Judging by its FY2012/13 first half performance, Qantas looks like it
is back on track. The Australian flag carrier reported a net group
profit of A$111 million (US$114 million), which is almost triple last
year’s A$42 million. This was achieved in spite of the continuing show
of red ink for its international operations, which one may even say was
an impressive result considering the reduced losses of A$91 million from
last year’s A$262 million.
Qantas chief executive Alan Joyce, pleased with the turnaround, said: “We are now beginning to realise the benefits of the tough decisions that we have made over the past 18 months.”
Aviation watchers are all too familiar with the restructuring programme that Joyce rolled out more than a year ago amidst concerns of the deepening losses suffered by Qantas’ international operations. Measures to improve the airline’s performance included reduced capital expenditure, product upgrading, route restructuring that would see an increased presence in Asia, and rationalisation of ground operations to eliminate redundant staff numbers through centralisation and outsourcing.
The most significant of those measures was the split of the parent airlines’ operations into separate domestic and international units under different management teams. That, one may concede, has produced positive results overall considering the improved performance of international operations although profits from domestic operations declined by more than 33% to A$218 million from A$328 million a year earlier.
Joyce explained the domestic performance as follows: “Clearly the Australian domestic market is highly competitive. We have seen elevated levels of capacity growth from competitors attempting to claim market share from Qantas Domestic.”
No skin off its nose, so it seemed. After all, Qantas still boasts a 65% share of the local market. But the flying kangaroo can expect increasing competition from its rivals, more Virgin Australia than Tiger Airways, noting how Virgin has only last year acquired 60% of Tiger with the intent to strengthen the competitive edge, which is still subject to regulatory approval from the Australian Competition and Consumer Commission (ACCC). Though Qantas continues to upgrade its cabin product, the competition for the short haul – as almost anywhere else in the world – is likely to be influenced mainly by price and scheduling. Tying up with Tiger’s parent Singapore Airlines (SIA), Virgin has hoped to provide better schedule meshing and more seamless international connections.
Internationally, Qantas’ improved performance may be partly
attributed to the recovery of the global economy, albeit a slow and
uncertain one, in line with improved results reported by most other
airlines in the region. However, it remains a big challenge for Qantas
to not lose passengers to rival airlines that include not just long-time
competitor SIA but new ones from the Middle East such as Emirates
Airline, Etihad Airways and Qatar Airways. Qantas reported a 4.3%
increase in the number of passengers carried in December 2012 compared
to that a year ago.
The game may be shifting in Qantas’ favour as the authorities prepare to formalise their approval of the partnership between Qantas and Emirates, opening up additional channels to Europe, the Middle East and Africa for Qantas customers through Emirates connections. In the meantime, Qantas has initiated plans to shift its hub for Europe-bound flights from Singapore to Dubai. The impact of the partnership could already be apparent in the second half results expected in August. Only then can it be ascertained if the airline is finally back on course, and, if so, the next question to ask is: Can it uphold the trend?
You need big moves to reverse deep losses. While many airlines react to the global financial crisis by trimming costs with reduced frills and reducing capacity and re-routing to match demand, and by banking on the expected recovery of the economy, the Qantas/Emirates alliance aims at changing travel patterns and preferences, thus redefining the competition, on the kangaroo route. The strategy aims at eliminating key rivalry on a reconstructed route. Clearly SIA and its home base Changi Airport will be largely affected by the shift though, lest one be too hasty in the assessment, not necessarily adversely if travellers still prefer to fly via Changi and if SIA and Changi can continue to attract them to stick with the tradition.
No doubt the Qantas/Emirates partnership will make a formidable competitor, but Qantas cannot assume its main rivals will stand on the sideline and do little else but watch passively. If Qantas is upgrading its cabin product, so are SIA and Cathay Pacific Airways. Qantas’ restructuring plan has identified Asia as the growth area, but this is also where these airlines and others such as Asiana Airlines, Japan Airlines and All Nippon Airways are the strongest.
Qantas has announced it would increase frequencies to Asian destinations, with Singapore serving as its hub for the region. In a supplementary move, Qantas continues to push the Jetstar brand across Asia, setting up base in Singapore, Japan, Vietnam and Hong Kong, pending local authority approval. Jetstar has proven to be a profitable budget venture in the Qantas stable, increasing revenue by some 12%. Already the largest low-cost carrier in the Asia/Pacific by revenue, Joyce said Jetstar would draw on “close partnerships with local market leaders.”
But if you wonder what happened to the much hyped proposal to set up a regional premium airline based in Asia, the idea is as good as dead. The failure to generate sufficient interest from potential partners in the proposal reflected the diffidence in either Qantas or the region or both then. Yet it may have been a blessing in disguise considering the uncertainty of the global economy that all but looked it would not spare Asia either. Besides, the proposal has outlived its promise, outdone by developments in the Qantas/Emirates relationships.
