Qantas’ Asianisation thrust

Courtesy Getty Images

Courtesy Getty Images

Qantas is adding more flights between Australia and Hong Kong as well as Manila. From October 26, there will be four weekly services between Sydney and Hong Kong added to the current daily services from Sydney, Melbourne and Brisbane. Services between Sydney and Manila will increase from four to five weekly services, commencing early December to last until late March next year.

This is nothing quite surprising. It may even be said to be expected in response to increasing demand from travellers. But moving resources across the network to meet demands may not be as simple as it seems; it’s not as if there are spare aircraft sitting on the tarmac waiting to be assigned. But Qantas seems to have found a formula to work round the complications, or so it seems, particularly when it comes to seasonal demands.

Qantas International Gareth Evans said: “We’re pleased to add to the seasonal services we’re set to operate to Asia later this year, with the fifth weekly Manila flight again representing the dynamic nature of our network, which has the flexibility to offer our customers more flights during peak seasons.”

This apparently has been made possible by the airline’s continued focus on more efficient use of aircraft across its fleet. And the agility, one may add, in making adjustment to the schedule. To be not only reactive but also proactive ahead of change and the competition, so as to stay lean and mean

That aside, the operations in the last few years demonstrate Qantas’ increased focus on Asia. The airline has earlier announced an additional 140 services to Singapore, Jakarta (Indonesia), and Wellington and Christchurch (New Zealand) over the summer holiday.

Services between Perth and Singapore will be daily, competing directly with Singapore Airlines (SIA)’s four flights daily. It was only in June this year that Qantas resumed direct services between the two cities, operating five times a week. Mr Evans said: “Our customers told us they missed us.” So that forebodes well for Qantas, which is also looking beyond Singapore with connections on partner airlines to destinations such as Koh Samui and Phuket in Thailand, and even Tokyo in Japan, which testifies to the continuing importance of Singapore as a transfer hub. For travellers arriving from Singapore, Qantas will be offering direct onward services from Perth to Auckland from October to April 2016, the third year in a row that it is doing this.

Qantas executive manager international sales Stephen Thompson said: “A key part of our strategy is listening to and responding to our customers’ needs and developing an agile and flexible network which offers more options during peak periods.”

Good work there, and one then asks: What after that? There is a possibility that a temporary operation may become permanent, subject to regulatory approval, particularly if you believe in the industry wisdom that capacity creates demand or as a way to gain approval when demand justifies the case. Yet when you consider the short duration of the fifth weekly service between Sydney and Jakarta – from 2 December to 10 January 2016 – you may be persuaded to believe that Qantas is unlikely to sit its aircraft idle. Qantas has also announced additional services to Bali, a popular destination for Australian holiday travellers – four additional weekly during December this year and January next year, making a total of 33 return services between Sydney and Bali, adding to 65 services per week by Jetstar from Australia. Operating across the northern and southern hemispheres has given it a geographical advantage; it means catering to different peak seasons.

The transformation program that Qantas chief executive Alan Joyce said was the reason for the airline’s dramatic turnaround in profitability had identified Asia as its best bet for growth and expansion. (See Qantas is Asia Pacific’s new star performer, 27 Aug 2017). Australian politicians have long debated the toss of aligning their country with Asia (instead of Europe), at least economically. While the proposal to set up an Asia-based premium carrier never took off, that did not stop Qantas from expanding its reach into the Asian hinterland by other means.

No foreign carrier calling at Singapore more than Qantas has taken advantage of Singapore’s strategic location at the crossroads of international routes. For years until 2013, Singapore has been an important hub for Qantas flights. Although the airline has since shifted its hub for the kangaroo route to Dubai, in an alliance with Emirate Airlines, it continues to retain, even growing, the Singapore hub for connections to the rest of Asia, a strategy that Virgin Australia tries to replicate in a three-way tie-up with SIA and Air China.

However, the game continues to shift. In recent years, Qantas has been introducing more direct services between Asian and Australian destinations. This makes sense particularly when these destinations become tourist attractions in their own right and attract more traffic to justify direct routings. China for one has become Australia’s biggest inbound tourism market, projected to contribute up to A$9 billion (US$6.4 billion) annually to the Australian economy by 2020. Chinese carriers too have increased their frequencies to Australia.

In this connection, Qantas has strengthened its alliance with major Chinese carriers such as China Southern and China Eastern Airlines to deliver expanded services, better departure and arrival schedules, shorter transit times, increased frequent flyer benefits and a wider range of onward connections within China and Australia. Commencing April last year, customers on both Qantas and China Southern could travel on each other’s flights to the four destinations of Xiamen, Kunming, Fuzhou and Urumqi within China, connecting at Guangzhou, from Sydney, Melbourne, Brisbane and Perth, and on the Qantas Domestic network as well as on services between Sydney and Auckland.

