Why is Singapore important to Qantas?

Courtesy Qantas

Courtesy Qantas


YET again Qantas reiterates the importance of Singapore to the airline. Qantas chief financial officer Narenda Kumar told Singapore’s Today newspaper just that, as if out of a guilt complex to having to continually justifying the Australian flag carrier’s recent shift of its hub for European flights from Singapore to Dubai, consequent to a mega commercial agreement with Emirates Airlines for the kangaroo route.

Singapore should however not be unduly flattered by Qantas’ reassurance – that it is doing Changi Airport a favour. It is cold business, and Qantas is doing it for itself. Singapore, as a major Asian hub, is not a point that Qantas would skip in its network, the way that many, if not all airlines, do not want to bypass London if it can help it in reaching out to, across and beyond Europe.

Truth be told, Qantas needs Asia, and Singapore is key to that strategy.

Mr Kumar said: “When you think about how the timings of our flights and how our schedules used to operate, it was all about the end-to-end destinations.” He added: “Now we are able to put in dedicated flights (in Singapore), improved timings and increased connections, and this has made Singapore and Asia that much more important.”

Yes, indeed, if Qantas is focussing on end-to-end traffic, then it does not matter whether its kangaroo run stops at Singapore or Dubai, or for that matter anywhere else, which could well be Bangkok, for example, so long as it offers the best deal for its customers and the most cost-beneficial modus operandi for the airline. For years now, the international arm of Qantas operations has been in the red, and the market served by the kangaroo route is a critical component of its operations.

Tying up with Emirates, Qantas now boasts that its customers can connect to more than 70 destinations to Europe, Africa and the Middle-East out of Dubai. For some travellers, Dubai might offer a more comfortable mid-point in their travel, depending on the timings of the flights. Unlike some other possible mid-points, Dubai International is said to be a competitive alternative to Changi. Strategically, it is not what Dubai offers on home ground but beyond that probably convinces Qantas of its advantage over Changi.

But, as Qantas from the day it announced the tie-up with Emirates until today continues to reiterate, Singapore is in the same way an important hub for its connections to the rest of Asia. It is not something new; Qantas has for years used Changi, courtesy of Singapore, to fan out flights to other parts of Asia without restricting Qantas passengers to having to access those destinations only from Australia. In other words, Changi has long functioned like Sydney, Melbourne or Perth for Qantas. Of course, Singapore enjoys the benefit of becoming a favoured and convenient tourist’s stopover for Qantas passengers as well, though not undeservedly for what it has to offer. This is not to underplay the popularity of Singapore as a destination for Australians, hence the remark by Mr Kumar about the focus on end-to-end traffic.

Then again, talking about end-to-end traffic, Qantas is not wasting time tying up deals with other airlines, such as China Eastern Airlines, to provide more direct access for Australians to Asian destinations and vice versa for nationals of Asian countries to Australia. In other words, this can reduce the reliance on Changi as a transit stop, not that this will spell immediate gloom for Changi since Qantas has announced it is in fact increasing flights to Singapore. The increase may be a necessary change for now, with its shift of its hub for European flights from Changi to Dubai International.

Still, the loss of Changi’s hub status has exposed the vulnerability of Singapore’s apparent geographical sovereignty, a reminder of how in the 90s there was rumour of Qantas threatening to move its Singapore hub to Bangkok. Changi has done exceptionally well in fending off the competition from regional airports, but that ghost may still be lurking in the shadow of its success.

As part of its Asian strategy, Qantas has been pushing and building up the Jetstar brand. It is Qantas’ intention to use budget subsidiary Jetstar Asia to increase its connections with Asian destinations such as Kuala Lumpur and Bangkok through Singapore, which is home to the budget carrier, and in direct competition with rival Singapore Airlines (SIA)’s Scoot and Tigerair and Malaysian operator AirAsia. Speaking of the advantage of the network connections between Qantas and Jetstar, Mr Kumar cites the following example: “If someone is going from Australia to Singapore to Shanghai and back to Australia, you can do that it in three sectors with us without having to return to a hub to complete your itinerary.”

It looks like Qantas may be having its cake and eating it. But if that helps to spur traffic growth at Changi, Singapore is unlikely to censure it. Qantas’ nemesis is not Changi but SIA. Tying up with Emirates is like two hitherto rivals taking on a common foe. Changi may not be that worse off without Qantas’ kangaroo run routing through it, so long as it continues to grow its Asian hub and, as Qantas has repeatedly assured it, remain important to the Australian carrier. For SIA, it will be a different story.

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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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