Qantas/Emirates tie-up: the initial results are in

Introduction

The first data since the Qantas/Emirates tie-up has been released and we can start to examine the performance of the respective players under the new state of affairs. In short, the new Qantas/Emirates tie-up has resulted in:

1. Qantas and Emirates extensively code-sharing on each other’s flights between Australia, Dubai and Europe (but no revenue-sharing);
2. Qantas ditching its joint business venture with British Airways on the Australia to UK/Europe routes;
3. Qantas routing its Melbourne to London and Sydney to London services via Dubai instead of Singapore; and
4. BA replacing its old 747 product on the Sydney route with its newest product, the 777-300ER.

Let’s crunch the limited data we have available. The big disclaimers are that:

1. whilst loads are an indicator of a route’s performance, information on yields (ie fares paid) is also required to assess how profitable a route is; and
2. there is incomplete data on the routes between Asia/Middle East and London and we need to make some assumptions based on scheduling ‘rules of thumb’.

I have not been able to find the time to update this blog over the last 12 months, but hope to do so more regularly. These posts usually require a solid few hours of number-crunching and research (the writing is the easy part). My sincerest thanks to anyone who has stuck around!

Passenger flows on the Kangaroo route services.

The key flows on the Kangaroo route through-services are shown in the diagram below:

The major observations:

1. Virgin Atlantic is primarily an Australia to Asia operator in the Australian market. This reflects Virgin’s shortage of capacity on the London to Hong Kong route and the higher yields available on the Sydney to Hong Kong route (relative to BA’s Sydney to Singapore leg).
2. BA, in contrast, is primarily using their flight as an Australia to UK service.
3. Qantas is carrying some traffic to Dubai (presumably connecting to Emirates’ small 3AM European departure bank) but London is the main-game for these flagship flights.

Although there is no data on the Asia/Middle East to London sectors, we can assume that:

1. BA is doing well on the Singapore to London route given the recent reduction in capacity on that route, Singapore Airlines’ recent addition of a fourth daily service and BA’s mentions of Singapore getting an A380;
2. Virgin Atlantic are filling up their planes between Hong Kong and London given that they offer so little capacity on that route; and
3. Qantas, by virtue of their status as a ‘fifth freedom’ carrier between Dubai and London, attracts less profitable traffic (BA and VS both have heavy customer bases in the UK).

Questionable future for Melbourne – London

When you operate an A380 from Australia-midpoint-London, you need passengers getting on at the midpoint to replace those passengers that flew from Australia-midpoint. When Singapore was the intermediate stopover, passengers from Brisbane, Perth, Adelaide and Auckland would replace the passengers who got off at Singapore.

Many passengers are getting off the Qantas planes at Dubai rather than carrying onto London. It is therefore unclear how Qantas is filling up its twice daily A380s between Dubai and London given that:

1. Emirates is more likely to put their passengers on their own planes than give them to Qantas (because, unlike the QF/BA relationship, the QF/EK tie-up is not a revenue sharing joint venture);
2. Qantas has little marketing presence in Dubai and little local recognition; and
3. airlines operating between two foreign countries generally struggle to fill up those planes with anything other than cheap, unprofitable fares.

To add two data points, I recently enjoyed a row to myself between Dubai and London on Qantas.

There are two factors counting in favour of Qantas retaining QF9 beyond Dubai:

1. Qantas justified its Emirates alliance to the ACCC partially on the grounds that Melbourne would lose its London flight if the alliance was not approved (Qantas submission to ACCC, part 7.6, para 6).  Cutting the route after the ACCC approved the alliance would discredit Qantas.
2. Qantas’ premium 5:30 and 6:30 arrival times into Heathrow are of value to Emirates passengers and Emirates may be directing flows onto the Qantas services. Qantas’  early AM Heathrow slots are the scheduling equivalent of the top end of Collins Street and Emirates has no slots until 7AM.

Singapore struggles

It turns out that Qantas’ Singapore services were being largely propped-up by people wanting to visit UK/Europe and that Singapore is struggling as a destination in its own right. One disadvantage that Qantas has on its Australia to Singapore routes is that it is heavily dependent on origin-destination traffic (ie people who want to go to Singapore itself) as it lacks an extensive full-service partner at Singapore Airport.

The above screenshot (prices in Singaporean dollars) shows Qantas is relying on heavy discounting and that the twice daily Sydney services are struggling the most.

BA giving Sydney a red-hot go

British Airways’ core business is operating a monorail between the UK and the US (ie trans-Atlantic flying) and its parent company claims that the “future” lays in increasing a presence in Asia. In short, Australia is (sadly) not a core part of their business.

