QFA (Qantas) to invade Asia

AJC wrote:
Low-cost carriers stimulate new business. Nowhere is this more evident
than in Europe. The same has, and will continue to happen in
Australia

Yes, Ryannair is now world famous for allowing football hooligans to travel a
to many more games even outside the UK. (but yes, i know that they carry more folks).

But in Canada, Westjet and Jetsgo haven't really created much of a new market,
they just stole passengers from Air Canada. Air Canada's share has dropped by
20% in about one year because traffic went to Westjet and Jetsgo.

Europe is a very large market. Neither Australia nor Canada are very large markets.

And even in the USA, the legacy airlines are being hurt by the low costs.

The low cost carriers do open a new market. But once they have captured that
market, any remaining growth happens at the expense of the legacy operation.

Europe has been lucky because the arrival of the low cost carriers coincided
more or less with the demise of some legacy carriers, and severe downsizing by
BA. Virgin Blue grew because of the demise of Ansett creating instant demand
for capacity.

JetBlue in the USA grew by stealing pax from legacy airlines. And Legacy
airlines lost their high yield pax on which they relied for survival because
the later saw the price difference between United and Southwest/Jet Blue for
last minute business travel.

Before the low cost carriers were taken seriously, they were limited to their
"new market" niche that had stolen pax from cars, buses. But it is when the
legacy carriers started to overcharge, be plagued by delays etc, that
Southwest really started to be taken seriously and then it grew by stealing
pax from the legacy airlines.

The fact remains that it would be far more efficient for an existing Qantas to
provide low-cost service on its existing flights compared to setting up a
totally different entity with additional planes. The additional capacity will
lower load factors especially at the legacy carrier unless it drops capacity
to compensate for the added capacity at its new subsidiary.

When Air Canada started Zip in western canada, it essentially gave the
territory to Steve Smith and dramatically reduced old legacy AC flying in the
region. There just isn't enough room for Westjet AC and Zip.

(Leo Hamulczyk) writes:

Qantas doesn't have any problems with its mainline operations. Unlike
most major airlines at the moment, Qantas is profitable and has been
profitable for the last few years, including immediately after 9/11.
They are diversifying. And if it means cheaper flying out of
Singapore, good on them, I will fly them. I look at Silk Air's fares,
and I wish both Qantas/Jetstar Asia, Air Asia and any new entrants
good luck.

Another plus is that the Qantas subsiduary will be stationed at Singapore,
and that will evade the conditions that Australian unions would impose on
Qantas had it been based in Australia. This would reduce overheads,
allowing the cheaper fares.
--
Widya Santoso +61 2 6288-0405
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And miles to go before I sleep, And miles to go before I sleep
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On Tue, 06 Apr 2004 21:50:30 -0400, nobody wrote:

A Guy Called Tyketto wrote:
carrier based in Singapore, despite concerns the venture is risky and
the Flying Kangaroo is over-extending.

Has Qantas done anything serious to make its mainline operations more cost
efficient ? Or is it doing like more "old legacy" airlines, giving up on its
core operations and starting low cost carriers in the hopes that it will
magically fix their mainline operations ?

They have done plenty to reduce costs and improve productivity, it is
just that in Australia's labor market and labor laws there is only so
far they can go with the current operations, and starting up a brand
new carrier and starting from scratch means that they are effectively
starting with a clean sheet of paper, without any of the restrictions
that the old workforce would have had.

Dave

=====

NSW Rural Fire Service - become a volunteer today.

http://www.rfs.nsw.gov.au/

On Wed, 07 Apr 2004 04:01:39 -0400, nobody wrote:

AJC wrote:
Is there a problem with QF's mainline operations then? They are doing
the same as European airlines, diversifying. They set up Australian as
a long-haul leisure airline, a bit like Martinair, LTU, and so on.
They then set up Jetstar just as bmi set up bmibaby to compete in the
low-cost market. If you compare QF's current position with the mess AC
is in, you've got to say they are doing just fine.

If Qantas was unable to compete against Virgin Blue and thus had to setup a
different company, then that tells me that Qantas' mainline domestic
operations have a problem.

And of course, its own domestic low cost carrier will steal pax more from
Qantas mainline than from Virgin Blue.

Which means they will stay with the Qantas group - they will be the
SLC's who want to pay low amounts of money, and with DeathStar's
greatly reduced costs will result in increased profits for the Qantas
Group as a whole.

In the end, it just doesn't make sense to operate two airlines on the same
route with different planes.

Why not? Instead of dividing the market 70/30 it will probably be
60/25/15, with Qantas/DeathStar getting the 85% - which is 15% more
than they have now.

And this applies especially for long hauls where Qantas will compete against
its own airline on some long haul routes.

They won't be competing on long-hauls. Qantas will be making the
decisions about where and when DeathStar will fly, NOT DeathStar
management.

There is no reason that a mainline could not be *operated* as efficiently as a
low cost carrier.

There is under Australia's arcane labor laws. It is way too difficult
to reduce entitlements to current employees, and impossible to put new
employees on at conditions way below those which current employees are
entitled to.

Far far easier to just set up a new operation.

Dave

=====

NSW Rural Fire Service - become a volunteer today.

http://www.rfs.nsw.gov.au/