So, is Qantas finally back on track? The next six months will tell if the Qantas/Emirates partnership has made any difference, over and above the expected recovery in demand for seats and hopefully some stability in the fuel price.
Read Aspire Aviation‘s most in-depth & comprehensive analysis on the Australian market >>
http://www.aspireaviation.com/2013/03/08/is-qantas-back-on-track/
Qantas chief executive Alan Joyce, pleased with the turnaround, said: “We are now beginning to realise the benefits of the tough decisions that we have made over the past 18 months.”
Aviation watchers are all too familiar with the restructuring programme that Joyce rolled out more than a year ago amidst concerns of the deepening losses suffered by Qantas’ international operations. Measures to improve the airline’s performance included reduced capital expenditure, product upgrading, route restructuring that would see an increased presence in Asia, and rationalisation of ground operations to eliminate redundant staff numbers through centralisation and outsourcing.
The most significant of those measures was the split of the parent airlines’ operations into separate domestic and international units under different management teams. That, one may concede, has produced positive results overall considering the improved performance of international operations although profits from domestic operations declined by more than 33% to A$218 million from A$328 million a year earlier.
Joyce explained the domestic performance as follows: “Clearly the Australian domestic market is highly competitive. We have seen elevated levels of capacity growth from competitors attempting to claim market share from Qantas Domestic.”
No skin off its nose, so it seemed. After all, Qantas still boasts a 65% share of the local market. But the flying kangaroo can expect increasing competition from its rivals, more Virgin Australia than Tiger Airways, noting how Virgin has only last year acquired 60% of Tiger with the intent to strengthen the competitive edge, which is still subject to regulatory approval from the Australian Competition and Consumer Commission (ACCC). Though Qantas continues to upgrade its cabin product, the competition for the short haul – as almost anywhere else in the world – is likely to be influenced mainly by price and scheduling. Tying up with Tiger’s parent Singapore Airlines (SIA), Virgin has hoped to provide better schedule meshing and more seamless international connections.
Image Courtesy of Phozographer
The game may be shifting in Qantas’ favour as the authorities prepare to formalise their approval of the partnership between Qantas and Emirates, opening up additional channels to Europe, the Middle East and Africa for Qantas customers through Emirates connections. In the meantime, Qantas has initiated plans to shift its hub for Europe-bound flights from Singapore to Dubai. The impact of the partnership could already be apparent in the second half results expected in August. Only then can it be ascertained if the airline is finally back on course, and, if so, the next question to ask is: Can it uphold the trend?
You need big moves to reverse deep losses. While many airlines react to the global financial crisis by trimming costs with reduced frills and reducing capacity and re-routing to match demand, and by banking on the expected recovery of the economy, the Qantas/Emirates alliance aims at changing travel patterns and preferences, thus redefining the competition, on the kangaroo route. The strategy aims at eliminating key rivalry on a reconstructed route. Clearly SIA and its home base Changi Airport will be largely affected by the shift though, lest one be too hasty in the assessment, not necessarily adversely if travellers still prefer to fly via Changi and if SIA and Changi can continue to attract them to stick with the tradition.
No doubt the Qantas/Emirates partnership will make a formidable competitor, but Qantas cannot assume its main rivals will stand on the sideline and do little else but watch passively. If Qantas is upgrading its cabin product, so are SIA and Cathay Pacific Airways. Qantas’ restructuring plan has identified Asia as the growth area, but this is also where these airlines and others such as Asiana Airlines, Japan Airlines and All Nippon Airways are the strongest.
Qantas has announced it would increase frequencies to Asian destinations, with Singapore serving as its hub for the region. In a supplementary move, Qantas continues to push the Jetstar brand across Asia, setting up base in Singapore, Japan, Vietnam and Hong Kong, pending local authority approval. Jetstar has proven to be a profitable budget venture in the Qantas stable, increasing revenue by some 12%. Already the largest low-cost carrier in the Asia/Pacific by revenue, Joyce said Jetstar would draw on “close partnerships with local market leaders.”
But if you wonder what happened to the much hyped proposal to set up a regional premium airline based in Asia, the idea is as good as dead. The failure to generate sufficient interest from potential partners in the proposal reflected the diffidence in either Qantas or the region or both then. Yet it may have been a blessing in disguise considering the uncertainty of the global economy that all but looked it would not spare Asia either. Besides, the proposal has outlived its promise, outdone by developments in the Qantas/Emirates relationships.
So, is Qantas finally back on track? The next six months will tell if the Qantas/Emirates partnership has made any difference, over and above the expected recovery in demand for seats and hopefully some stability in the fuel price.
Read Aspire Aviation‘s most in-depth & comprehensive analysis on the Australian market >>
http://www.aspireaviation.com/2013/03/08/is-qantas-back-on-track/
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