Singapore’s surprised rejection of Qantas’ premium airline proposal

Courtesy Wikipedia Commons

Courtesy Wikipedia Commons

THERE is a fresh take on Qantas’ abortive RedQ project – that bold initiative in the early restructuring package announced by Qantas to turn its loss-making international operations around. The idea may yet be resurrected.

Qantas chief of its international operations Simon Hickey revealed that Singapore rejected the Australian flag carrier’s request to base its Asian premium carrier in Singapore.

Mr Hickey said: “The Singapore Government said ‘no’. We’re still open to hearing if that changes but you take the umpire’s decision.”

Singapore’s rejection of the Qantas proposal does come across as being somewhat surprising, as Singapore has been known to be a keen supporter of the open market and competition, and is one of the most liberal proponents of the open skies policy. Besides, at the time of Qantas’ expressed interest in setting up RedQ, there had been a lot of speculation as to where it was likely to base the carrier, with bets on Singapore, Kuala Lumpur and Hong Kong.

The airport in each of these cities boasts certain advantages. Hong Kong is close to China, which is the key growth market that Qantas is eyeing. Kuala Lumpur may be able to offer lower charges and has ample room for Qantas to grow Kuala Lumpur International Airport (KLIA) with RedQ as a dominant player. In fact, it was rumoured that the Malaysian authorities were more than keen to anchor Qantas at KLIA in direct competition with Singapore Changi Airport. But it would be obvious why Qantas would pick Changi above the other two airports, although it would face fierce competition from rival Singapore Airlines (SIA), but for its established hub status, its cutting-edge infrastructure and its efficiency.

Why then did Singapore turn its back on Qantas’s proposal? It could not be because there was reservation that Changi might not be able to cope with the increased traffic, as Changi is constantly adding on capacity in anticipation of the regional competition. Was it protecting the interest of SIA, which has never feared competition and turned in many years of stellar performance in spite of it? Or was it the outcome of botched carrot-and-stick negotiations at a time when Qantas might have already decided to move its transit hub on the kangaroo route transit out of Singapore to Dubai? We can only speculate.

Mr Hickey said Qantas was not interested in Hong Kong or Kuala Lumpur as the base for its proposed regional premium carrier. That could be an afterthought. It is understood that Qantas was courting potential partners for the proposed premium airline in the latter days following protest by local employees who feared the loss of jobs although Qantas chief Alan Joyce also said a joint venture would reduce capital expenditure. It might also be more palatable in light of staff concerns.

Malaysia Airlines was said to be an interested party then, and it would mean basing the joint-venture airline in KLIA. But talks between the two airlines broke down.

All that is water under the bridge, but it looks like Mr Hickey is clinging on to the hope that Singapore may yet change its mind. Changi can certainly afford the capacity now that Qantas is moving its hub for Australia-Europe bound flights to Dubai although it has plans to increase flights to Singapore which will remain its hub for Asia

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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