More recently, a codeshare agreement with China Eastern not only further increases capacity between the two countries but also maximises Qantas’ presence within China. Mr Joyce said:
“We cannot fly to every destination in China. However, our deepened relationship with China Eastern supports our successful strategy to work with key partners around the world to offer the most comprehensive network and world class travel experiences for our customers.”

Being visible helps; Chinese travellers voted Qantas as having the “Best Cabin Crew” in the 2014 iDEAL Shanghai Awards, judged by more than 100,000 people in Shanghai across all categories, and evaluated by a jury of reporters, columnists and lifestyle writers.

Underscoring how partnerships are at the core of the Qantas strategy in Asia, the airline announced in Mar last year a codeshare agreement with Bangkok Airways which will significantly improve travel options for its customers travelling across South East Asia. Customers will be able to fly from Bangkok and Singapore to six new destinations including Ko Samui, Chiang Mai and Phuket. (See Air New Zealand poised for growth, Sep 10, 2015)

Qantas’ Asianisation thrust is not confined to the operations of the parent airline alone. The budget brand of Jetstar adds to its reach across the region, as can be seen in the set up of the Jetstar Group’s ventures in different locations – Jetstar Airways (Australia and New Zealand), Jetstar Asia Airways (Singapore), Jetstar Pacific Airlines (Vietnam), and Jetstar Japan. The only setback it experienced so far was the Hong Kong Air Transport Licensing Authority (ATLA)’s rejection of its application for Jetstar Hong Kong’s low-cost alternative at the doorstep of the large China hinterland, a move that met with strong objection from Hong Kong based carriers led by Cathay Pacific. (See The real battle behind Jetstar HK’s rejection, Jun 30, 2015)

Optimistically, however, Jetstar Hong Kong’s rejection may be compensated by the increased flights by Qantas between Sydney and Hong Kong. While stating the obvious that “customers travelling from Sydney will have the choice of double daily flights to Hong Kong on peak days of the week for business travel,” Mr Evans hinted that “we’ll look at expanding beyond that if the opportunity is available.”

Hong Kong will have more to be concerned about. As in the case of Singapore which has thrived as a transfer hub, more direct flights between Australian and Chinese destinations do not spell good news for it.

For an airline like Qantas based in a far corner of the world, it is blessed that geography has not deprived it of opportunities in other parts of the world. The ATLA’s rejection aside, while Mr Joyce prided himself as the master of a transformation program that has driven the airline’s dramatic recovery, Qantas too has much to be thankful for the largely liberal skies that loom over Asia. Something for Australia to consider when called upon to open its doors to foreign carriers that wish to mount transpacific operations from its ports to the Americas.

This article was first published in Aspire Aviation.

Competing to be the best: How reliable are survey readings?

Courtesy Cathay Pacific

Courtesy Cathay Pacific


SKYTRAX has named Cathay Pacific as the world’s best airline in 2014, displacing last year’s winner, Emirates. In second and third place are Qatar Airways and Singapore Airlines (SIA) respectively. Asian and Middle East carriers dominated the ranks of the top ten: Emirates (4th), Turkish Airlines (5th), All Nippon Airways (6th), Garuda Indonesia (7th), Asiana Airlines (8th), Etihad Airways (9th) and Lufthansa (10th). No American carrier was placed.

Are those really the world’s best airlines?

The winning airlines are unlikely to question the validity of any survey, as you can see how many of them are listing awards from all and sundry like a laundry list as endorsement of their good reputation. The corollary must be that if you accept the accolade willy nilly, so must you recognize one and all sideswipes.

Which leads to the next question: Is Skytrax the standard?

Skytrax claims its World Airline Awards to be “the global benchmarks of airline excellence”. The winners are decided by 18.85 million travellers from over 160 countries, and that should take care of any misgiving about the survey having an inadequate population and most importantly, the bias factor or its susceptibility to political influence.

Cathay CEO Ivan Chiu said: “The World’s Best Airline award is particularly important to us because it was decided by the votes of close to 19 million travellers from around the world.” Cathay was placed sixth last year and has won the award four times, previously in 2003, 2005 and 2009.

Emirates president Tim Clark said: “These awards are widely regarded as the industry’s benchmark for excellence. To be voted ‘World’s Best Airline’ by millions of discerning travellers is something… to be proud of.”