This made it all the more surprising when BA, in response to being dropped by Qantas, decided to:

1. replace its 747 on the London-Singapore-Sydney route with the 777-300ER to both increase fuel efficiency and provide a more desirable product;
2. start marketing within Australia (it had traditionally relied on Qantas to sell its seats) including emphasising that its services continue to stop in Singapore;
3. operate the flight to/from Heathrow Terminal 5 (which is nicer than the previous Terminal 3);
4. take on Cathay as an Asia-Australia codeshare partner, undoubtedly on terms quite favourable to Cathay; and
5. roll out a lower cost cabin crew to reduce the route’s costs.

The flows indicate that BA is focuses on the Australia to UK market whilst its counterpart Virgin Atlantic focuses on the Australia to Asia market. Given that the Sydney to Singapore route is hard-going in terms of yields, there may be an argument for BA to swap its intermediate stopover to another location (it might be worth giving Qatar a call) where it can perform better on the leg into Sydney.

Qantas – fewer flights, less choice to London

Introduction

Last week saw Qantas scrap two of their four services on the Kangaroo Route between Australia and London with the removal of QF1 Bangkok to London and QF29 Hong Kong to London. This move will reduce the attractiveness of Qantas on the route, as the airline now offers fewer departure time choices than their major competitors. Additionally, Qantas’ competitive advantage of being able to provide multiple stopover destinations has now been removed.

	Before	After
Flight time choices (Aus-UK)	Daytime departure Late night departure	Daytime departure
Flight time choices (UK-Aus)	Daytime departure Late night departure	Late night departure
Stopover locations	Singapore Hong Kong Bangkok	Singapore(others require BA)

It is very interesting that, despite being the largest player in the Australia to UK market, Qantas and BA collectively offer such a narrow choice of flights.

.

‘Fly when you like’ vs ‘Fly when we tell you to’

One acute weakness of the new Qantas schedule is that it actually provides fewer departure options than its key competitors. From Australia, the major competitors offer two choices of departure times; Qantas only offers one as it lacks a night-time departure option:

Out of Sydney, the three daily Qantas/BA services to Singapore (two continue to London) all leave within twenty-five minutes of each other:

It is a similar story leaving London. Starting this week, Qantas/BA will distinguish themselves from their competitors by being the only major player to NOT offer a daylight flight to Australia:

Passengers like having a choice of flight-times. It is interesting that, despite collectively being the largest carrier on the Kangaroo route, Qantas and BA can’t scrape together more than one flight-time option for their customers on a Flagship route.

.

One potential solution

Constructing an Australia to UK schedule involves reconciling multiple factors, including:

• Ensuring an appropriate level of capacity is provided
• Commercially attractive flight times (ordinarily, these involve late-night departures or early morning arrivals in order to minimise passengers’ ‘days off’)
• Working around curfews (at both London and Sydney)
• Fleet utilisation
• Coordinating connections at hubs (particularly at Singapore)

One option to improve Qantas’ Kangaroo route offering would be to re-jig the Hong Kong schedules; this would enable a night-time departure out of Australia towards the UK and a daytime departure out of London towards Australia.

Currently, flights from Sydney, Melbourne, Brisbane and Perth all fly up to Hong Kong during the daytime, have a short layover in Hong Kong, and return to Australia as overnight flights that land back in Australia the following morning. Qantas could change these flights to depart Australia at night – they would arrive into Hong Kong in the following morning and allow passengers to connect to a BA service to London; that flight to London would arrive into Heathrow in the early afternoon. The Qantas aircraft would return from Hong Kong to Australia in the morning (maintaining today’s turnaround times), but be fed by a BA arrival from London. This arrival from London would have left Heathrow at around midday, thereby restoring the daytime departure that had been removed.

A concept schedule is shown below:

.

This schedule would see the Hong Kong to London flight be fed by all the major Australian cities. This avoids the mistake they made last time of “starving” their old Hong Hong to London service of feeder flights, thereby contributing to its demise.

Alan Joyce has stated that Qantas is looking to increase capacity into London in a few years’ time; Qantas could therefore extend their Sydney – Hong Kong A380 service to London to provide the Hong Kong to London link discussed above. Qantas A380s currently sit around at London for fifteen hours each day, so operating these legs would allow the A380 fleet to be used a bit more efficiently.

Thanks for reading

Air NZ enters the Bali fray

Introduction

In June, Air New Zealand will begin operating a twice-weekly  Auckland to Denpasar B767 service. Although there are plenty of Auckland to South East Asia options, Air NZ will be the only carrier to be servicing the NZ – Bali route nonstop.

Flight times are as follows:

NZ245 AKL2350 – 0520+1DPS 763 26
NZ246 DPS0725 – 1925AKL 763 37

Air New Zealand has made an interesting choice in selecting Bali. There is currently heavy competition on the route (via Australia and SE Asia) and, at least superficially, it appears that there are higher-yielding opportunities that could have been pursued.

