Caution keeps B737 Max jet grounded

Courtesy Getty Images

Carriers which had been hopeful that the Boeing B737 Max jet would return to the skies as early as next month have deferred scheduled dates to operate the aircraft.

Earlier in August, Boeing CEO Dennis Mullenburg was hopeful that this would happen in the fourth quarter of the year and the airlines could look forward to capturing the peak holiday season traffic.

American Airlines which owns 24 of the Max jet is pushing the date to Dec 3. United Airlines with a fleet of 14 is moving it further down the road to Dec 19. It looks like both carriers are still hoping to cash in on what shall remain of the peak season including the Christmas holiday. But Southwest Airlines, the largest of the Max operators worldwide with 34 aircraft has moved the scheduled date to Jan 5 next year.

North of the border, Air Canada (which owns 24 Max jets) and Sunwing (with 4 aircraft) are not expecting the aircraft to be operational until next year. For Air Canada, it is Jan 8. And for Sunwing, even later in May. WestJet (with a fleet of 13 Max jets) too is not scheduling Max flights during the year-end holiday season, but said the company might consider an occasional flight to ease the demand should the ban be lifted then.

WestJet’s vice-president in charge of scheduling said: “It’s a little harder to unmix the cake at that point, but we would look at peak days, the Friday before Christmas (for example) where we can still sell seats and we’ll put the airplane back in.”

Elsewhere across the world, affected carriers remain non-committal on their plans. Other major operators until the jet was grounded include Norwegian Air Shuttle (18 aircraft), China Southern Airlines (16), TUI Group (15), China Eastern Airlines (14), Lion Air (14), FlyDubai (14), Turkish Airlines (12), and XiamenAir (10).

The B737 Max jet was grounded globally following two fatal incidents, one involving Indonesian carrier Lion Air in Oct last year and the other involving Ethiopian Airlines in Mar this year, both crashes claiming a total of 346 lives.

Quite naturally, carriers which own the Max jet are keen to see its early return to the skies. Many of them have cut back capacity to cope with the shortage of aircraft and are reporting losses as a consequence. United which took out 70 flights a day in its September schedule will see the number increased to 90 in December. Together, the three airlines – American, United and Southwest – have cancelled 30,000 flights. Delta Air Lines, however, stands to gain from these airlines’ disadvantage as it does not own any Max aircraft.

Budget carrier Norwegian Air Shuttle which plies the ultra-long haul is said to be on the brink of collapse, and the grounding of the B737 Max jet isn’t helping. According to former CEO Bjorn Kjos, the restriction has cost the airline US$58 million. Norwegian, which took the US by storm with its low fares, raising objection from American carriers, has cancelled numerous flights between Europe and the U.S.

Both the US Federal Aviation Administration (FAA) and Boeing have suffered some loss of credibility in the wake of the two crashes. Stories about Boeing’s shoddy work at is plants and allegations of FAA’s relegating its oversight role to the manufacturer had hit hard. FAA’s delayed action to ground the Max jet after a number of authorities across the globe had done so also called into question FAA’s leadership role in the field.

However, FAA may have learnt its lesson. Following meetings between Boeing and various industry players where disagreement on the readiness of the Max jet was apparent, FAA had said, “Our first priority is safety, and we have set no timeframe for when the work will be complete. Each government will make its own decision to return the aircraft to service, based on a thorough safety assessment.”

Europe’s aviation safety watchdog – the European Aviation Safety Agency (Easa) – for one will not rely entirely on a US verdict on whether the Max jet is safe to resume flying. It will instead additionally conduct its own tests on the plane before giving its final approval.

Transport Canada has insisted on the need for essential simulator training in early discussions when Boeing said it was not necessary since the Max jet was a variation of the B737 master model. The authority said it “will not lift the current flight restriction… until it is fully satisfied that all concerns have been addressed by the manufacturer and U.S. Federal Aviation Administration, and adequate flight crew procedures and training are in place.”

According to a report by the Wall Street Journal, multiple regulatory bodies around the world were not satisfied with Boeing’s briefing on the Max software update. They contended that Boeing “failed to provide technical details and answer specific questions about (the) modifications.” Boeing is expected to resubmit documents providing more details, and that these should be first approved by FAA before a follow-up meeting is convened. This in a way reminds FAA of its oversight role.

While affected airlines are looking forward to normalising their operations with the return of the B737 Max jet, what happens post-ban is another story. In fact, it may present a more difficult problem to handle than the technical aspects of the saga as the carriers try to win back the trust of travellers. If, indeed time is the healer, then taking the time to be absolutely convinced of the jet’s airworthiness before lifting the ban may be a good thing for the airlines.