Qatar CEO Akbar Al Baker said: “These awards are highly rewarding as they are judiciously voted by passengers a true account of the overall experience felt by customers who have travelled with the airline.” Qatar won in 2011 and 2012.

Courtesy Etihad Airways

Courtesy Etihad Airways


However, Etihad’s withdrawal from participation apparently over differences in the methodology may tell a different story. Although it had never won, Etihad was consistently placed in the top ten in the past five years, ahead of Emirates in some years. Despite its withdrawal, Etihad was still ranked in this year’s survey because according to Skytrax, “an airline cannot be withdrawn from the World Airline Awards since these results are directly decided by customers.” That statement should add to the survey’s credibility, yet without taking sides and arguing the toss about fairness, one can only suspect and understand that the subjective nature of the survey (and of any survey) is naturally exposed to dissatisfaction, whether baseless or with reasons which may well be valid, the way that the Oscars results do not sit as squarely with a lot of people. Now and then you get an outstanding actor declaring his or her disinterest in the awards.

The issue is usually one of weightage and relevance of selection. However designed, the respondents may to some degree be steered by what is being asked. Take, as matter of curiosity, the 2014 Skytrax survey readings for the top ten. SIA is ranked ahead of Cathay for inflight entertainment, cabin cleanliness, First Class amenities, First Class cabin overall, seats in First, Business and Economy, and First Class meals; but close behind Cathay in other areas except for its noted absence for airport services, Business Class amenities and Business Class meals. Yet Cathay takes the cake.

It is encouraging to see breakthroughs by airlines such as Turkish and Garuda in a game dominated by the familiar big names. Interestingly, Turkish ranks above everyone else except Emirates and SIA for inflight entertainment. It is no surprise that Garuda tops for cabin crew, the epitome of Asian service culture, in a category swept by Qatar (6th) and nine other Asian carriers: Cathay (2nd), SIA (3rd), Asiana (4th), Malaysia Airlines (5th), EVA Air (7th), ANA (8th), Thai Airways (9th) and Hainan Airlines (10th). In like fashion, with the exception of KLM (8th) and Qantas (9th), the airport services category belonged to Asian carriers: ANA (1st), EVA (2nd), Thai (3rd), Asiana (4th), Cathay (5th), Korean Air (6th), Garuda (7th) and Dragonair (10th).

Yet, giving credit where it is due, one may question the appropriateness of comparing a carrier having limited global presence with others that are more exposed in the global arena, and how a population of largely local respondents compares with the wider global population. Hence it may be more meaningful to look at niche rankings, but we all love the sweeping titles of the best overall, don’t we? Even regionalized readings must be viewed in their proper context. The Qantas Group went ga-ga over Jetstar Airways’ win as best low-cost airlines in Australia/Pacific over AirAsia X (2nd), Scoot (3rd) and Tiger Airways (4th), but the world’s best is AirAsia followed by AirAsia X in second place ahead of Jetstar Airways (4th). Note how the preferences change when the population mix changes.

Who then really is the best overall? It may be difficult to say for sure one definite airline, and under the circumstances a wider reading of the top three or five or up to ten may be a more sensible assessment. The contest is to get into that magic circle of the elite.

Courtesy TODAY

Courtesy TODAY


Equally significant is the consistency over time. Airlines such as Cathay, Emirates, Qatar and SIA may pat themselves on the back for being there long enough to deserve their stripes. Narrow that down further, and you will see that only two airlines – Qatar and SIA – have been consistently placed in the top three in the past five years. Asiana had a good run from 2010 to 2012. Cathay was just outside in 4th place until it tumbled to 6th last year and bounced back to be this year’s winner. The wider reading should lead some airlines such as Qantas to ask why it has dropped out of the respectable club.

One survey alone cannot be definitive, hence winning across notable surveys may strengthen the reading. Compare the Skytrax results with Conde Nast Traveler’s assessment by its readers – based on the same principle of uninfluenced feedback – and you will begin to understand why. In its ranking for foreign carriers (outside America), Etihad is placed 4th behind Emirates (2nd) and ahead of Qatar (7th). Cathay is 7th, and the winner is SIA. Korean Air (8th) did better than rival Asiana (18th), and so did Japan Airlines (16th) over ANA (21st). The Conde Nast top ten includes Virgin Atlantic (3rd), Air New Zealand (5th) and Swiss International (10th).