.

Flight times and connections

Air NZ’s Bali flight will depart Auckland around midnight, arrive into Bali at 5AM, perform a quick turnaround and arrive back into Auckland at 7:25 PM.

The arrival time into Bali may be inconvenient for passengers. Business destinations such as London and Los Angeles call for early arrival times in order to allow premium passengers to get straight to work – however, such a schedule is undesirable for a beach destination such as Bali because passengers will have to wait around until at least mid-morning until they can check into their hotels. Passengers will also dislike having to wake up at 5AM after a big night out in order to catch their plane back to Auckland.

Subject to fleet availability, Air New Zealand may have been better off providing a mid-morning departure (with connections from other NZ cities), an evening turnaround at Bali and an early morning arrival back into Auckland. This scheduling approach is adopted by Australian airlines on their Bali/Phuket routes and also Air NZ on their Honolulu service.

.

Air New Zealand B767 – looking for work

Air New Zealand has chosen to fly to Bali to make use of some spare B767 capacity created by the upgauging of the Honolulu route from B767 to B777. The mid-range B767 fleet has historically been employed by Air NZ on flights to Asia and one-stop flights via the Pacific Islands to the US. However, with the flights to Asia now generally being operated by the B777, and the Pacific Islands to USA network having been largely dismantled, the five-strong B767 fleet has been mostly consigned to mid-range flights to Australia and nearby Pacific.

Essentially, Air New Zealand has some spare B767 capacity (with comfortable, recently refurbished cabins) and has decided to put it to use. Let’s see how the Bali route stacks up to other potential uses for the aircraft.

.

The Bali market and current competition

Air NZ openly acknowledges what we already know – that Denpasar flying is heavily dominated by leisure traffic. The fact that Qantas completely withdrew from the market nearly a decade ago, that the airlines that do fly there do so with fairly high-density (ie little, if any, business class) aircraft and that Bali is cheaper than other beach destinations like Thailand suggests that it will be a fairly low-yielding market.

Air NZ will be competing against one-stop options via Australia on Jetstar and Virgin and one-stop options via Asia on Jetstar Asia, Singapore Air and Malaysia Airlines. Generally, the services via Australia are the cheaper than the via Asia options; however, with Jetstar Asia struggling on its Singapore to Auckland route (they can’t fill the plane), there may be some strong discounting from this carrier in response to Air NZ’s move. I believe that the price-sensitive NZ  to Bali market is unlikely to significantly reward NZ for providing them with a nonstop service (particularly given the somewhat inconvenient flight times).

It is curious that a full-service airline like Air NZ would choose to enter this market, even with a ‘seats to suit’ product, given the cost and revenue profiles of this route.  Of course, one advantage of flying to a “lowest-bidder” market, where the concept of loyalty to an airline is not at play, is that they can come and go as they wish.

.

Other alternatives

There are countless other ways that Air NZ could deploy their spare B767 capacity. Of course, without the extensive data that goes into these network planning decisions, it is impossible to draw any definitive conclusion.

One option would be to operate an NZ – Australia – Asia trip. The collapse of Air Australia has left a hole in the Australia to Asia holiday market and, rather than fly over Australia, Air NZ might be well-served picking up a few passengers from its wealthier neighbour on its way to Asia. As an example, Air NZ could consider operating an Auckland – Melbourne – Phuket route. This would allow Air NZ to pick only the most high-yielding passengers from both markets, and back-fill the “spare” seats across the Tasman with passengers travelling from NZ to Australia.

A very crude analysis of fares in July suggests that there would be greater revenue potential with a stop in Australia:

Air NZ already flies Sydney to Rarotonga nonstop, and used to fly Sydney to Los Angeles nonstop, so the notion of Air NZ flying out of Australia is not completely new. Of course, we do not have the full picture, so it is difficult to say anything conclusively. This is more just some food for thought.

.

Putting it all together

There is definitely money to be made in flying tourists to beach destinations over the winter holidays – with the exception of Qantas (who only fly to Honolulu), major airlines around the world are all getting a piece of the “bucket and spade” action. Whilst the flight times of Air NZ’s new Denpasar flight may inconvenience some, and there could potentially be some extra money to be made by servicing the Australia to Asia market, this is a progressive move on Air NZ’s part and should be applauded.

Qantas cuts India and Auckland to LA

Introduction

Qantas has announced a second round of international network changes (predominantly cuts); this follows the cuts announced in August 2011. In brief:

• Auckland – Los Angeles A332 route axed
• Los Angeles – New York JFK tag upgraded from A332 to B747
• Singapore – Bombay A333 route axed
• Increased A330 flying on Perth transcontinental routes

Running a bigger aircraft on the LAX-JFK shuttle while cutting back the number of services feeding it at LAX will probably kill it off – Alan Joyce is on the record stating that New York is not profitable with the B747 that they are reverting to. Longer term, by cutting India and thereby reducing connections beyond Singapore, one of the Australia – Singapore flights (presumably one of the Perth trips) will probably be cut.