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Is the Boeing Max ready to fly?

Courtesy Boeing

Airlines looking forward to fly their fleet of Boeing B737 Max 8 aircraft have just got their planned schedules jiggered up by the Federal Aviation Administration (FAA)’s announcement that it may take up to a year before the jet is cleared again for commercial flights.

According to the BBC, FAA chief Daniel Elwell said: “If it takes a year to find everything we need to give us the confidence to lift the (grounding) order so be it.”

It may be read that underlying this is the FAA’s understanding that time is needed to regain the world’s trust – in both the aircraft and the FAA as regulator. While Boeing seems ready to sign off the improved jet, saying it has finished updating the pertinent flight-control software, FAA in an apparent redeeming move following censure of its lax oversight is assuming control as the final authority to certify the jet’s safety.

According to Bloomberg, Mr Elwell added at a meeting with representation from across the globe, “If there is a crisis in confidence, we hope this will help to show the world that the world still talks together about aviation safety issues.”

In Boeing’s favour, some airlines have voiced their support of the Max. Understandably so, particularly if the airline owns a sizeable fleet of the jet. American Airlines (AA) for one is confident of an “absolute fix” but CEO Doug Parker was also quick to add, “But…it’s not for us to decide whether or not the aircraft flies. It needs to be safe for everyone.” The airline, which has a fleet of 24 Max jets, has cancelled thousands of flights and has now cancelled Max schedules through mid-August.

Another airline which has pledged its commitment to Boeing is Singapore Airlines (SIA). The airline is pledging its commitment to purchase 39 Dreamliner jets and its re-commitment for a previous order of 30 planes. Although this is not related to the Max aircraft of which its subsidiary SilkAir has six of them, it gives Boeing a boost of confidence after reports of shoddy production and poor oversight at the Boeing plant in North Charleston surfaced, and following grounding of some Dreamliner jets because of problems with the Rolls Royce Trent engine fitted to the aircraft.

Read also:

https://www.todayonline.com/commentary/grounding-boeing-max-and-dreamliner-planes-how-can-singapores-airlines-reassure-customers

It’s good to have friends, indeed. But while it’s not yet known if airlines such as AA and SIA have sought or will seek compensation from Boeing, others which have made known their intention include Norwegian Air Shuttle, Ryanair and the big three Chinese carriers of Air China, China Eastern Airlines and China Southern Airlines. A strongly worded report from the Chinese Global Times newspaper said: “We must use punishment and tell the Americans their practice of using concealment and fraud to extract benefits from others, while benefiting themselves, is unfair.”

Can Boeing regain travellers’ confidence in its B737 Max 8 jet?

Courtesy Reuters

Now that the world’s entire fleet of the B737 Max 8 jet has been grounded, the big question for Boeing must be whether it can regain travellers’ confidence when the suspension is lifted, presumably with its promised software enhancement in place. Of course, much will depend on the conclusions of the investigations into both the Ethiopian Airlines and Lion Air crashes.

The grounding is expected to last through May, but it could be longer.

Some airlines are already considering cancellation of their orders, among them Garuda Indonesia which has an order for 20 planes. Kenya Airways may switch to Airbus and VietJet will await the findings of the investigations before deciding. Boeing itself has temporarily halted deliveries of the new aircraft, but said it has no plans to slow production.

When the all-clear signal is finally given for the service to resume, the airlines may not immediately regain full confidence of the traveller. Following the Ethiopian Airlines crash, many passengers cancelled their bookings or switched flights to avoid flying the jet. It will take a while.

Air crew may not have the choice, although workers’ unions representing them had said their members should not be forced to fly the aircraft if they had safety concerns. With corrective measures in place, they would have no cause to protest.

Travellers on the other hand can always avoid booking a flight operated by the Max 8 jet. However, that may not always be the case as airlines do switch planes according to operational needs. It is likely that airlines may now be more cautious about protecting their right to do so. The traveller’s only option then is to avoid altogether airlines that operate the jet. This may not be possible in some markets.

There were some 370 Max 8 jets in service around the world before the grounding, and because this constitutes a small number of the world’s total fleet, some analysts wrongly point out that the impact would not be significant. What really matters is where the majority of the Max 8 jet is used – mainly the short-haul, and for some airlines that might make up a high percentage of their flights,

Airlines that have the most Max 8 jets in their fleet include Southwest Airlines (34), American Airlines (24), Air Canada (24), China Southern Airlines (24), Norwegian Air Shuttle and WestJet (13).