Then there is the annual Airline of the Year award given by the Air Transport World (ATW) magazine. The criteria take into consideration financial performance (which debunks the myth that the world’s favourite airline is not necessarily the most profitable or even profitable) and visible leaps forward in services. However, naming only one winner can often lead to suspicions of political influence (the way that some beauty pageants are said to be when a winner is crowned) and the tendency to pass the honour around although airlines such as ANA (2007 and 2013) and Air New Zealand (2010 and 2012) had been named twice. Cathay (2006), SIA (2008) and Asiana (2009) had all had their turns. Delta Air Lines is ATW’s Airline of the Year 2014.

Several other magazines also dish out their own annual awards, which may be based on their readers’ feedback, or assessed by a panel of judges or arrived at combining the two methods. Some of them target niche markets such as awards that recognize the best airline for business travel. That in a way avoids spillover or halo effects and sectarian prejudices as, for example, an airline that impresses in First and Business Class may pay scant attention to what happens in Economy.

Nevertheless, surveys are useful tools in maintaining competition. Everyone loves to win, unless you do not give a hoot about how the world sees it and how that may affect your bottom line. So too, everybody loves a winner; but that is no guarantee that the traveller will necessarily fly with the named best airline. Without downplaying their influence on the market, such awards probably mean more to the airlines than the travellers.

This article was first published in Aspire Aviation.

Advertising gimmick: Tigerair’s Infrequent Flyer Club

tigerair adYOU are familiar with a frequent flyer program, but what about an infrequent flyer scheme that supposedly rewards everyone even if he or she doesn’t fly frequently enough?

That’s the new club that budget carrier Tigerair has introduced in Australia targeting the everyday man. This is not to be confused with Stripes, a membership program that is managed by Singapore’s Tigerair Group. The Stripes club comes with an annual fee (S$29.94 or the equivalent of US$23.94) whereas the Infrequent Flyer Club membership is offered free. However, compared to Stripes, the Jetstar Club also charges a fee (A$39 or US$36 per year), which includes access to members-only events, promotional fares, and discounts and special offers from partners.

So what is the big deal about Tigerair’s new “free” scheme?

Tigerair Australia’s Head of Communciaitons Vanessa Regan said: “The Infrequent Flyer Club is a fun promotional campaign to engage with our Australian consumers and allow them to receive exclusive surprises, offers and special deals direct from Tigerair Australia.”

With some sense of humour, you might say this is a spoof on the frequent flyer program adopted by many airlines as a carrot for loyalty. For many people who fly infrequently, the benefits are unrealizable as some of them carry an expiry date. But really is it one big gimmick or novelty by way of an advertising brainchild. The scheme will run on a customer relationship management platform, created in partnership with McCann Australia. So, said McCann Executive Creative Director John Mescall: “Any airline can have a frequent flyer program, but it takes a special kind of airline to think about the people who may not be able to fly regularly.”

A bit of the underdog appeal there, indeed. It may work, capitalizing on the ordinary man’s need to belong and to feel special. Members do not earn points by flying, so they do not fear losing them if they do not make a next trip to top up, or feel the compulsion to fly to reach a next level for better perks. And members get to choose their membership levels designated by such hip names of colours as Bin Green, Hipster Chino, Aerobics Leotard Blue, ‘70s brown and triple emerald sapphire ivory. People love choices. To encourage sign-up, the first 5000 members will get a $100 voucher, and be the first to know about special offers or new Tigerair’s destinations. There is no better way for Tigerair to beef up its database of potential clients.

Is this a formula for definite success? Apart from gaining some PR traction in ribbing the recent overhaul of its frequent flyer program by Qantas (including Jetstar) as the rivals compete for the somewhat dormant Australian market, it depends on what Tigerair does next to shore up the excitement. Membership alone is not a criterion of success. The hard truth about cold business is that customers have expectations, they want to be rewarded for their loyalty, and at some point the good feel has to be translated into tangibles. However, the nature of the budget business is such that perks matter less than cost. In a survey conducted by a major airline of its customers’ preferences – and this, it is to be noted, is not even a budget carrier – travellers prefer a 10-oer-cent discount upfront on the fare rather than points for flight redemption. Better a bird in hand.

Nonetheless, cheers to Tigerair’s Infrequent Flyer Club if only for the fun of it. As the industry moves into a transitional phase, it’s the season to be different. But note that affter the fizz without the champagne, customers will sober, I mean, wise up.

Qantas’ dismal performance: The singer or the song?

Courtesy Getty Images

Courtesy Getty Images


QANTAS reported a loss of A$252 million (US$225) for the half year (July-December 2013) which was worse than the loss of A$91 million last year. At the same time the Australian flag carrier announced it would cut 5,000 jobs as part of a three-year plan to reduce costs by A$2 billion. Other measures include deferring delivery of eight Airbus A380 for the parent airline and three Boeing B787 Dreamliner aircraft for budget subsidiary Jetstar as well as relinquishing some of the routes.

