This is the label Tim Clark gave to today’s announcement of the partnership between Qantas and Emirates. For Emirates, it is merely an endorsement that its strategy and positioning has worked. For Qantas, the agreement represents a considerable strategic shift, forcing the airline to finally acknowledge many of the operational issues that should have been acknowledged up to a decade ago.
From 1 April 2013, Qantas’ services to London will operate ‘The Falcon Route’ via Dubai. Subject to regulatory approval, the centerpiece of this strategic is an 10 year operational partnership with Emirates Airlines which includes integrated network collaboration with coordinated pricing, sales and scheduling as well as a benefit-sharing model. Akin to having fully metal-neutral Anti-Trust Immunity, the agreement also provides scope for further expansion, Alan Joyce saying “the two airlines can do a lot more together into the future.”
The partnership “representing a step-change for the aviation industry” while true, is ironic. Qantas has essentially endorsed Emirates strategy and positioning, something it has vehemently fought against and accused of everything from receiving subsidies to capacity dumping for years. Even after the Qantas rhetoric, will passengers buy this sudden strategic shift? Perhaps.
Why? Sure, it doesn’t deliver Qantas operated services to passengers outside Melbourne or Sydney. What it does represents a fundamental change in airline thinking, that Qantas recognises the importance of the mature and continuously developing expectations passengers have of airline alliances. It recognises that passengers will fly if the alliance can take you where you want to go, with the benefits you deserve with full reciprocity. Something which has become murky in the wider world of airline alliances.
The alliance is risk averse, it allows Qantas to minimise its exposure to the European market and the trans-Tasman market, where Emirates with its much lower margins and cost structure is more competitive. The association with a brand considered to be one of the world’s best, will also dramatically enhance Qantas’ international exposure.
“It’s not you, it’s me”. On 31 March 2013 Qantas will end the 17-year Joint Services Agreement with British Airways, the breakup an indication that in today’s operational environment the alliance wasn’t delivering from an operational, passenger experience or yield perspective. Qantas will also cease to fly the Kangaroo Route to Europe, just over 65 years after the airline first started flying the route on 1 December 1947. Services to Frankfurt will also be suspended, a route that has long not been profitable because of high jetfuel prices, the Boeing 747-400s full burn and high-aircraft weight.
The following slide from the Qantas presentation gives an idea of the significant markets the Qantas-Emirates partnership will open up:
The partnership doesn’t extend across Asia, with QF/EK connections only available to Emirates services through Singapore and Bangkok. In addition, Qantas codeshare services with Cathay Pacific and Air France to Rome and Paris respectively will also be cancelled. Changes have also failed to address Qantas’ neglected international markets from Perth, Adelaide and Brisbane.
Perhaps more important than the partnership, is Qantas acknowledgement that its Asian services need to be transformed. For many years Qantas has neglected the region home to our biggest trading partners and inbound tourism markets. Services to the region will be enhanced, with new flights and changes to schedules in recognition of a need to be more business friendly. Will Qantas actually receive a portion of the 15 Boeing 787-8s it subsequently directed to Jetstar in support of this? Time will tell.
Back in 1996, Qantas entered into a partnership with an emerging carrier, Emirates. When it ended, no one noticed. How things change in 15 years. Now the world is watching, and it seems everyone else, especially John Borghetti, was right.
The ambitions of Emirates and Etihad were given a boost this week, with Fiji and the UAE signing their first bilateral air service agreement. Apparently, Emirates had requested an open skies agreement, but the Fijian government declined reasoning that they want the national carrier Air Pacific/Fiji Airways to first become ‘stronger’.
The Fijian government is seeking an ‘airline’ partnership, though what form this will take is still unclear. The new Fijian ambassador to the UAE, Mr Robin Nair confirming “we have spoken with Emirates and are also in talks with Etihad, they are very close to circumnavigating the globe”.
Mr Nair also noted “Fiji needs more airlines to bring tourists and business people, especially from newer markets, such as from the Middle East and Europe.”
Would it be viable? Perhaps, but geographic and economic factors often stymie carriers in there attempts to viably serve the South Pacific Island Countries.
A significant proportion of international traffic to Fiji already transfers through Australia, and the market is also substantially tourism based with little high-yield business traffic. During Virgin Australia’s transformation the carrier’s Boeing 777 services to Fiji were cut, John Borghetti reasoning “to be operating a three class widebody (B777) service to leisure markets like Fiji has to be a no-no”.
The South Pacific suffers from separation anxiety. A long way most of the world, at 14,000km a direct Abu Dhabi (AUH)/Dubai (DXB) – Nadi (NAN) service pushes the economical range limits of any aircraft except the Airbus A340-500 or 777-200LR. In addition, Emirates Chairman Tim Clark maintains it won’t operate to a location unless it can operate daily services.
But would there be enough traffic to sustain daily services? Tellingly, Air Pacific only operates to Auckland, Brisbane, and Sydney at a frequency of daily or higher. Even with the power of Emirates and Etihad’s back-end network feed, it may be difficult to fill an A340 or B777-200LR daily, let alone a 400-seat Boeing 777-300ER.
Emirates will inevitably operate to Cairns, and could piggyback NAN services through the city. Its current second daily Brisbane service operating DXB – Singapore (SIN) – Brisbane (BNE) could have a Nadi leg added on. Alternatively, services could bypass Australia altogether, operating via SIN to collect connecting intra-Asian traffic feed.
