#21
|
|||
|
|||
Not exactly correct Ash. Route Profitability includes all costs associated with operating the market. It isn't simply fare yield. Labour cost is a big factor, and disadvantage for Qantas, since Asia operates ~40% less than Australia.
Qantas is also disadvantaged by geographical region, and does not have the same hub-ans-spoke advantage of Asia / Middle East etc. That sad, Qantas has plenty of code share partners ex Asia, customers can connect too. Buy route profitability determines viability, and all elements of operations are costed at market level, to determine overall viability of operating on a market. |
#22
|
|||
|
|||
True, but in the specific case mentioned, it became unviable for Qantas to operate A330's PER-SIN when the onwards traffic demand ex Perth was reduced by Qantas dropping 2x A380 SIN-LHR and 1x747 SIN-FRA flights.
And even when Qantas did have that traffic SQ was still operating more flights than Qantas, due in no small part to the fact you can access the entire SQ network from SIN. |
#23
|
|||
|
|||
Yeah, that's definitely a good point Ash. The whole situation works against QF really, which just makes the point even more so that a 73H is better than nothing for the customers (and not very different to a number of domestic sectors), and much lower risk and higher potential for QF.
|
#24
|
|||
|
|||
That's right, just now need to get into the mindset that a 737 (or A320) is not that bad, and worldwide quite normal on 5 hours flights on point to point flying. We here in Aus are for the most part very much spoilt by choice and product.
That said do think Qantas needs to up the 737 business offering a little, though down the back with AVOD in the newer aircraft, sitting 3x3 in a 737 is not too much different than sitting 3x3x3 in a 777, or 2x4x2 in an A330, and best not to mention 3x4x3 in a 777. |
#25
|
||||
|
||||
I'm having a little trouble wearing the whole "Qantas is also disadvantaged by geographical region" piece and "The whole situation works against QF really" when Air New Zealand (even more geographically challenged and with a fifth of the population to work with) can still turn a nice profit year after year.
|
#26
|
|||
|
|||
Qantas is most certainly at a disavantage compared to the hub carriers of Asia and the middle east, no doubt about it.
But you do raise a good point re ANZ. What do they do and what do they do well? Yep they fly point to point regionally, they partner with a major Asian hub carrier and fly a few niche long haul routes. Plus they don't try and compete on unprofitable long haul routes. What has Qantas done? Dropped routes that were for the most part directly competing with the Asian/Middle east hub carriers (FRA and halved London). Have partnered with a hub carrier (Emirates) to carry some of this traffic, but kept some niche long haul and are concentrating on regional flying. So in many ways Qantas is trying to make itself into a larger version of Air New Zealand. Exactly what they have to do, because no point competing for limited traffic for long haul where the hub carriers have it over them. |
#27
|
|||
|
|||
Mike - Air New Zealand and Qantas are operating in very different environments. Just look at the markets operated, and the competitors / capacity on those markets, relative to population / per capita.
They are not the same, and cannot be compared, like-for-like. |
#28
|
||||
|
||||
Not saying they should be compared like for like Thomas, just how the "woe is me" story continuously emanating from Qantas is hard to take when there is an airline nearby setting examples of how to maximise your strengths and minimise your weaknesses and not try to be a world leading international carrier (ego? A380?) and focus on what's best for the airline, shareholders, it's employees and it's customers (pretty much what Ash is getting at)
Last edited by Mike W; 5th March 2015 at 03:09 PM. Reason: Add final sentence |
#29
|
|||
|
|||
Qantas operates in a very competitive environment, and is very much unfairly disadvantaged. The 'open skies' environment of Australia, whilst opening up access to carriers and driving value for consumers is good for that respect, it makes it hard for Qantas. The environment is not balanced. This is clear.
For example - Qantas could not secure daily traffic rights between Singapore and Paris, in their bilateral, due to the governments of Singapore and France. Air France and Singapore airlines could operate daily. Subsequently, all the premium traffic travelled on those airlines, as those airlines could offer attractive business-centric schedules. The route was no longer viable, and Qantas exited. This has nothing to do with Qantas trying to compete. This had everything to do with unfair advantage. No other competitor in this country, has any bilateral restrictions, and because the are not an end-of-the-line carrier, they have the advantage of hub-and-spoke models, to filter onward / connecting traffic. They can essential do anything they like. You need to understand the bilateral limitations with each country Qantas operates to, and how they are disadvantaged, particularly from operating into Europe. The EK deal had to happen, to ensure the internationals survivability. Qantas has made inroads in doing its best to reduce its cost base (cASK) and improve its customer proposition, to drive consumers to the brand. But it will continue to struggle, when competitors operate in very different environments. Air New Zealand, whilst being an end-of-the-line carrier, still has many advantageous, not available to Qantas. It is hard to apply the same methodology. I like AIR NZ. I think they are a great airline. But in perspective. Remember they had to be bailed out by the Government. Even with their advantages, they would have collapsed. And I always position financial performance this way. It is not the profit in dollars that matters. It is the ROI, and that the business can meet its cost of capital. A business delivering a 3% ROI is not a well performing business. You might as well stick your money in bonds. Investors want returns, be it capital appreciation and dividends, otherwise they won't invent, and Qantas can't access capital investment, to invest in their product. Sure, margins can improve through improvements in rASK, and cASK, and this will help, but it isn't simply a matter of jacking up fares. With the number of competitors, who aggressively price under Qantas, and do so due to either operating on lower cost bases, are willing to accept losses in one part, to be offset with strong margins in another part, or have a direct agenda, this makes it hard for Qantas. |
#30
|
|||
|
|||
Quote:
Australia has made a push for an open skies agreement with the European Union, but that seems to have stalled with no real action in the past couple of years. Other than that, most of your analysis is pretty much spot on. |
|
|