Qantas CEO Alan Joyce said: “We must take actions that are unprecedented in scope and depth to strengthen the core of the Qantas Group business.” He added: “We have already made tough decisions and nobody should doubt that there are more ahead.” So what’s new? One may then wonder if the dismal performance of Qantas is more about the singer than the song.

Mr Joyce attributed the poorer results to competition, high fuel prices and unfavourable foreign exchange rates – all the stock answers you can expect from any airline in a similar situation, not that they were in any way invalid but that they were definitely not the unusual suspects. The unions, naturally disenchanted by the announced staff cuts, had suggested that this might have been in part due to creative accounting in recent years.

It does not bode well for Qantas when the global economy is on the road to recovery with some major airlines already reporting profitable performances in sync with the optimistic outlook forecast by the International Air Transport Association. The flying kangaroo has been struggling to regain profitability on the back of a major restructuring initiative filled with such promise that would have observers believe in its certain recovery although not everyone was convinced. Something seemed to have gone amiss along the way.

A major thrust of Mr Joyce’s “transformation” strategy was to capitalize on the growth in Asia, which saw Qantas mounting more direct services in the region. But the flying kangaroo suffered from an image problem that even Australians preferred to book with competitor airlines such as Singapore Airlines (SIA) and Cathay. According to Mr Joyce, “82 out of every 100 people flying out of Australia are choosing to fly with an airline other than Qantas, not including Jetstar.” That might still hold true considering the airline’s latest results. The Asia plan to avert what Mr Joyce then referred to as an Australian “tragedy” was to launch a premier regional carrier based in Asia code-named RedQ, which never took off, and to promote Jetstar aggressively across the region. Jetstar Japan was launched in 2012 jointly with Japan Airlines, and Jetstar Hong Kong was established with China Eastern Airlines much to the displeasure of Cathay. But even Jetstar, once the star performer, was reporting a loss. Did Mr Joyce misread Asia and underestimate the competition? Was there a mismatch between his enthusiasm and the reality? Or did the fault lie in the execution?

Today Mr Joyce is reiterating the call for renewal he made two years ago when, announcing a 52% dip in first half profits, he said: “The highly competitive markets and tough global economy in which we operate mean that we must change.” At that time, 500 jobs were axed consequently. Then Cathay also reported a plunge of more than 60% in full-year profits (2011) and the results for SIA were just as lacklustre. The airline industry was suffering. To avert further losses largely incurred by its international arm, Qantas split its international and domestic operations into separate autonomous units in May 2012. Mr Joyce could be right that international and domestic operations faced different demands and challenges, and an independent Qantas International would have a freer hand in pursuing the Asia dream and other channels of growth. He said then, “We have begun the process of restoring Qantas International to a sustainable position.” Then as higher losses were expected for the full year came the glimmer of hope when the mega alliance with Emirates Airlines was announced, an initiative that looked likely to hurt rival SIA with the shift of Qantas’ hub for the kangaroo route from Singapore to Dubai that expands its accessibility to Europe, the Middle-East and Africa through Emirates. While Mr Joyce admitted that the alliance had cushioned the losses, the impact was far below expectations.

Only last year did Qantas send out signals that it was back on course, reporting a reduced loss for the first half. Mr 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.” The improved performance of international operations was encouraging. It turned out to be a lull before the perfect storm. To be fair to Mr Joyce, one has to take a long term view of the strategy and recognize that external and unexpected events can affect the initial plans adversely and avert the desired results, and that under the circumstances a change of course would be expected of any dynamic organization. So one should cut Mr Joyce some slack lest one becomes too hasty in one’s judgement of the supposed “Qantas transformation program” which he would now accelerate to achieve a cost reduction of A$2 billion by 2016-17.

But the future looms large with uncertainty. It is not quite clear how Qantas would move ahead as the added measures appear to be short term and expedient, which may decelerate the growth of the airline and open up more room for the competition. A press release issued by the pilots’ association stated: “Qantas management has today outlined a demolition of jobs, but failed to follow through with a strategy for how it will grow the business and serve the national interest.” As if in preparation to ameliorate the negative impact of the devastating results, Mr Joyce has been harping on the Australian government’s unfair treatment of Qantas compared to Virgin Australia. The rules limiting foreign ownership have apparently put it at a disadvantage; rival Virgin on the other hand enjoys the investment that comes from partial ownership by Air New Zealand, Etihad Airways and SIA. Mr Joyce asserted: “The Australian domestic market has been distorted by current aviation policy.”