It is also interesting that the most unprofitable route on the network (Auckland to LA)  was actually one operated by foreign crews, undermining management’s argument that Australian pay and conditions are to blame for Qantas International’s demise.

..

Auckland – Los Angeles A332 axed

Qantas is pulling the plug on its long-standing NZ to USA service, essentially handing Air NZ a monopoly on the NZ-USA route (at least until United begin their Houston – Auckland nonstops). Unsurprisingly, Air NZ have announced that they will increase services on AKL-LAX. The NZ Government does not release numbers on passenger loads, so it is difficult to analyse the numbers behind route; however,  the Pointhacks website notes that AKL-LAX is a heavily used byr frequent flyers “burning” points, suggesting that actual revenue is poor.

It is ironic that, despite Qantas management’s cries about the cost of Australian labour making Qantas International uncompetitive, it was Auckland-LAX that got cut. This is because, despite being passed off as a Qantas “Spirit of Australia” route, Auckland – LAX had actually been outsourced to Jetconnect (a NZ labour hire company with lower wages than Qantas). The cutting of this route demonstrates that Qantas International’s problems are more to do with network structure than a few “overpaid” Aussie crews.

One downside is that, by cutting capacity into Los Angeles, the Los Angeles – New York tag loses about 15% of its feed. Joyce stated that the Los Angeles – New York tag was marginal, so how does reducing its feed by 15% whilst concurrently putting on more capacity (LAX-JFK moves to a B747) add up?

.

Los Angeles – New York tag reverts to B747

It is interesting that Qantas is reverting to a B747 on the LAX-JFK-LAX shuttle. Four months ago, Alan Joyce said that the route was only profitable because they had replaced the B747 with an A330 – now they’re replacing the “profitable” A330 with an “unprofitable” B747.

Qantas has been operating the New York “tag-on” since around 1999 – it is a fantastic service and is an example of creative, product-differentiation network planning. Essentially, one of the five morning arrivals into LAX continues onto New York with passengers from the other flights connecting over. This aircraft does a quick turnaround at JFK and returns to LA in time to allow passengers to connect to all five Australia-bound flights. Qantas operates the service for two reasons:

1. Flying home from New York, boarding a comfortable Australian B747 and enjoying five hours of free food, beer and movies over to LA is streets ahead of starving on a yank narrow-body. This provides Qantas with a competitive advantage on the Australia – USA routes.
2. Freight – Qantas can carry a large amount of freight across the USA by operating their international widebodies against the US-based domestic narrowbodies.

The reason why the route is reverting to a B747 is because, with Auckland – LA being cut, there will no longer be any Qantas A330s sitting around at LA to operate the shuttle. There are two factors threatening the long-term future of this route:

1. Increasing a route’s capacity whilst concurrently reducing its feed does not add up. Alan Joyce himself has said that the B747 is too large for the route.
2. Qantas’ new route to Dallas may also cannibalise some bookings on the LAX-JFK-LAX service.
3. Qantas operates fewer “feeder” flights into LAX from Australia/NZ than the last time they tried a daily B747.

On the other hand, Qantas needs only cover the cost of fuel and crew, as the aircraft sits around doing nothing all day at LAX anyway. Medium term, I expect that Qantas will either reduce the frequency or cut the route altogether (and blame the staff). I have used the Qantas New York tag twice and it is a fantastic service – I hope I am wrong.

.

India axed

Qantas is withdrawing its Singapore – Mumbai service; this move is unsurprising, as the route had relatively low yields and poor aircraft utilisation.

Low yields

The route initially started up with a B743 from Sydney – these aircraft were the oldest in the Qantas fleet, with a sub-standard Business Class product and a high number of economy seats. It then moved to an A333 with a tech-stop in Darwin, then to an A332 nonstop, and then back to an A333 tag-on from Singapore. The choice of high-density  aircraft and relatively inconvenient schedules operated on this route indicate that it was patronised by relatively low-yielding traffic. Probably not the best destination for Qantas to have been serving in the first instance.

Low aircraft utilisation

The aircraft used to operate the route sits at Mumbai for around 8 hours. This is largely a product of Qantas tying the route into the Singapore “scissor-hub” and offering connections to the Australian capital cities. Essentially, axing this route will free up one A333 three days a week back into the general fleet – this additional capacity  will presumably be used to either indirectly retire a B747 or for additional Perth transcon flying.

Weakening the Singapore hub?

