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QFA (Qantas) to invade Asia



 
 
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  #1  
Old April 7th, 2004, 01:46 AM
A Guy Called Tyketto
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Default QFA (Qantas) to invade Asia

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http://www.theage.com.au/articles/20...222466768.html

Low-cost Qantas bounds into Asia
By James Chessell
Sydney
April 7, 2004

The lure of a ripening Asian travel market has proved too strong for
Qantas chief Geoff Dixon who has unveiled plans to start a low cost
carrier based in Singapore, despite concerns the venture is risky and
the Flying Kangaroo is over-extending.

Qantas yesterday announced it hoped to become the fourth budget carrier
to set up in Singapore this year after teaming up with the state-owned
investment agency Temasek Holdings.

Australia's flagship carrier announced today it will take a 49.9 per
cent stake in the $S100 million (A$79 million) airline, likely to be
known as Jetstar Asia, with Temasek Holdings holding 19 per cent.

Singaporean businessmen, Tony Chew and FF Wong, whose previous airline
experience is an involvement with Myanmar's national carrier, will take
21.1 per cent and 10 per cent respectively.

Mr Dixon said a fleet of four aircraft of either Boeing 737-800s or
Airbus A320s financed through operating leases would begin flying before
the end of the year, building to a fleet of more than 20 over the
following three years.

The carrier, joins Singapore Airlines' Tiger Airways, AirAsia and
Valuair in the race to secure the growing intra- Asian tourist dollar.

'This is a high risk, high return play by Qantas but in the scheme of
things a $50 million investment is not material," Goldman Sachs JBWere
said.

The broker cited the 548 million people within three hours flying time
of Singapore, Asian governments wanting to develop intra-Asian tourism
and middle class growth in Asia as examples of a region that "appears
ripe for expansion of (low cost carriers) with key fundamentals in
place".

Analysts also warned that the deal, which follows the start up of the no
frills domestic carrier Jetstar earlier this year, could stretch Qantas
management and absorb free cashflow with the airline facing serious
capital commitments over the next three years such as $7 billion for new
fleet.

The region appears ripe for expansion of low cost carriers.

"The investment adds minimal amount of value to Qantas' existing
business, and it's questionable how much value Qantas can add to its
business," said one analyst who did not want to be named.

"Qantas is going through a massive overhaul at the moment, with a
reorganisation of its business, and start up of Jetstar, and an ongoing
cost reduction program," he said.

"The risk is that management's attention is drawn away from getting
these things right, to the new investments such as a low cost carrier in
Asia or Startrack Express these new investments will do little if
anything to smooth Qantas's earnings cycle."

However, Mr Dixon described the move as "a modest investment" and said
the new airline would not cannibalise any of its existing operations.

Qantas shares closed 4 lower at $3.54.

BL.
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Brad Littlejohn | Email:
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Web + NewsMaster, BOFH.. Smeghead! |
http://www.sbcglobal.net/~tyketto
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  #2  
Old April 7th, 2004, 02:50 AM
nobody
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Default QFA (Qantas) to invade Asia

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 ?
  #3  
Old April 7th, 2004, 08:13 AM
AJC
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Default QFA (Qantas) to invade Asia

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 ?


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.
--==++AJC++==--
  #4  
Old April 7th, 2004, 09:01 AM
nobody
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Default QFA (Qantas) to invade Asia

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.

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

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

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

Where there are differences are before and after the flight. Reservations
costs, interlining costs, FF programme costs, handling of pax where there are
missed connections.

But you could easily solve this by offering the "low cost tickets" only
through the web, no connections, no interlining, no FF and no whatever else
that costs Qantas more than on a low cost carrier. But once you get to
airport, you get to board the same aircraft. So, you get a better meal than on
a true low cost carrier, but that is just about $8 more and this may in fact
win you customers over the no-meal low cost carriers even if your ticket is $8 more.

In the end, Qantas would make much better use of its equipment, much better
use of its crews both in the air, and airpoort check-in staff (no need for
different counters for instance).

Air Canada learned that operating Tango as a separate brand ended up costing
it more and has since re-integrated it into mainline and has instead decided
to just sell "tango like" fares operating on it mainline aircraft. But that
is still not enough and this is evidenced by the fact that Zip remains a
separatre entity with its own independant management team that knows how to
operate a low cost airline. (Steve Smith formerly of Westjet). Now, if they
put Steve Smith as the head of AC instead of Milton, don't you think that he
could work his magic to make Air Canada a lean and mean competitor ?

I think that Qantas' Singapore investment is more of a strategic one to
prevent Singapore airlines from capturing all that market.
  #5  
Old April 7th, 2004, 09:51 AM
AJC
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Default QFA (Qantas) to invade Asia

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.