That restriction might be a hurdle to Qantas’ expansion, but it did not explain satisfactorily the failure of the airline to perform in progression with Mr Joyce’s grand restructuring plan. Above the sound and fury, as Australian Prime Minister Tony Abbott had commented, Qantas would have to first put its house in order.

Move over, Ryanair, the new low-cost model is Jetstar

Courtesy AFP/Getty Images

Courtesy AFP/Getty Images


REPORTING a net profit of 602m euros (US$831m) for the six months to end-September and despite an increase of 1% year-on-year, Ryanair yet again warned that profits are likely to fall for the full year. The airline reiterated an earlier exhortation about the numbers dipping as low as 500m euros compared to last year’s 570m euros, thus negating the gain made in the first half.

It is bad news that profits will fall despite an expected drop in fares by 10% over the winter months. Ryanair attributed this to “increased price competition, softer economic conditions in Europe and the weaker euro-sterling exchange rate.” As a result, the airline may ground some aircraft.

The truth is that Europe’s biggest low-cost carrier is beginning to feel that its hitherto successful modus operandi, hailed as a true budget model, may be finally running up against the wall. Surprise, surprise, surprise it is that the airline is talking about change, and more specifically in the department of customer service when previously it may even be said to have been sitting pretty comfortable and breathing arrogance about being labelled brusque, unfriendly and uncompassionate. Ryanair chief Michael O’Leary acknowledged it is now time to “listen to customers” in a somewhat belated but hopefully never too late attempt to retain customers and attract new ones.

Among the measures to be introduced are: the return of allocated seating in February next year for a smoother boarding process and to enable families and other groups of passengers to sit together; the allowance of a small second carry-on bag, which will be a bonus compared to other low-cost operators; and a 24-hour grace period to allow passengers to correct minor booking errors, a far cry from the alleged erstwhile practice of faulting or penalizing passengers on the slightest technical inaccuracy. It is a lesson learnt that in an increasingly competitive environment, customers do have a choice.

But, of course, many upstarts in the same niche market as Ryanair have failed to make the same strides as the Irish carrier. Some of them tried in vain to tweak the low-cost model to do one better and then ran the risks of evolving an expensive but misplaced hybrid model. Ryanair made no secret about flying the dollar and that everything else was baloney. Can you blame it that in its robust years it had not anticipated that this day of reckoning would arrive?

Image courtesy ABC

Image courtesy ABC


Younger Jetstar Airways and its sister airlines operating in a different part of the world might have gleaned some valuable lessons from the doyen’s experience. A subsidiary of Australian flag carrier Qantas, Jetstar has made its mark not only domestically but also in New Zealand and across Asia with local partners in Singapore, Vietnam, Japan and soon Hong Kong. It is fast becoming the region’s favourite low-cost carrier, competing with AirAsia and Tigerair whose founding fathers included Ryanair. Ranked tops in Australia, Jetstar Airways was second to AirAsia for best low-cost carrier worldwide in the Skytrax 2013 survey. Singapore-based Jetstar Asia was ranked seventh in the same category, but there was no mention of either Ryanair or Tiger Airways (now Tigerair) in the top ten list. In the Asia category, Jetstar Asia was ranked ahead of Tiger Airways. For Europe, Ryanair was outside the radar.

Jetstar is spreading its wings across Asia as Ryanair has done in Europe. It is enjoying an Asian boom, posting double-digit passenger growth. Since 2009, it has flown 23 million passengers within Asia and 10 million passengers from Australia to Asia. However, as pointed out by Jetstar CEO Jayne Hrdlicka, “low fares are just part of the story.” For too long while the going was good, competing on the lowest fares was everything for Ryanair. Price leadership has to be complemented by good products and services. Jetstar has identified “customer advocacy” as one of its drivers for growth. Providing a consistently good experience each time that a passenger flies is the surest way of attracting returning as well as new customers. It is the best advertisement that you can get.

Jetstar has contributed positively to the bottom line of the Qantas Group even though its last full year (ending June 2013) profit dipped by 32%, attributable largely to start-up losses in Jetstar Japan and Hong Kong. Is Jetstar, compared to standalone Ryanair, advantaged by its being an offshoot of an established legacy brand? Jetstar may attribute its success largely to its focus on local and independent management, but you cannot rule out parental influence. The airline is not alone in that aspect, if you consider the many others so conceived. This could well be the reason why AirAsia failed to work with partner All Nippon Airways (ANA) in the Jetstar Japan venture which has since been fully assimilated by ANA and the airline renamed Vanilla Air. Yet Qantas and Japan Airlines so far seem to have done all right in the case of Jetstar Japan.