Cutting Bombay services leaves the Singapore hub with only two onward destinations (London and Frankfurt), which threatens the viability of the hub. Watch as Qantas axes Australia – Singapore services citing a lack of demand (because they systematically dismantled the onward connections). QF72 Singapore to Perth will probably go soon, as they retimed it to depart Singapore at midnight (without any feed) and arrive into Perth at 0440, basically ensuring that it will fail. Another complication with cutting this route is that, because of the way the A330 cycles are timetabled, passengers from Adelaide will now face a longer connection time to London/Frankfurt at Singapore.

Whilst India may be a low-yielding destination, Qantas should be replacing it with a new, high-yielding destination from Singapore. A Singapore to Beijing tag flight, fed from all of the Australian capital cities, would be a sure-fire success.

.

Watch this space

Qantas is setting itself up to fail on the New York route – they are upgauging to the very aircraft that, in their own words, was “unprofitable”. I also predict that flights to Singapore will be cut because of reduced onward connections – to go out on a limb, I doubt that QF72 Perth – Singapore will be around much longer.

What we know about RedQ

Background

Last year, Qantas declared that the future of its international business lay in setting up “a new premium, full service carrier based in Asia under a new brand”. Unfortunately, six months on, critical details such as where the carrier is to be based and what type of aircraft it will fly have not yet been settled on. Some strategy…

The aim of this post is to summarise what Qantas has announced and what the media has reported are the likely forms of the future operation. From this, the likely options for how Qantas’ Asia operations will look can be developed.

.

What we know

Putting together Qantas ASX releases and various media reports we know that the new carrier (which might be called RedQ – they haven’t decided yet) will have the following characteristics:

• Full service – Alan Joyce has described the on-board product as “better than A380”, but this should be taken with a grain of salt given that A320s are likely.
• Hub based – Singapore and Kuala Lumpur have been flagged as likely cities
• Same day connections from Australia to Asia – given that Qantas does not plan to increase widebody capacity, the  mention of “increased frequencies from Australian ports” means that RedQ will be flying to Australia
• Malaysia Airlines is joining Oneworld – this is likely to have some bearing on the decision, particularly as Qantas plans to codeshare on MH’s services to Europe (Amsterdam, Paris, Rome and Turkey)

.

.

.

How it might look

Option 1 – grow the Singapore hub

Singapore is a cornerstone of Qantas’ international network, operating as the ‘scissor-hub’ through which Qantas’ UK/Europe/India flights are funnelled. Essentially, Qantas flights from the major Australian cities arrive into Singapore simultaneously, and passengers can then connect onto Qantas services to London, Frankfurt and India. Additionally, Singapore is the base of Jetstar Asia, a Qantas controlled low-cost carrier operating to cities within Asia using a fleet of 16 A320 narrowbodies.

Singapore is a logical choice as a RedQ hub, as the addition of Singapore to Asia flights would bolster loads on the Qantas services from Singapore to Australia and UK/Europe. Put another way, operating RedQ out of Singapore would strengthen existing Qantas International routes. With additional connection opportunities, existing services (such as Adelaide to Singapore) could be lifted to a daily frequency whilst major cities such as Melbourne could (re)gain multiple daily frequencies.

Qantas has flagged that it would initially require up to 11 A320 narrowbodies for the operation. In the longer term, it is likely that Qantas will be outsourcing some of their 787 flying to RedQ, probably operating some secondary frequencies into Australia.

Strengths

• Bolsters QF services from Singapore to Australia and Europe by improving connectivity options
• Connections to/from Asia could improve the changes of Qantas re-establishing a second daily flight bank out of Singapore (a future post will deal with this)
• Potential for Qantas to re-establish a second flight bank out of Singapore
• Feed from RedQ could potentially allow some EU destinations to be reopened (eg Paris, Rome) either by Qantas or RedQ

Weaknesses

• Requires additional capital (although they did defer some A380s to pay for this new venture)
• Directly competing against Singapore Airlines, which offer more comfortable widebodies and multiple daily frequencies. A small fleet of small A320s just won’t cut it in the intra-Asia market (although it might suffice for connecting traffic from Australia/UK)
• Does not compliment Malaysia Airlines’ entry into Oneworld

.

.

Option 2 – A330s out of Kuala Lumpur

Qantas is reportedly examining the option of using 15 soon-to-be delivered Malaysia Airlines A330s widebodies to base its new operation out of Kuala Lumpur. Qantas is planning to codeshare on Malaysia Airlines services to Amsterdam, Paris and Turkey, so the notion of developing a secondary hub at Kuala Lumpur needs to be explored.

