Check in on Qantas New Strategy

I am not a complete fan of Qantas survival strategy outlined by CEO Joyce in 2011. The strategy involved the following key elements:

  1. Paring back Qantas International to key points such as Hong Kong, Bangkok, Los Angeles, Santiago and Dallas, handing passengers over to One World partners at those points
  2. Creating a Premium airline in Asia in conjunction with an Asian partner called  RedQ, RedQ Executive Flyer, OneAsia or RedSky, all names Qantas trademarked in Jun-2011  This carrer would operate an initial fleet of eight A320s, growing to 11 in the medium-term, focused on service to key medium-haul Asian destinations like China and India as well as to Australia.
  3. Growing Jetstar in Asia
Mr Joyce said in Aug-2011: “As a nation we used to fly over or via Asia, on our way to Europe. Now we fly to Asia, both for business and relaxation. And as Asian economies grow, the future will be about travel both to and within Asia,”

Strategy one has started with Qantas pulling out of services to London from both Hong-Kong and Bangkok.  The Auckland-Los Angeles services will go in April this year. The airline also added Santiago and dropped Buenos Aries. This means Qantas International is now very light on. Compared to Qatar, Etihad and Emirates, Qantas is starting to look very shabby. Acknowledging the subsidies and favourite tax treatments of some of these airlines, they all offer what is perceived to be very good service on very new aircraft to a very large range of destinations. Despite Mr Joyce’s rhetoric, Qantas International does not fly to key cities in Asia such as Bangalore, Beijing, Delhi, kuala Lumpar, Kyoto, Seoul and Tapei and the carrier will soon drop Mumbai.

As for strategy two, Qantas CEO Alan Joyce emphatically said there were ‘no plans’ or discussions with China Eastern concerning a jointly owned premium carrier (RedQ is one possible name). This strategy has failed to  get traction in Singapore or Malaysia.   Singapore was ruled out after active lobbying from national carrier Singapore Airlines and problems getting landing rights for China. Malaysia became more of interest when Malaysia Airlines announced its intention to join One World.  It also announced an equity swap with Air Asia. However, Malaysian have already planned  their own premium airline named “Sapphire” and Malaysian lost $780million last year.  Qantas pulled the pin on March 12. Next steps anyone? The question on everyone’s lips is: “What is Plan C for Red Q?” One wonders if it is completely dead?

Strategy three  is full throttle, with this week’s decision to form Jetstar Hong Kong with China Eastern Airlines.This move aims to tap into both the Hong Kong and Chinese markets. Jetstar says that budget airlines account for under five per cent of the  Chinese market.  Hong Kong, however, has not been kind to low cost carriers with Oasis Air shutting down in 2008 and Viva Macau Airlines collapsing in 2010.  Qantas and China Eastern are  contributing just $US198 million in start up capital is needed  from both Qantas and China Eastern. With three A320s in 2012 moving to 18 by 2015 this gives  Qantas  rapid passenger growth for a very low cost.

So Qantas Strategy? Two thirds on track?




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