It is not a given. The parental association can benefit or be detrimental to the offshoot carrier. United Airlines and Delta Airlines were reluctant parents to Ted and Song respectively. Or, it can disappoint. The magic of Singapore Airlines has not seemed to rub off Tigerair, not even Scoot that it wholly owns.

Good bloodline may provide an advantageous lift-off; the rest depends on the offspring coming into its own. Jetstar has scored many firsts since its inception, among them the first LCC in Asia-Pacific to introduce customer self-service for changes and disruptions, SMS boarding passes, and the unbundling of check-in bags. It was also the first LCC to put on board iPADS with the latest content and the first LCC to offer interline and codeshare flights. Soon it will be the first LCC to launch avatar chat (“Ask Jess”).

In all fairness to Ryanair, it is an equally innovative airline and it should be commended for being a bold one too. Here is where the path diverges for both airlines. As a true blue low cost carrier, Ryanair is focused on measures aimed at reducing costs further. The first principle of economics is that ceteris paribus, consumers will go for the lowest cost. If, for example, you do not fancy eating up in the air, why should you subsidise the cost of meals that other passengers tuck in? You pay only when you want to eat. Budget carriers, including legacy airlines – notably North American carriers – operating domestic or the short haul routes are already subscribing to that principle. Ryanair goes further with other measures such as charging a fee for counter check-in and has no compunction about bumping off a passenger who arrives at the airport without a pre-printed boarding pass. Scrimping on staff numbers to provide customer service also helps to reduce its operating costs. Mr O’Leary raised some brows when he suggested charging for the use of the aircraft loo and providing standing room only fares. The vibes turn out to be negative.

Jetstar on the other hand offers more positive solutions to perceived constraints that may be considered by many travellers as necessary evils of the budget travel mode. It has adopted a consolatory approach that has earned it brownie points. What little additional costs it incurs on the swings, it more than makes up for it on the roundabouts. Ancillary services are a major earner for the airline.

Move over, Ryanair, the new low-cost model is Jetstar. Still, it is quite something to hear Mr O’Leary say: “Listen to customers.”

Qantas finds its route to profitability

Courtesy Getty Images

Courtesy Getty Images

The market is tough, admitted Qantas chief executive Alan Joyce when he announced the airline’s FY13 performance. Against that background, even as uncertainty lies ahead for the industry – with the looming fear of a Middle-East crisis as the political turmoil in Syria comes to a head, threatening yet another round of spiralling fuel prices – the Australian carrier deserved a well-earned moment to celebrate its steady recovery in international operations whose losses have shrunk by half to A$246 million (US$221 million).

Mr Joyce attributed the positive swing to Qantas’ alliance with Emirates although the full impact of that partnership would only be felt in 2015, by which time he expected the international arm would be back in the black.

He said: “The Qantas Emirates partnership gives the group a strengthened position on routes to Europe, the Middle East and North Africa, via the global hub of Dubai.” According to him, “Bookings have been very positive, running at about twice the level of Qantas’ previous code-share arrangements for flights to Europe.”

So it has emerged that Qantas has made the right decision – to ditch British Airways for Emirates and re-route the flights through Dubai instead of Singapore. That was a move that could be said to have changed the rules of the game, much to the credit of Mr Joyce. In his words, “It gives us a clear network advantage over our competitors to London and Europe.” That demonstrates how geography can shift with improved technology, enhanced by strategic alliances and positioning. However, Mr Joyce said “there is still a lot of work to do bedding down the partnership in FY14”, unwittingly suggesting that even that could change if taken for granted.

At the same time, Mr Joyce reiterated the importance of Asia in Qantas’ international operations as laid out in its 5-year restructuring plan now in its second year. The approach is one of providing “the best possible product and service on routes to major Asian hubs – and to extend our network through the right partners.” Using Singapore as a major Asian hub is not an entirely new strategy; Qantas has long been taking advantage of Singapore’s liberal aviation policies to connect passengers within Asia.

Besides Dubai and Singapore as part of restructuring the international network “around a series of global gateways”, there is no clear indication of what other hubs Qantas is considering at this moment or in the immediate future. Unless there are more strategically placed and at the same time more cost-effective alternatives, it is unlikely that Dubai and Singapore will lose their importance in this respect. Nor is there any pressing need for Qantas to dot more hubs across Asia, excepting perhaps a most likely third hub to be Hong Kong or an airport in mainland China to capture the Chinese market. Qantas will most likely look to working closely with partners such as China Eastern Airlines to extend its reach across the region.

