for the government superannuation scheme!
Remember boys........"It's the Super, of the Future!!!"
Reackon you'd have to be a gutsy advertising exec to suggest Alan Fels for an advert though!
Later lads
