Qantas Shrinking Growth

2007 to present

In response to an 83 per cent fall in its first-half net profit to $A42 million to December 31 and as a part of a half a billion dollar cost cutting measure. Qantas is pulling out of two more routes in May and cutting 500 jobs in catering, engineering and heavy maintenance. The sectors being lost are:

  • Auckland, New Zealand (AKL) to Los Angeles, USA (LAX) QF25 and 26
  • Singapore (SIN) to Mumbai (India) (BOM) QF 50 and 51

These cuts are in addition to the previously announced withdrawals in March from the Hong Kong-London and Bangkok-London routes.

The Singapore to Mumbai cancellation is not a total surprise. This route has had a checkered history over the last decade. Qantas planes used to fly non stop to Bombay.Then the Singapore stopover was added.

Then the flight went back to non-stop.

In 2009, the stop in Singapore was added again.The stop meant Qantas could pick up Indian passengers who fly between Singapore and India. The biggest disadvantage of the service was the passenger unfriendly 2am arrival time.

I suspect Jetstar will take up this route soon.

 

The Auckland to Los Angeles axing is more of a surprise. Qantas have been flying this sector for many decades.I have flown on this route ten times, evenly split between Qantas and Air New Zealand. Up to 2009, the service was operated by a 747 which started in Melbourne, flew to Auckland and then onto Los Angeles.

The 747 was phased out and the route was split into two parts. Today, the time table looks like this:

  • QF 25 Dep MEL: 06:00am Arr: AKL 11:40am Boeing 737 (168 pax in 2 classes)
  • QF 25 Dep AKL: 03:05pm Arr; LAX 06:40am (same day): Airbus 330 (307 pax in 2 classes)
  • QF 26 Dep LAX 11:25pm Arr: AKL 09:55am (2 days later): A330
  • QF 26 Dep MEL: 12:45pm Arr: AKL 2:45pm B737

The two aircraft basically turn around so the 737 is shuttling between Melbourne and Auckland and the 330 between Auckland and Los Angeles. There is now a more significant wait in Auckland than there used to be when the same aircraft went all the way through. Passengers can also fly from Sydney to Auckland on QF 55 which arrives at 2;25pm and connect on to the LAX bound A330.

The biggest advantage to me of this service was it allowed me to stop over in New Zealand on the way to or from the USA. This meant I could combine business in two markets in a time efficient cost effective way. I have also noticed that Qantas consistently prices flights on the MEL to lAX via AKL more cheaply than the direct MEL- LAX flights.

 

I have four concerns with the announced changes:

1. Market Loss

Qantas is effectively removing itself from potential travellers coming from North America, who may wish to combine Australia and New Zealand without backtracking and Australians who may want to combine the USA and New Zealand. I am not sure how big the market is or will be and I know Qantas can re enter the route.

2. Air New Zealand gains Monopoly status

I don’t believe Air New Zealand will go too crazy with fare increases but we will see some reduction in the number of discounted seats available. Air New Zealand still has to price the route at a rate the market will bear and one which is low enough to entice people to fly that distance. In addition Air NZ are still competing with Qantas on LA-SYD and must bear Qantas pricing in mind

 

3. One World Alliance impacted

There is now a gap for One World round the world tickets. Passengers wanting to include Nee Zealand in a one world round the world itinerary will have to go via Australia to fly a one word carrier to or from North America. We also lose the option of earning One world points on this sector. Every reduction in One world earning capacity pushes me further toward Virgin Australia and  partners and Star Alliance (Air New Zealand belongs to Star).

4. The Joyce Grand Plan

As I have blogged before, I am not a big fan of Alan Joyce’s (pictured) new plan for Qantas. The plan consists of trimming Qantas to a few key routes which feed int One World partner routes at key points (e.g. Hong Kong, Los Angeles, Dallas, London), the creation of a Premium Qantas Asian carrier and the expansion of low cost carrier Jetstar. I fear the trimming of Qantas will reach a point where Qantas is almost a skeleton only. It reminds me of the Uk railway system under Lord Beeching in the 1960s. He reduced the rail system to a few trunk lines by closing as many rural branches as possible. It was only a few years later that people realised that successful main lines gained their passengers from these branch lines. Chopping the branches pushed people into motor vehicles and they by passed the trains altogether. This is now being reversed in the 21st century but the damage to rail lasted almost five decades.

 

 Reaction

The announced changes have not been greeted with excitement by passengers or employees. Qantas is currently,  the subject of an Australian Parliamentary inquiry as a result of the grounding of the whole airline last October by Mr Joyce. The relationship with the Unions is already at the lowest ebb. That seems to have got even worse with the Transport Workers Union head Tony Sheldon today saying”. “It’s clear the Australian people have got one foul liar running a company and destroying the company,” Sheldon said of Joyce. “It’s become clearer and clearer from both statements within Qantas management privately, and from our politicians in Canberra on both sides of the house, that Qantas intends to strip the flying kangaroo and Jetstar in an operation to maximise profits for the executives.” He went on to demand Qantas be prosecuted as the union felt the job cuts violated Fair Work Australia’s requirements.

The skies will remain turbulent for the Australian Flag Carrier especially as it seeks to avoid a demise like Malev, the Hungarian Flag carrier.

In the meantime, thanks to the crews who have looked after me on the Auckland service. May see you one more time in April!

 

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Comments

  1. I was disappointed to read this. I just booked QF 25 amd 26 through American miles, for travel in Nov/Dec. do you know what the plan is for getting rebooked?

  2. Qantas will be in contact. Otherwise, call American. I assume they wil re accomodate you on another flight. If you were planning a NZ stopover, I will be curious to see how they handle that.

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