Time heals. People forgive and forget, and they become more receptive after some time, convinced that the new Max 8 jet is safe to fly. That’s Boeing’s and their airline customers’ best hope.

CAAS’ quick suspension of Boeing 737 MAX 8 a right call, but could SilkAir have done better?

https://www.todayonline.com/commentary/quick-suspension-boeing-737-max-8-right-call-caas-could-silkair-have-done-better

Making sense of flying the world’s longest flight

Courtesy Singapore Airlines

Courtesy Singapore Airlines


ONCE upon a time, the honour of flying the world’s longest nonstop commercial flight belonged to Singapore Airlines (SIA). That was in June 2004 when SIA launched its non-stop service from Singapore to New York (Newark), a journey of 19 hours on the Airbus A340-500 jet covering a distance of 9,535 miles. SIA had earlier in February of the same year inaugurated a non-stop service to Los Angeles, flying 8,770 miles in 18 hours.

Both services had been terminated by SIA, to Los Angeles in October 2013 and to New York a month later. Looking back, SIA chief executive officer Goh Choon Phong cited the unsuitability of equipment for such a long flight that contributed to the unprofitability of both routes and their eventual discontinuation. He said: “There isn’t really a commercially viable aircraft that could fly nonstop.” The airline is said to be talking with Airbus Group SE and Boeing Co. on developing a plane with new technology that would make flying non-stop to the US profitable. In Mr Goh’s words, “We, of course, want it as soon as possible.”

With SIA out of the race, the world’s longest flight today is operated by Australian flag carrier Qantas, from Dallas-Fort Worth in the US to Sydney in Australia over a distance of 8,578 miles and taking up to 17 hours. But that record will soon be broken when Emirates Airlines mounts a service from Dubai to Panama City, Panama in February next year. The journey of 8,588 miles will take 17 hours and 35 minutes. And yet again the title will pass on to another carrier when Air India flies from Bangalore in India to San Francisco as planned, a distance of 8,701 miles that would take up to 18 hours of flight time.

Courtesy Airbus

Courtesy Airbus

Surely there is more to the business of flying such a long route than the media hype that comes with it. In truth a flight of more than 15 hours is hardly an exception. Middle East carriers are aggressively connecting US destinations directly with their home bases. Emirates is already operating from Dubai to San Francisco, Los Angeles and Houston. Etihad Airways flies from Abu Dhabi to Los Angeles, San Francisco and Dallas Fort Worth. Saudi Arabian Airlines has a service from Jeddah to Los Angeles. Qatar Airways operates from Doha to Houston and Dallas Fort Worth.

Courtesy Qantas

Courtesy Qantas

Besides Dallas Fort Worth, Qantas also operates from Melbourne to Los Angeles. Air India already flies from Mumbai to New York (Newark). American carriers are not left out of the game. Delta Air Lines operates from Atlanta to Johannesburg. American Airlines has a service from Dallas Fort Worth to Hong Kong. United Airlines also has a non-stop service to Hong Kong from New York (Newark) and from Chicago, and to Mumbai from New York (Newark) as well as to Melbourne from Dallas Fort Worth.

Other carriers that operate similarly long routes nonstop include Cathay Pacific (from Hong Kong to New York, Boston, Chicago in US and Toronto in Canada); China Southern Airlines (from Guangzhou to New York), EVA Air (from Taipei to Houston and New York), South African Airways (from Johannesburg to New York), and Air Canada (from Toronto to Hong Kong).

It is clear that the operations of such a flight have in the past been hampered by the limitations of an aircraft’s range. With advanced technology, gone are the days of the milk run of an airline hopping from port to port, making the n3ecessary technical stops, to reach its final destination. Take, for example, an airline such as SIA flying from Singapore to London in the 70s stopping en route at Bangkok or Mumbai, then Bahrain, and then Rome and Amsterdam to drop but not pick up passengers. The flying time (including time spent in transit) has been cut down drastically today for a non-stop between Singapore and London, taking only 13 hours.

Additionally what has opened the windows for long distance non-stop flights is the onset of a more liberal open skies aviation policy adopted by like-minded nations around the world. A major problem facing many airlines that are operating services over a long distance with stopovers is the hurdle of the absence of fifth freedom rights. SIA’s Goh recognised this in the case of SIA. He said, with specific reference to SIA’s interest in the US: “There is a lack of viable intermediate points. That’s largely because the countries concerned are not really giving us the rights to operate what we call the fifth freedom from those points to the U.S.” This may be pushing SIA to consider not only putting back its nonstop services to New York and Los Angeles but also adding other points. SIA’s withdrawal is largely seen to have benefitted rival Cathay Pacific which introduced a nonstop service between Hong Kong and New York on the heels of SIA’s termination of its service between Singapore and New York.