No, I see it as Qantas identifying changes in the market, and reacting
to it rather than sitting back and hoping to rely on their reputation.



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


Not the case in Europe. The number of people travelling increases,
there may be a loss of loyalty as passengers try the different
carriers, but overall the Qantas group will increase their numbers. It
is a standard business practice, often illustrated using washing
detergent sales. One company, say Unilever, will offer several brands
all competing with each other, because this gives them a larger
customer base than if they just had one brand.



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

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


On how many routes does this happen? Few, if any Australian routes
duplicate QF services, the whole point was to transfer those leisure
routes to a dedicated, one-class operation. As I understand it Jetstar
will not compete directly with QF on many domestics either. They are
opening up a secondary airport at Melbourne instead of using
Tullamarine, and taking over many of the QF Airlink operations that
couldn't sustain mainline QF service anyway.




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

Where there are differences are before and after the flight. Reservations
costs, interlining costs, FF programme costs, handling of pax where there are
missed connections.


The low-cost and leisure services need one-class aircraft, at tighter
seat pitch so they are going to be separate fleets anyway.




But you could easily solve this by offering the "low cost tickets" only
through the web, no connections, no interlining, no FF and no whatever else
that costs Qantas more than on a low cost carrier. But once you get to
airport, you get to board the same aircraft. So, you get a better meal than on
a true low cost carrier, but that is just about $8 more and this may in fact
win you customers over the no-meal low cost carriers even if your ticket is $8 more.


But this way on say MEL-SYD QF offer their passengers a choice of full
-service, from the main Melbourne airport with all it's facilities, or
no-frills service from a secondary airport. Low-cost customers tend to
look at the ticket price and that alone. That is the experience of FR
and EZY in Europe. Even that $8 can make a difference.


In the end, Qantas would make much better use of its equipment, much better
use of its crews both in the air, and airpoort check-in staff (no need for
different counters for instance).


As I already said you need a denser configuration for the low-cost
product. You also need lower staffing of check-in counters and
boarding gates, therefore longer waiting times, but reduced cuts. Full
service customers need something better for their money.



Air Canada learned that operating Tango as a separate brand ended up costing
it more and has since re-integrated it into mainline and has instead decided
to just sell "tango like" fares operating on it mainline aircraft. But that
is still not enough and this is evidenced by the fact that Zip remains a
separatre entity with its own independant management team that knows how to
operate a low cost airline. (Steve Smith formerly of Westjet). Now, if they
put Steve Smith as the head of AC instead of Milton, don't you think that he
could work his magic to make Air Canada a lean and mean competitor ?


I don't think AC is a very good example, they don't seem to be able to
get anything right! Bmi's low-cost carrier has been a success so far,
as have the European long-haul leisure airlines taking over routes
from mainline carriers.

--==++AJC++==--
  #6  
Old April 7th, 2004, 10:16 AM
Leo Hamulczyk
external usenet poster
 
Posts: n/a
Default QFA (Qantas) to invade Asia

nobody wrote in message ...
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 ?


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.
  #8  
Old April 7th, 2004, 11:02 AM
A Mate
external usenet poster
 
Posts: n/a
Default QFA (Qantas) to invade Asia

QANTAS is in no way comparable to AC. Qantas runs at a profit. Has done so
since it was privatised and floated. It pays regular dividends. It is
efficient, with a better 'on time' record than Virgin for example, and
continues to provide much wider service than its competitors.

For some reason, quite beyond me. a few posters here seem to have a 'thing'
about Qantas. It is!! It functions well! It's profitable. So!! What about
that disturbs some 'people'????


"nobody" wrote in message
...
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.

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

And this applies especially for long hauls where Qantas will compete

against
its own airline on some long haul routes.

There is no reason that a mainline could not be *operated* as efficiently

as a
low cost carrier.

Where there are differences are before and after the flight. Reservations
costs, interlining costs, FF programme costs, handling of pax where there

are
missed connections.

But you could easily solve this by offering the "low cost tickets" only
through the web, no connections, no interlining, no FF and no whatever

else
that costs Qantas more than on a low cost carrier. But once you get to
airport, you get to board the same aircraft. So, you get a better meal

than on
a true low cost carrier, but that is just about $8 more and this may in

fact
win you customers over the no-meal low cost carriers even if your ticket

is $8 more.

In the end, Qantas would make much better use of its equipment, much

better
use of its crews both in the air, and airpoort check-in staff (no need for
different counters for instance).

Air Canada learned that operating Tango as a separate brand ended up

costing
it more and has since re-integrated it into mainline and has instead

decided
to just sell "tango like" fares operating on it mainline aircraft. But

that
is still not enough and this is evidenced by the fact that Zip remains a
separatre entity with its own independant management team that knows how

to
operate a low cost airline. (Steve Smith formerly of Westjet). Now, if

they
put Steve Smith as the head of AC instead of Milton, don't you think that

he
could work his magic to make Air Canada a lean and mean competitor ?