Softened by the reduced losses of international operations, the Qantas group made a net profit of A$6 million, reversing last year’s loss of A$244 million. The earnings were also boosted by a settlement of A$125 million it received from Boeing following B787 order cancellations. Qantas Domestic, Jetstar and Qantas Loyalty continued to be profitable; however, earnings for both domestic operations and the budget carrier declined.

Increased competition was cited as a reason for the 21-per-cent dip in profitability of domestic operations to A$365 million. However, Virgin Australia, which has acquired a 60-per-cent stake in Tigerair Australia, is expected to report a full year loss of up to A$110 million, pointing also to a general slowdown in demand across the country. Mr Joyce remained optimistic about Qantas’ prospects vis-à-vis the competition, reporting a trend of corporate customers switching back to the airline, apparently “after trying the alternative”. Qantas’s share of the corporate travel market in Australia is 84 per cent.

Jetstar’s profits suffered a steeper drop of 32 per cent to A$138 million. However, the budget carrier remains a strong contender in the low-cost market in the region and a complementary arm of the parent airline if not a key extension of the Qantas network. Jetstar Japan, launched in July 2101 in partnership with Japan Airlines, has emerged as the leading budget carrier in Japan, outshining rival AirAsia Japan which has since been fully acquired by All Nippon Airways and renamed Vanilla Air.

Qantas will prove wrong critics who doubted the viability of a budget carrier in Hong Kong as approval for Jetstar Hong Kong – a partnership with China Eastern Airlines and Shun Tak Holdings – by the authorities looks set to be formalized. With the huge potential of the China market, there is little reason to doubt that the carrier will make some impact on a market dominated by Cathay Pacific and Dragonair.

Going forward, Mr Joyce said “the global outlook is mixed” with signs of recovery in America and Europe but the uncertainty of its sustainability. It being a volatile market, his commitment to focus on “the elements we can control” may be about the best that any airline can do under the circumstances, but within the framework of a disciplined programme such as one known as Qantas Transformation.

Qantas back on course

Courtesy Qantas

Courtesy Qantas

AUSTRALIAN flag carrier Qantas is back on course judging by the results of the first six months (July to December 2012) even as its international operations continue to be in the red but with a reduced loss. 

The airline group reported a net profit of A$111m (US$114m), which is almost triple last year’s A$42m. Equally impressive conversely was the drop in losses for the international operations arm to A$91m from A$262m last year. Qantas CEO 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

Among the measures introduced were the restructure of the airline operations into separate domestic and international units under different management teams, reduced capital expenditure, route restructuring that would see an increased presence in Asia and rationalizing ground operations to reduce redundant staff numbers.

By and large, these measures have produced positive results although profits from domestic operations declined by more than 33 per cent to A$218m from A$328m a year earlier. On that, Mr Joyce said: “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.” But Qantas still boasts an 80 per cent share of the local market. It is Virgin Australia, more than Tiger Airways that Qantas should be wary about. Virgin has only last year acquired 60 per cent of Tiger.

The good news is improved performance by the international operations arm although it is still in the red. It remains a big challenge for Qantas to not lose passengers to rival airlines that include not just long-time competitor Singapore Airlines (SIA) but new ones from the Middle-East such as Emirates Airlines, Etihad Airways and Qatar Airways. The game is shifting in Qantas’ favour as the authorities prepare to formalize their approval of the partnership between Qantas and Emirates, opening up additional channels to Europe, the Middle East and Africa for Qantas through Emirates. Consequently Qantas is shifting its hub for Europe-bound flights from Singapore to Dubai, a move that is likely to shake up competition on the kangaroo route.  The impact could already be apparent in the second half results expected in August.

But not every measure has been realized according to plan. The programme to focus more on Asia has seen new joint ventures for Jetstar in Japan and Hong Kong (pending approval) and increased flights between Australia and Asian destinations, but Qantas failed to kickstart a regional premium airline to be based in Asia on its own or to generate sufficient interest from potential partners in its proposal. That project could be deemed to be finally dead and buried, yet it may have been a blessing in disguise considering the uncertainty of the global economy not sparing Asia entirely and in light of its partnership with Emirates.

You need big moves to reverse deep losses, and it looks like the flying kangaroo is finally back on course. The question is: Can it uphold the trend? It certainly cannot assume its main rivals will stand on the sideline and do little else but watch passively.