Ultimately it is all about filling up the plane. Nonstop services thrive on demand for seats point to point. In an earlier piece that I wrote, a reader commented on how American carriers are losing out by not operating nonstop services from the US to Singapore. The same “how” question may be asked of them as of SIA: Is there enough traffic to justify SIA’s nonstop services to the US? Presently SIA operates from Singapore to New York via Frankfurt, and to San Francisco or Los Angeles via Hong Kong, Taipei, Seoul and Tokyo. Its services are popular in the markets of the intermediate points. Yet it would be presumptuous to think that Singapore’s lack of a hinterland market, compared to, say, Hong Kong situated at the doorstep of the huge China mainland, may not do as well for a nonstop service to the US. The market is as wide as how you define it and make it work. Clever and effective marketing supported by an excellent product and a strong network of connectivity entailing growing partnerships with other airlines can overcome germane geographical issues, the reason why SIA flights to North America continue to be popular among Indian travellers even if they had to connect at Singapore with a layover, the way that the numbers are also increasing in competition on Cathay Pacific connections out of Hong Kong.

But the aviation landscape is constantly shifting and changing. Timing is everything but can also surprise. Emirates’ planned flight to Panama City is premised on what it noted of the Latin American city’s advantageous location, burgeoning business environment and gateway for tourism. Similarly, Singapore too is noted for its strategic geographical location as a gateway to Southeast Asia and beyond, and as a centre for global business, the way that Dubai too has grown in geographical importance as a gateway to not just the Middle East but also the rest of Africa and Europe. There is a hint of the early bird advantage in Emirates’ strategy. The Middle East carrier has so far been quite successful expanding its network across the globe, and its penetration into the US territory has recently caused the big three of American carriers (United, American and Delta) to cry foul alluding to an unfair advantage it enjoyed from state subsidies.

So too would SIA have enjoyed that early bird advantage when it launched its nonstop services to Los Angeles and New York, and becoming the first legacy airline to operate an all-business class service, which indicates the market segment that SIA was after. In fact, SIA was not the only Southeast Asian carrier to operate nonstop to the US. Thai Airways International introduced nonstop services to New York and Los Angeles in 2005. The New York run was short lived, ending in 2008. The nonstop Los Angeles service followed much late in 2012. The spiralling cost of fuel was cited as a reason.

Courtesy AP

Courtesy AP

But for Air India, there could not a better time than now in the context of the low fuel price that airlines are enjoying. The carrier’s planned service from Bangalore to San Francisco is a dream stolen from erstwhile Indian competitor Kingfisher Airlines which went under a heap of debts before it could realise its ambition. The new link appears to be a logical move particularly when there is a significant Indian population in Silicon Valley and there is increasing demand for travel between the two cities which are cyber hubs on opposite sides of the world. Besides, India has a large population base to justify more nonstop flights, unlike Singapore but like China, which has seen more nonstop flights from China to countries like Australia. Air India’s first challenge would be to attract Indian passengers back to flying with them non-stop where the options are available instead of connecting on other carriers. The record for flying the world’s longest flight is good only when the plane has the load to make it profitable.

This article (alternatively titled “Making sense of ultra long-haul flights” was first published in Aspire Aviation.

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.

Air New Zealand poised for growth

Courtesy Air New Zealand

Courtesy Air New Zealand

Air New Zealand (ANZ) is probably best known for its innovative approach in its in-flight safety video presentation. Drawing inspiration from the Men In Black to Hobbits of the Middle Kingdom, what used to be or is supposed to be a staid, no-nonsense delivery of critical information that is often ignored by many travellers, particularly repeat fliers, the presentation has become entertainment. Though not without controversy, the videos show how ANZ is not only innovative but also bold enough to break tradition. While the initiative cannot be said to be a marketing strategy to attract more customers, one is tempted to ask if ANZ is in like manner finally emerging, albeit slowly, from a lacklustre past and turning heads across the industry.

The kiwi airline has just reported an impressive full-year performance. Operating revenue as at end-June 2015 was NZ$4.92 billion (US$3.01 billion), increasing by 6% over last year. But annualised earnings before taxation rose by 32% to NZ$496 million, and the statutory net profit after taxation was NZ$327 million, up 24%. The results were released right after Qantas’ announcement of a dramatic turnaround and were not surprisingly overshadowed by the hype drummed up by the flying kangaroo’s performance and no less the outspoken personality of its chief executive Alan Joyce (See Qantas is Asia Pacific’s New Star Performer, Aug 27, 2015).