I think that Qantas' Singapore investment is more of a strategic one to
prevent Singapore airlines from capturing all that market.



  #9  
Old April 7th, 2004, 11:49 AM
nobody
external usenet poster
 
Posts: n/a
Default QFA (Qantas) to invade Asia

A Mate wrote:

QANTAS is in no way comparable to AC. Qantas runs at a profit. Has done so
since it was privatised and floated.


Just because it is profitable now does not mean that it will remain profitable
with all the changes that have occured in the industry.

Jetstar not competing against Qantas on SYD-MEL due to different airport
at Melbourne.

Either the airport different will not matter and passengers will flock to the
cheaper Jetstar service, leaving the full service Qantas with much lighter
loads, or if the airport is a concern, people will avoid Jetstar and Jetstar's
loads won't be so great.

Does Virgin operate out of Tullamarine or the other airport ?
If Tullamarine is the superior airport and Vrigin operates from there, then
Jetstar will be at a a competitive disadvantage.

Also, Qantas is duplicating staff and ground support if it operates from 2
airports in the same city just so it can claim that its 2 services don't
compete. Not exactly efficient.

In terms of higher density seating, you should note that in north america, the
trend is now for the low cost carriers to increase seat pitch since they now
compete against each other. JetBlue doesn't exactly have cardboard seats with
25" seat pitch. It has leather seats with in set entertainment, and I belive
Westjet will also follow suit.

Except for meals, Jetblue offers superior coach service to the old airlines.
The differences lie on the ground and prior to flight (reservations process,
pricing etc)


What is going to happen is that Qantas will see frequencies reduced on its
mainline service where there is competition from Jetstar. Australia is nowhere
near as big as the USA in terms of market. So addition of capacity should be
followed by reduction by another carrier. And Virgin isn't about to reduce its
capacity just so that the more expensive Qantas mainline flights can retain
good load factors.

What I predict is that Jetstar will take over most of Qantas domestic routes,
except for a few mainline frequencies that act as full sercice feeders for
international flights, as well as a couple of monring and evening fligsht for
those few business man who insist on business class or full service coach.
  #10  
Old April 7th, 2004, 12:38 PM
AJC
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Posts: n/a
Default QFA (Qantas) to invade Asia

On Wed, 07 Apr 2004 06:49:38 -0400, nobody wrote:

A Mate wrote:

QANTAS is in no way comparable to AC. Qantas runs at a profit. Has done so
since it was privatised and floated.


Just because it is profitable now does not mean that it will remain profitable
with all the changes that have occured in the industry.

Jetstar not competing against Qantas on SYD-MEL due to different airport
at Melbourne.

Either the airport different will not matter and passengers will flock to the
cheaper Jetstar service, leaving the full service Qantas with much lighter
loads, or if the airport is a concern, people will avoid Jetstar and Jetstar's
loads won't be so great.


No, the two products will attract different sectors of the market.


Does Virgin operate out of Tullamarine or the other airport ?
If Tullamarine is the superior airport and Vrigin operates from there, then
Jetstar will be at a a competitive disadvantage.


The other airport will have lower costs which will translate to lower
ticket prices. Same as the competition between Ryanair and Easyjet in
Europe.

Also, Qantas is duplicating staff and ground support if it operates from 2
airports in the same city just so it can claim that its 2 services don't
compete. Not exactly efficient.


It isn't, and doesn't have to claim anything. QF is successful in what
it currently does, and is going to try branching out in to another
sector of the market.


In terms of higher density seating, you should note that in north america, the
trend is now for the low cost carriers to increase seat pitch since they now
compete against each other. JetBlue doesn't exactly have cardboard seats with
25" seat pitch. It has leather seats with in set entertainment, and I belive
Westjet will also follow suit.

Except for meals, Jetblue offers superior coach service to the old airlines.
The differences lie on the ground and prior to flight (reservations process,
pricing etc)



North American, or more to the point US trends, are not applicable,
certainly not in Europe, and probably not in Australia. The US market
is completely different, always has been. They have never adopted
European style short-haul business class, and flexible configurations
for example. They have never gone for European style no-service
carriers. Australia seems to have far more in common with European
aviation.



What is going to happen is that Qantas will see frequencies reduced on its
mainline service where there is competition from Jetstar. Australia is nowhere
near as big as the USA in terms of market. So addition of capacity should be
followed by reduction by another carrier. And Virgin isn't about to reduce its
capacity just so that the more expensive Qantas mainline flights can retain
good load factors.



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

--==++AJC++==--
 




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