The major drawback of the Kuala Lumpur strategy is that it will result in a “dual-hub” network structure. Qantas has long-complained that they do not have sufficient feed through Singapore to justify services other than London and Frankfurt; this, in turn, means that they lack feed for more than one plane a day to cities like Melbourne and Brisbane (and three a week to Adelaide!). Constructing a secondary RedQ hub at Kuala Lumpur will mean that Qantas has two small hubs rather than one big hub – not a great way to build the kind of momentum that Singapore Airlines or Emirates have achieved.

Another issue is that the new codeshares to Europe do not gel well with potential RedQ flight timings to and from Australia. Unless RedQ do multiple daily frequencies to Australia (unlikely), they will have to choose between connecting Australian cities to Asia or connecting them to the new Europe destinations. This probably means that Qantas will handball end up Australia – Europe passengers over to Malaysia Airlines for the entire trip.

Ultimately, the “capital-light” Kuala Lumpur option will likely see Malaysia Airlines flying a large number of Qantas passengers from their Australian capital city all the way to their destinations. Just to further muddy the waters, Malaysia Airlines is currently in the process of setting up a 737-based premium carrier (possibly called ‘Sapphire’) to serve Asian destinations.

Strengths

• Requires less capital (according to SMH)
• Gels with Malaysia Airlines’ entry into Oneworld

Weaknesses

• Splits Qantas operations between two hubs, fundamentally weakening the route structure
• Adds nothing to existing Qantas International route structure
• Kuala Lumpur’s premium demand is weaker than Singapore’s – neither BA nor Qantas have bothered flying there for over a decade
• Malaysia Airlines’ existing hub in K.L. seems to render the whole RedQ exercise redundant
• Little scope to feed Malaysia Airlines services to Europe (on the Australia – KL leg) without jeopardising Australia to Asia connectivity

.

.

Option 3 – the Hong Kong/China wildcard

Every so often, you hear ramblings about Qantas operating services out of China. It is interesting that Alan Joyce makes such comments, given that over the past few years, the company has:

• Axed Beijing altogether
• Axed Melbourne – Shanghai services
• Axed Hong Kong – London services (through poor network planning), which could have potentially fed an operation out of Hong Kong

In light of Qantas’ recent decisions regarding the PRC, I’d argue that their rhetoric regarding services out of China should not be taken very seriously.

.

Conclusion

There are clearly a variety of route structure, fleet and airline partnership decisions that Qantas can make in developing their revised Asian route structure – these decisions must be made in a manner that complements the UK/Europe flights. If done correctly, the RedQ strategy has the potential to improve Qantas International loads and yields; if this venture is poorly planned, Qantas will end up with a nasty ‘dual-hub’ network split between K.L. and Singapore with a limited schedules out of both.

Ultimately, Singapore offers the greatest potential as a RedQ hub. With Qantas services to Australia and the UK/Europe, and RedQ connections all throughout Asia, the Qantas Group will be able to build up the critical-mass necessary to open up new destinations and provide sorely needed frequency upgrades to cities like Melbourne and Adelaide. The cynic in me says that, instead, Qantas will just outsource the bulk of their flying to Malaysia Airlines, live with a “split-hub” and blame the workers.

Disappointing implementation of SilkAir/VA’s new Darwin to Singapore service

Overview
In March 2012, SilkAir will begin operating the Darwin to Singapore route four times a week using an A320 series aircraft – Virgin Australia will codeshare on the service. The Darwin – Singapore route is Darwin’s only link to a major overseas hub and is currently serviced by a daily Jetstar A321.

Interestingly, the new SilkAir flight offers poor connectivity to Europe and good connectivity to Asia; in the case of Jetstar, the opposite is true. Overall, SilkAir’s lengthy connection times at Singapore, dearer fares and “part-time” frequency mean that it is not the panacea towards the Darwin market´s overseas travel requirements that some may believe.

Comparing connectivity at Singapore
This new flight links Darwin to the Singapore Airlines network, which offers a far wider variety of destinations out of Singapore than Jetstar/Qantas. It also fills the void of full-service carriers out of Darwin since Qantas pulled its daily Cairns – Darwin – Singapore 767 service.

The new service is scheduled to depart Singapore late at night and return before the morning peak, essentially making use of an aircraft that would otherwise sit idle:

MI802 Mon, Wed, Fri, Sun Singapore 1930hrs Darwin 0145hrs + 1
MI801 Mon, Tue, Thu, Sat Darwin 0230hrs Singapore 0530hrs

 

One weakness of this schedule is that it makes for very unattractive connection times to many major destinations in Europe:

Singapore Airlines flights from Europe are primarily scheduled to arrive into Singapore in an early morning bank, so passengers travelling towards Darwin must wait for 13 hours until their 1930 connecting service. Similarly, in the Europe-bound direction, passengers must wait around for 18 hours to connect to the midnight departure bank. Connection times travelling back from the Los Angeles are similarly lengthy, meaning that Darwin passengers are better off connecting via the Australian East Coast.

