Airbus A380: Big is not necessarily beautiful

Courtesy Airbus

BIG is not necessarily beautiful. Now that Qantas has cancelled its order for eight Airbus A380 superjumbo jets while Emirates, the largest operator of the double-decker jet, is also considering switching some orders to the smaller A350, the future of the world’s biggest aircraft hangs in the balance.

A Qantas spokesman said: “These aircraft have not been part of the airline’s fleet and network plans for some time.”

Clearly things are changing and the preference is trending towards a smaller but more fuel efficient aircraft.

The A380, which can carry as many 850 passengers, is supposed to cater to the rising demand for seats and at the same time relieve airport congestion. However, ten years after its inauguration, the industry is yet again shifting. It may seem the ideal solution moving more people at the same time. But as more airlines compete with non-stop flights, filling to capacity becomes increasingly challenging.

Qatar Airways Group CEO Akbar Al Baker said: “As an aircraft, it is very well suited for routes that require high capacity. We have successfully deployed it in markets where we see this large volume of passengers and operate to slot-restricted airports.” However, he was of the opinion that “this aircraft is very heavy (and) has very high fuel consumption.”

Besides, its size does not allow the flexibility to use it on other less populated routes which are dependent on seasonal demands.

Qatar has 10 A380s in its fleet. Other major operators include Singapore Airlines (24), Lufthansa (14), Qantas (12) and British Airways (12). But none comes near Emirates’ fleet of 109 with more than 50 on order.

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Qantas considers “crazy” ideas for ultra-long flight

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Qantas is taking the lead in raising the bar for the ultra-long flight. And it is understandable why. The Australian flag carrier will be launching the world’s longest flight from Sydney to London in 2022 – a journey of 20 hours and 20 minutes.

Qantas is already flying non-stop from Perth to London, but the flight (17 hours and 20 minutes) is shorter than Qatar Airways’ 18-hour flight from Doha to Auckland and Singapore Airlines (SIA)’s flight from Singapore to New York (closer to 19 hours).

However, not many people may think staying up in the air for that long a time is the best way to travel. So the task for Qantas is to shift that mindset. According to the airline, their Perth-London experience has shown that health and wellness are the main concerns of passengers, and these may be translated into “comfort, sleep, dining, entertainment, and state of mind”.

The package goes beyond providing more comfortable seating, noise-reduced headsets and food specially designed to help the body adjust to the journey.

The limited space of the aircraft’s pressurized cabins and its complete lack of view pose a big challenge. So pre-flight programs become an option.

Qantas has introduced a lounge at Perth International with ‘light therapy’ showers, hydration menus and yoga classes to reduce the effects of jetlag. But this facility is only open to customers travelling in business, gold, platinum and platinum one Frequent Flyers, Oneworld emerald and sapphire customers, and Qantas Club members and their guests.

What about the rest of the travelers who are travelling in economy? These are the passengers who probably need more convincing than premium passengers. Unless, as in the case of SIA’s Singapore to Newark flight which offers only business and premium class seats (there again, certain privileges may not apply to the lower class).

That said, what really matters is what happens on the flight. According to a Qantas study, suggestions include common spaces for stretching (now there’s the rule about not conglomerating), a cafe and stand-bar (which is not new even for the long-haul), exercise bikes and guided meditations.

Think cruise, as it were, although that’s not quite a fair comparison. But they all seem to be saying: If you can’t sleep through the flight or enjoy the view outside, and when you are tired after watching several movies or getbleary-eyed reading, you want to be doing something else or simply to get out of your seat.

Qantas said it is thinking outside the box and considering some “crazy” ideas. That will certainly change the flying experience, cost aside. It may mean the return of luxury air travel at least for the ultra-long haul.

But it is a strategic investment for the flying kangaroo “because of where Australia is situated on the globe,” said Phil Capps, head of customer experience. He added, “we’ve always had to push the boundaries of long-haul flying to ensure our passengers arrive at their destination ready for the next stage of their journey.”

While more airlines are battling it out in the long and ultra-long haul arena, the real competitor for Qantas may be SIA since there may still be many travelers who prefer to break their journey and because Singapore Changi Airport is the indisputable airport for transiting. The corollary is that SIA will be equally challenged to keep them coming through Changi.

Joon’s failure re-validates old lessons

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In just a year after its launch, Air France is shutting down its low-cost subsidiary airline Joon which promised to carve out a new niche market among millennials. The reason, said Air France, is because the brand had been “difficult to understand from the outset.”