In their part of the world, ANZ and Qantas are major rivals. Indeed, considering that ANZ’s short-haul load makes up 88% of the 14.3 million passengers carried for the full year, the kiwi airline is more a regional than international airline. Australia was its biggest membership base for ANZ loyalty program Airpoints, with growth in that market exceeding 20% during the year. ANZ chief executive officer Christopher Luxon said: “This doesn’t surprise us as more Australian than ever are embracing the Air New Zealand product and service offering whether it be on the Tasman, to the Pacific Islands, North America or South America.”

Obviously Australia is an important market which is critical to ANZ’s growth as an international airline, perhaps an ironic corollary to how Qantas probably sees New Zealand as a necessary appendage by offering a one-dollar fare for onward travel through Australian gateways. Both airlines have enlarged their interest bases in each other’s land – Qantas through its budget subsidiary Jetstar Airways and ANZ its investment in Virgin Australia. And both airlines, situated at the far end of the kangaroo (and beyond) route, face competition beyond their shores from a slew of airlines such as Singapore Airlines (SIA), Cathay Pacific and Middle East carriers.

Mr Luxon said: “We remain focused on the Pacific Rim as our growth strategy and will continue to provide the best connections, product and service at competitive prices, to maintain and grow our market share in these regions. Next year will see further capacity growth in international markets as we look forward to new routes starting in December 2015 to Houston and Buenos Aires. And while we are gearing up to launch these exiting new routes we have a team assessing potential new opportunities in Australia, Asia and the Americas.”

Can ANZ overcome an apparent geographical disadvantage and turn it into a strategic marketing benefit, and identify new windows of opportunities?

Mr Luxon has identified the Pacific Rim as its focus. So, fly west. The Americas are much closer and offer room for growth. Qantas too in recent years has been ramping up its connections westward, penetrating deeper into the US. It operates the world’s longest non-stop flight, between Sydney and Dallas (the record will go to Emirates when it introduces a service between Dubai and Panama City in February 2016). The challenge remains whether ANZ has enough hinterland traffic to sustain that initiative, and whether this will hinge on how successfully it can challenge Qantas on market share for the region. To turn a geographical advantage into a benefit demands a lot of the innovative spirit to make it work. ANZ is already flying onward from Los Angeles to London with fifth freedom rights.

Meantime Qantas has not only strengthened its alliances with American Airlines but also entered into partnerships with airlines in other regions, especially China having identified Asia as a potential area of growth in its restructuring plans. While still maintaining a hub for Asian connections in Singapore (after moving the hub on the kangaroo route from Singapore to Dubai in partnership with Emirates Airlines), it has been active in mounting direct flights between Australian and Chinese destinations. This, of course, makes sense when China has become Australia’s biggest inbound tourism market. The Qantas/China eastern connection now commands 87% of the market share on the Sydney-Pudong (Shanghai) sector. Qantas would have commanded a strong presence in Hong Kong in a tie-up with China Southern Airlines had the Hong Kong administration not rejected the Jetstar Hong Kong’s application.

Qantas offers a ready lesson since Mr Luxon had expressed ANZ’s interest to grow in Asia although, to be noted, Virgin Australia which is 26% owned by ANZ has also entered into an alliance with Air China for flights between China and Australia. Just that it seems a couple of steps behind. However, there are situational differences between Qantas and ANZ although the challenges may be similar. Among the factors for ANZ’s success, ANZ chairman Tony Carter cited “the continued development of our alliance partner relationships”. ANZ and Air China will jointly launch a Peking-Auckland service in December.

Mr Carter is optimistic about ANZ’s immediate future. He said, “Given the current known operating environment, along with our increased capacity and improved operating efficiencies, we expect to achieve significant earnings growth in the coming year.” How “significant” that will be is to be seen, but Mr Carter seemed encouraged by “current sales momentum”. Of course, the lower fuel prices help, but then as Qantas Joyce said, “Every airline gets the benefit.” What lifted Qantas above the rest, according to Mr Joyce, was its transformation program. This does not mean ANZ should roll out a similar program. Far from it. We’d rather be surprised by ANZ’s knack for innovation a la Lord of the Rings.

This is an abridged version of the article which was first published in Aspire Aviation, titled “Partnership is Air New Zealand’s answer to litmus test” .