Of course, Jetstar´s schedule (which operates around the Qantas UK/Europe flight bank as per its Qantas predecessor) is quite limited in servicing Asia, which demonstrates that it is difficult to develop a schedule that pleases everybody.

Closing remarks
This new SilkAir service will cater primarily towards Darwin to UK and Darwin to Asia traffic; most of the new European destinations that are opened up (via the Singapore Airlines network) require such lengthy connections that passengers are better off continuing to fly Jetstar/Qantas to London and backtracking to Europe.

Qantas A380s to Hong Kong and future deployment of A380/B747 fleet

Qantas announced yesterday that it will begin operating the A380 on the QF127 Sydney to Hong Kong service. This is newsworthy in its own right, as it significantly alters the state of competition between the major carriers on the route. However, it is also of interest because it reveals how the Qantas long-haul fleet is likely to be deployed over the next few years.

Sydney to Hong Kong route
Initially, four services per week will be operated by the A380. Presumably, the flight will go daily once Nancy-Bird Walton (Qantas’ first A380) returns from her extended holiday as Qantas tends to avoid operating different equipment types on the same flight number over extended periods.

When Qantas starts running the A380 to Hong Kong in January 2012, it will be the only carrier on the route with First and Premium Economy cabins; this will be a source of considerable competitive advantage, although Cathay plans to introduce a Premium Economy cabin in mid-2012. The deployment of A380s also sees Qantas roll out its Skybed II Business product to Hong Kong, replacing the not-quite-flat bed on the A333s that currently ply the Sydney to Hong Kong route.

Cathay will retain the upper hand in terms of service frequency, operating four daily services against Qantas’ one (two on certain days). This advantage is particularly significant because the Cathay services are spread evenly throughout the day (at least in the SYD-HKG direction):

Long-haul fleet deployment
Placing an A380 onto SYD-HKG provides some further clarity on the likely deployment of the long-haul fleet once the B747 fleet has been cut down to 9 and the A380 fleet lifted up to 14. There are numerous ways to deploy the fleet:

Two things stand out:

1. Looks like either QF107 (Sydney – Los Angeles – New York) or QF63 (Sydney – Johannesburg) will lose First once the B747s are reconfigured. My prediction is that the A380 will to go Joburg because that QF107 LAX-JFK is now operated by a two-class A332 and passengers can no longer book First to New York anyway.
2. The long-haul fleet will be very hard-pressed until the 787s and additional A380s start coming online with no apparent spare aircraft. This means no more B747s on transcons! Admitted, Qantas does operate some lengthy layovers at Los Angeles and London which eat into utilisation but allow more attractive flight times.

Contrary to what Qantas advised, is likely that A380s number 13 and 14 will delivered with a First Class cabin after all. They need these cabins to maintain the current set of first class destinations and it would be operationally unstable to attempt to operate a sub-fleet of two aircraft. My prediction is as follows (with A380s appearing on B747 routes as three class aircraft):

How do you think the Qantas long-haul fleet will look? Am I completely off the mark?

Qantas grounding/lockout: how many passengers?

Today Qantas has grounded all flights in anticipation of a lockout. A quick calculation shows that Qantas International carries approximately 12,000 passengers per day in both directions; this is a large number of passengers to re-accommodate:

However, this is considerably less than the 13,000 passengers per 24 hours in each direction that The Age quoted from Qantas (perhaps a misprint?).

UK/Europe and the US are Qantas’ biggest destinations and see multiple daily B747 and A380 services.The UK/Europe passengers will be easier to re-accommodate than the US passengers. There are many airlines that fly between the EU and Asia/Australia, so a large proportion of stranded pax should be able to be re-accommodated.

The US will prove more challenging as Qantas has a relatively large market share of the route, so it will be difficult for United, Air NZ, V Australia and Delta to pick up the slack. Additionally, there is relatively less capacity between USA and Asia than there is between Europe and Asia to divert the remainder of passengers through.

As for the dispute itself, I don’t really have an opinion; there are always two sides to every story. And here there are three separate stories (management and international pilots, management and engineers, management and baggage handlers).

QF29 Hong Kong to London: How Qantas trashed their own route

In August, Qantas announced their intention to cut their Hong Kong to London service as part of a series of network changes. Its demise can be attributed to a series of poor network planning decisions made by Qantas that starved it of customers.

Background

Currently, Qantas operates a daily 747-400 between Hong Kong and London as QF29/30; this flight begins in Melbourne and is one of four daily Qantas services between Australia and the UK. Qantas is planning to axe the Hong Kong to London route in March 2012.

Qantas also flies to Hong Kong from Brisbane, Sydney and Perth using its A330-300 (the workhorse of the Asia network).