Strange as that may sound, it shows how a major player like Air France itself has failed to understand the market forces at play. Or, an ill-timed miscalculation of the market trend.

A little history is appropriate here. When budget travel first emerged on the scene, legacy airlines were inclined to dismiss the upstarts as unlikely competitors, believing their markets to be markedly different. The established carriers, so to speak, were not interested in the budget market and were quite happy to let low-cost operators be.

The failure of many an ambitious budget carrier supported that view, particularly at a time when the volatile fuel price moved like a yo-yo but largely trending upwards. That hit the budget carriers hard since fuel is a significant component of their cost, and cost is all that budget travel is about.

But some like Ryanair and easyJet survived the storm and made good progress. That was when the big boys decided they too wanted in on a flourishing market. A number of them set up their own budget arms, such as United Airlines’ Ted and Delta Air Lines’ Song. They didn’t last long.

As the line of competition began to blur with low-cost carriers soon attracting business away from the traditional sources, more legacy airlines carried the battle cry into the fray. Among them, British Airways which started Go, which it later sold; Singapore Airlines (SIA) which went into partnership with Ryanair to start Tigerair; and Qantas which set up Jetstar.

The budget threat heightened with low-cost carriers venturing into the long-haul. There were casualties along the way, a notable one being Oasis Airlines which flew from Hong Kong to London as well as Vancouver. Hailed as a trail blazer for good service on a shoe-string budget, it could not survive the barrage of rising costs.

But that didn’t stop others to boldly go into a domain dominated by full-service airlines, a move which many observers thought was foolhardy. Today, low-cost carriers such as Norwegian Air Shuttles, Wow! Air and AirAsia continue to rattle the hitherto safe market of the Goliaths.

It seems independent low-cost carriers are more successful than budget offshoots of legacy airlines with few exceptions such as Jetstar. Why so is this? The failure of Joon only serves to revalidate the lessons of past failures.

The overall market has shifted from one distinct full-service vs budget scenario to a common market for all airlines. For many travellers, it is a conscious choice between legacy and budget carriers, the consideration not so much in name as in value for what it costs. For many travellers, the comfort and convenience of full-service still outweigh the savings of flying budget, particularly for the long haul. But for a growing number too, despite the higher risk of flight disruptions by low-cost carriers, why not?

Studies have shown that millennials have different priorities, and the budget model of paying for only what you want may have some appeal as it means control over how you spend your money. The new and younger travellers are more adventurous and not averse to taking chances.

The shift in the market is becoming more evident in how legacy airlines are in fact no longer completely full-service as they used to be, adopting increasingly the budget pricing model in charging for ancillary services what used to be part of the package deal, such as seat selection, priority boarding, and checked baggage.

It is not a given that a successful legacy airline will be as successful in operating a budget subsidiary. On the contrary, it faces the challenge of separating the two entities to operate them on their own terms. Too often this may be compromised with the parent airline subsidising the struggling offshoot. At the same time, the parent’s product may be diluted.

Much as the parent airline likes to maintain its distance and many of them have declared that their budget offshoots are running on their own steam, the reality is far from being so. Their influence is inevitable, however indirect and unintended. That may lead to tweaking the low-cost model to be less budget and more a copy of the old block, resulting in higher costs.

This is also not helped by the expectations of the customer when the budget offshoot carries the association with the reputable parent’s brand name. For example, while SIA has earned the reputation of being one of the world’s best airline, the same could not be said of Tigerair whose customers were sadly disappointed when the carrier ran into frequent bad patches.

What can be worse is when the budget subsidiary begins to compete with the parent company for the same low-end business.

American carriers however have found a solution to that: instead of operating separate budget offshoots to compete with independent low-cost carriers, they have introduced basic economy fares with similar terms to be accommodated within the same aircraft. The practice of offering different fare types even within the same class of travel is not new, but basic economy is aimed at keeping customers who may switch to budget carriers. And the model is gaining popularity across the industry.

Some observers may think Air France’s decision to shut down Joon premature as it has not allowed the latter time to grow. But not being clear about the product or the direction it is heading, it would be a hazy road ahead. It might as well nip the problem in the bud.

Singapore Airlines spreads its wings wider across the US

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Singapore Airlines (SIA)’s catchy “seamless to Seattle” byline echoes the popular Hollywood movie title “Sleepless in Seattle” starring Tom Hanks and Meg Ryan as it announces plans to launch a non-stop service to the Washington state gateway in north western USA. Flight time is estimated at 16 hours 30 minutes. Mark the date: 3 September 2019.

