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Qantas, London and its Asia-saves-us logic

December 22, 2011 – 12:04 pm, by Ben Sandilands
If there is one thing that troubles me as much as the death threats against Qantas management  that tied up the NSW Police with nothing found except a lot of shabby stunt headlines, it is the disconnection between the claims that cutting London flights will free up resources needed to save the carrier by starting an Asian based narrow body premium carrier with giant sleeper seats.

It’s not that Asia isn’t critical to the future of Qantas. But so is good management, and a workable strategy for participating in the hemisphere.

The discussion in an earlier thread makes this of real concern, in the logic or lack of it in the statements repeatedly made by Qantas CEO Alan Joyce that somehow there was a connection between these actions, and the apparent harm that results to Qantas in reducing London flights to twice daily A380s in each direction.

According to the BITRE statistics for the year to 2011 Qantas carried 1,074,860 passengers both ways combined on a total of 2816 flights with a seat occupancy of 86.15%.  The passenger numbers grew by 8.9 % over the previous full year.

However under the shrink-the-long-haul brand-to-save-it by establishing an Asian based carrier which it can only 49% own, Qantas would in a full year only operate 1460 flights between Australia and London, four a day, each in a jet configured at present with 450 seats.

So even if Qantas sells every one of those seats, it can only fly in its own metal, 657,000 passengers in that year.  The strategy is that the 400,000 odd passengers it will turn away on its own flights will willingly fly part of the way to a connection with a British Airways flight in Hong Kong or Bangkok.  If Qantas seriously believes that is the case it has lost all grasp of the competitive reality that it has smarter, better equipped competitors who have not neglected their product standards or network and can take their customers without a change of carrier all the way to London and many other European cities.

It is a move that will ensure that a large part of the customers that were to be punted to British Airways will walk away to Singapore Airlines or Emirates and may never return.

For an airline that acknowledges that its highly profitable loyalty program depends on its overseas brand, just how cutting into London capacity will impact those earnings ought to be a serious concern to investors.

Reviewing what Qantas has said and done this year, it is reasonable to conclude that the board and management have something else on their minds than the medium to long term survival of the airline.

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