Forgetting to connect the flights

Qantas neglected to follow a basic ‘Airlines 101’ principle in operating their Hong Kong hub – they forgot to time their flights so that passengers could connect. This meant that they could not fill up their Hong Kong to London flight with passengers from around Australia.

Airlines typically provide a service between Australia and the UK/Europe using the ‘scissor hub’ approach. This involves flying services from a range of Australian cities to a central hub where passengers connect onto services to the UK/Europe. Major players in the Australian to Europe market, such as Singapore Airlines, Cathay Pacific and Emirates, all use this approach. Qantas also employs this approach at its Singapore hub. Services from Adelaide, Brisbane, Melbourne, Perth and Sydney are neatly coordinated to connect to onward services to London, Frankfurt, Mumbai and formerly Paris.

The ‘scissor hub’ approach was not adopted by Qantas in scheduling their Hong Kong services. Flights from Brisbane and Perth, which lack a direct service to London, were not timed to meet the flight from London; instead, these passengers were funnelled via Singapore. Essentially, the Hong Kong to London service was fed by only one flight (QF29 from Melbourne) rather than four. An incredibly wasteful approach to planning a service.

Qantas had the potential to make this flight the primary link between Brisbane/Perth and London, leaving the A380s to be fed by services from Melbourne, Sydney and Asia (via RedQ). This oversight was particularly wasteful because Brisbane to London is actually faster via Hong Kong than via Singapore.

Inferior onboard product

Qantas rolled out its updated onboard product onto both its Singapore to London flights but not its Hong Kong to London service. This would have caused passengers to shift to the Singapore hub, thereby artificially diminishing the profitability of the Hong Kong to London route.

Qantas should have given the Hong Kong to London route the same product as the Singapore to London services. This product would have been a source of differentiation against competitors and removed the artificial shift of passengers towards the Singapore hub. It also would have left more space on the A380 for passengers connecting off the new ‘RedQ’ carrier.

A few other What-ifs

• It is likely that Qantas could have continued to operate the Hong Kong to London route, despite the poor scheduling out of Singapore, if they had bought the Boeing 777. Air New Zealand successfully operates the HKG-LHR route using the 777-200ER despite lacking any partner airlines at Hong Kong or London.
• The Hong Kong hub could have been used to operate a tag flight to Beijing to replace the Sydney to Beijing service that was axed in 2009. This would provide additional feed for the London flight and give one of the A330s something to do instead of sitting on the ground in Hong Kong all day.

Closing

The Hong Kong to London route’s supposed poor performance was caused by Qantas’ failure to manage the details effectively. The route could have been a real winner, particularly for Brisbane to London passengers, if Qantas bothered to connect the flights properly and provided the same onboard product that other Qantas London flights have received.

How could Qantas have better managed their Hong Kong network?

Qantas’ upcoming network changes – an overview

In late August, Qantas announced a series of changes to their international network. I plan on examining the details of this plan in future posts, but for the time being, here are the main points:

• London cut from four flights daily to two. The A380 services from Sydney and Melbourne via Singapore will be retained but Hong Kong to London and Bangkok to London services will be axed. The two vacated landing slots will be leased to British Airways for three years.
• New full service Asian carrier out of an unspecified Asian port (presumably Singapore or Kuala Lumpur) fed by services from Australia and Europe. This carrier will operate up to 11 Airbus A320 narrowbodies.
• Thrice weekly Buenos Aires route shifts to Santiago on the basis that it is a “larger, more premium market”. This begs the question of why Qantas selected a smaller, less premium market in Buenos Aires to begin with?
• Significant fleet deferrals, retirements and orders. The B747-400 fleet to be reduced to 9. The final six A380s on order (of 20) will be deferred until 2019 and used to replace the 747 fleet rather than introduce new capacity. In contrast, 110 A320 (Classic and NEO) frames will be ordered for Jetstar, a new Jetstar Japan and the unnamed premium Asian carrier.
• New Jetstar Japan low cost carrier operating 24 A320s.

Since then, Qantas has made the following statements regarding their network:

• Sydney to Dallas route to operate daily. Government data suggests that this route is experiencing strong loads and Qantas has indicated that the route has been successful.
• Heathrow services may be restored after the BA slot lease expires. Alan Joyce has speculated that this may involve A380s freed up from LAX route once 787-9s come online. 

This is the network as it stands today:

And here is what’s proposed (trivial details about Qantas’ new airline, such as where will be based, what it will be called or where it will fly to, have not yet been finalised):

This post is really just to summarise the information that Qantas has disseminated so far – I plan to scrutinise the major points of Qantas’ network changes in a series of upcoming posts.

.

What are your thoughts on Qantas’ upcoming network changes?

.