Seattle will be SIA’s fifth US city in the airline’s network after San Francisco, Los Angeles, New York and Houston. It is also the fourth city to be served non-stop from Singapore. Houston is served via Manchester in the United Kingdom (UK), the first connection between the US and the UK for the airline, which has historically been fighting hard to secure rights to cross the pond from Britain; its initial interest was to fly from London to New York.

Clearly the Singapore carrier is spreading its wings wider across the US. Based on current schedules, the Seattle service will increase SIA’s operations to 57 flights weekly. In the early days, the airline also flew to Honolulu; today, that destination is served by its budget subsidiary Scoot.

Strategically, SIA is well placed in the major hub cities, serving almost the four corners of the US. Seattle is a good bet as a western gateway into the heart of the US, particularly when it can also leverage on the wide network of Alaska Airlines in their partnership. Seattle is also a hop away from Vancouver in western Canada which SIA used to serve but may now use Seattle as the alternative.

At home, Changi Airport’s hub status will be enhanced by SIA’s success to channel traffic through the airport to regional destinations.

As SIA pushes more into the US, you may wonder which other cities are also on its radar. Will it be Chicago next? Too early to think about it? Not quite, in this business. And if you think Seattle is some ten months away, according to the SIA website, flights will be available for booking from 18 November 2018.

Qantas is changing the game

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After the successful launch of the non-stop Perth-to-London flight in March, Qantas is now working on plans to introduce a non-stop Sydney-to-London flight, which is expected to take a little more than 20 hours. Boeing and Airbus have been invited to retrofit an aircraft that will fly the distance, and Qantas CEO Alan Joyce expected a launch by 2020.

This is set to be a game changer, continuing the momentum set by the Perth non-stop which, according to the Australian flag carrier, is performing well, and in fact, exceeding expectations. Mr Joyce himself said early signs were positive, and that the new route “is the highest rating service on our network.”

The task now is how to make the ultra-long haul comfortable enough to influence the pattern of travel and get non-believers on board. According to the Independent, a Twitter poll with over 1,200 responses showed that 40 per cent would prefer a non-stop flight, 30 per cent would want a break in the journey, and the remaining 30 per cent said it would depend on the fare.

“We’re challenging ourselves to think outside the box,” said Mr Joyce. “Would you have the space used for other activities – exercise, bar, creche, sleeping areas and berths?”

Maybe think, along the line of a cruise?

One suggestion put forth was converting the plane’s cargo hold into sleeping pods.

With more non-stop ultra-long haul flights from Australia – Perth now, Sydney next and most likely Melbourne to follow suit – to London and possibly other European destinations such as Paris and Athens (and further down the road to key destinations in Africa and the Americas as well), how will this affect the competition?

The Kangaroo Route has been a lucrative route for Qantas and rivals that include Singapore Airlines (SIA) and Middle East carriers, notably Emirates Airlines (despite its alliance with Qantas), Etihad Airways and Qatar Airways, flying via their home airports. Even Cathay Pacific may be counted as a veritable competitor.

However, these airlines are themselves also operating the ultra-long haul, so they are not unaware of how the game may be changing. Take, for example, the Middle East: Emirates, Etihad and Qatar are all operating non-stop to Los Angeles, albeit from their different home airports of Dubai, Abu Dhabi and Doha respectively, in close proximity, and this is besides Saudi Arabian Airlines (Saudia) flying from Jeddah. Both Emirates and Qatar are also flying non-stop to Auckland.

Asian rivals Cathay Pacific and Philippines airlines both fly non-stop from New York to Hong Kong and Manila respectively, and will soon be joined by SIA connecting the Big Apple with Singapore. Cathay and Philippines are also competing on the non-stop option from Toronto, while SIA and United Airlines are taking on each other flying non-stop between San Francisco and Singapore.

Perhaps to the relief of Qantas, British Airways (BA) has expressed no interest in mounting non-stop flights between Australia and the UK. In fact, over the years, BA has reduced its interest in Australia, currently operating only one service from London to Sydney via Singapore.

It seems that the ultra-long haul aims at narrowing the rivalry on key routes where point-to-point traffic is the target, and is perhaps also an attempt to claim native rights, cutting out third parties jumping on the bandwagon. The question is whether there is adequate traffic to justify the operations.

The fortunes of some airlines may shift, so too those of some airports which rely on transit traffic with no real attraction other than being a convenient stop en route. One only needs to look back at how Bahrain Airport quickly lost its status when new technologically advanced aircraft able to fly a longer distance without refuelling emerged on the horizon.

Dubai International and Singapore Changi are two popular hubs on the Kangaroo Route. How will their fortunes change?

Yes, they may lose some traffic with Qantas flying direct from Perth, Sydney and Melbourne, but all is not lost so long as there continues to be up to 70 per cent of travellers who are yet convinced the ultra-long haul is the way to fly. The airlines themselves understand the dynamics, hence the dual strategy, offering the options. Qantas may reduce some flights, but it is unlikely to completely stop flying via Dubai or Singapore. Similarly, SUA will not cease making a stop at an Asian port just because it has introduced non-stop flights to Los Angeles and San Francisco.

Again, if one sees how Dubai International does what Bahrain could not do, reviving the importance of a Middle East hub with convenient connections to Europe and Africa, no less owing to the vast network of Emirates, and how Changi has enticed transit and transfer passengers with being more than just another airport, one can be hopeful of their future. They may even flourish as important regional hubs, feeding traffic from and into the ultra-long haul flights.

And don’t forget, non-stop flights cost more. People spend their dollar in different ways.

Japan Airlines eyes a bigger slice of budget market

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It is taking Japan Airlines (JAL) a long time to launch a budget subsidiary, but it’s never too late if the budget market continues to grow. One may say that the Japanese carrier is treading with extreme caution, and even if the economic arguments are no stronger now than before, there can be no better reason than the Tokyo Olympics in 2020 for the belated introduction.

At home, rival All Nippon Airways (ANA) has been operating two budget carriers, namely Peach and Vanilla (which was the rebirth of a failed joint venture with AirAsia), and has plans to merge the two carriers in preparation for medium-haul international flights.

Foreign low-cost competitors include AirAsia, Singapore Airlines’ Scoot and Hong Kong Express. And, of course, there is Jetstar, the budget arm of Qantas, in which JAL has a minority share. It is therefore not exactly correct to say that the Japanese national carrier has not tapped into the budget market earlier, though not in as big a way as the others.

The yet-to-be-named budget carrier, to be based at Narita International Airport, will commence operations with two jets in mid-2020, offering medium and long-haul flights to Asia, Europe and the Americas. It will operate to some of the destinations already served by JAL.

The timing cannot be coincidental, as this is when ANA is expanding the operations of Peach into the international market. Until then, JAL seems quite content that the competition is limited to the domestic market, but with Peach offering another option for loyal Japanese travellers besides others to fly beyond and into Japan at lower fares, it cannot be taken lightly.

The budget market in Asia is a growing business. JAL director Masaru Onishi said the airline will cater to a broad group of Japanese and foreign passengers, and will take a more experimental approach to its product than the full-service parent carrier. There will be a mix of budget and premium options for meals and seats. The airline aims to be profitable within three years.

JAL may be Johnny-come-lately, but it has ambitious plans for its budget offspring. The competition is set to intensify, not just with compatriot ANA but also with other foreign carriers.

Qantas continues to fly high, confident about the future

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Qantas continues to fly high with new confidence while most other airlines cringe at the prospect of reduced profitability or even losses in the wake of rising fuel prices.

The Australian national carrier posted a record profit of A$1.6 billion (US$1.2 billion) for the year up to June 30, 2018 – 14 per cent higher than last year and 5 per cent higher than the last record profit in 2016. All that despite incurring a fuel bill that increased by almost A$200 million, and which is expected to go up another A$690 million the current year.

Qantas chief Alan Joyce said: “We’re facing another increase to our fuel bill for FY19 and we’re confident that we will substantially recover this through a range of capacity, revenue and cost efficiency measures, in addition to our hedging program.”

The confidence is something of a rarity these days as the fortune of the industry becomes increasingly volatile these days, and most airline leaders choose to be conservative in their forecast moving forward, often citing the uncertainty of the fuel price and, of course, competition.

Qantas has risen to become Asia-Pacific’s – if not the world’s – star performer.

The airline’s performance was boosted by a record profit of A$1.1 billion, up 25 per cent, in the domestic market, achieved through the combination of Qantas and Jetstar’s network, schedule and product strengths in key markets.

Internationally, the airline’s earnings rose7 per cent on the back of a 4-per cent increase in capacity, achieving a load factor of 84 per cent. The new Perth-London route is said to be the highest rating service in its network, and this should cause some concern to its rivals plying the kangaroo route, Singapore Airlines being one of them.

Mr Joyce emphasized that “capacity discipline” was key to Qantas’ success. With strong forward bookings, the airline can certainly afford to be optimistic.