In reality how would a Fijian Government ‘airline partnership’ take? Rumour is Emirates is close to announcing a comprehensive partnership with Qantas (perhaps even this week), but although Qantas and Air Pacific continue to code share, the carriers are no longer friends following a bitter political dispute over board executive influence. This may make a code share arrangement with a relaunched Fiji Airways difficult.
Etihad and Virgin Australia could also prove suitable suitors. Rather than operate its own aircraft to Fiji, Etihad could leverage its partnership with Virgin Australia with passengers connecting to Virgin services in Brisbane or Sydney. A relationship with Virgin could also be a boon for Fiji Airways. Coordination of services and traffic feed providing the relaunched carrier with better returns, and free aircraft to launch services to destinations outside the region. Perhaps even allowing Fiji Airways to return to Singapore, with services passengers connecting to onward Etihad services.
Will a middle eastern carrier serve the South Pacific? Definitely. It’s now just a matter of how and when than if.
Who remembers the glamour era of air travel when travel was fabulous and happened on a 747 or Concorde? People living, visiting and doing business in Perth are reminded everyday as they travel through Perth Airport’s International Terminal, circa 1984.
Undertaking its first substantial redevelopment since 1984, the Airport has now made available artists’ impressions, of the expected interior of the completed international terminal and Virgin Australia’s new domestic pier at the airport. Some analysts have even labelled the redevelopment as providing Western Australia with the ‘best in airport design’.
Original plans promised a “world-class” 3 pier, 40-gate redevelopment that would be “one of the best in Asia” akin to Hong Kong or Seoul’s Incheon. These were subsequently reduced to:
All built to unexceptional IATA service C standard as extensions to the substandard circa 1984 terminal. Best in Airport design indeed.
Virgin Australia’s domestic pier does look snazzy and it will be the first airport terminal in Australia specially designed for the airline. The terminal will feature definitive Virgin elements passengers including a signature lounge “which will be the best that Western Australia has seen” says John Borghetti.
From March 2013, Emirates will fly 3 times daily to Perth. Images of the redeveloped Gate 51 are heavy with Emirates branding. Will this become a dedicated Emirates gate given the location adjacent to the Emirates lounge? Quite possibly. WAC redevelopment priorities see the redevelopment of Gate 51 to an A380 capable stand expediting for completion in 2013 to meet Emirates requirements. Perth will likely become Emirates third Australian A380 destination.
These developments aside passengers travelling internationally will still be required to go from the ground floor up to the level three departure lounge, before walking down stairs to aerobridges on level two. In addition, our measurements on the scale plans put the unaided walking distance between check-in and the furthest international gate beyond both 265m or 300m, industry guidelines for an airport serving 20 mppa or 25 mppa respectively. Figures Perth Airport may surpass by the end of the decade if growth continues at current rates.
CEO Brad Geatches says “our vision is to ensure all customers and visitors…enjoy a superior customer experience”. I doubt that. At an airport with exponential traffic growth, superior service in a facility designed for ‘good service’, does not deliver the ‘best in airport design’.
A further supplement to this article can be found here.
Everyone loves a little will they, won’t they situation, and a ripper is brewing in Australia right now with talk of a Qantas-Emirates partnership. But why has Qatar Airways slipped off the radar?
In Perth in early July, Qatar Airways CEO Akbar al-Baker confirmed the carrier was in talks with Qantas. Though as focus shifted to the fruits of an Emirates partnership, forgotten were the benefits a relationship with Qatar could bring.
Buoyed by the Emirates speculation Qantas’ dismally low share price gained 10%, and the rhetoric regarding all the potential benefits flowed. But, as Ben Sandilands noted “Emirates doesn’t actually need Qantas for anything it can’t do in its own right, including set up its own domestic entity in Australia if it ever felt so inclined”.
Qantas operates 28 services to Europe, assuming the unlikely event they cut Frankfurt (or move it to Berlin), 48 to Singapore, and only 7 to Bangkok, and 3 to Jakarta.
By March next year, Emirates will operate 84 weekly services to 5 Australian cities, most direct, and 28 via Bangkok, Singapore or Kuala Lumpur, and onward connections to 32 cities in Europe and almost the same in Africa. Emirates has better connections, an arguably better on-board product, and excellent lounges in Australian cities they service, so why would a passenger choose Qantas product over Emirates internationally?
Qatar Airways currently operates a comparatively small number of services to Australia – 10 a week, increasing to 14 in March 2013, and likely to increase further. Qatar also offers services to 32 destinations in Europe, and more than Emirates in Africa. Qatar’s currently serves Melbourne and Perth, not Sydney – originally not being granted permission to fly there.
What could a Q-Q relationship deliver?
1 – Connections.
An alliance with Qatar would offer significant advantages in terms of code shared network connections.
Qatar offers 14 weekly services to both Singapore and Bangkok, 11 to Hong Kong, and 10 weekly services to both Jakarta and Denpasar, neither of which Emirates serves – but which Qantas does. Although the airline doesn’t service Kuala Lumpur with it’s own metal, Malaysia Airlines’s expected post-Oneworld entry code sharing with Qantas could cover that.
2 – A boutique airline.
A boutique product and brand positioning exudes glamour and sophistication, Qatar’s focus is on building a boutique airline, consistently number 1 in the world, rather than a capacity dumping conglomerate. It does not offer passengers multiple service options that detract from Qantas’ limited services.
Anyone that has flown Qatar, knows that even in economy class, service is exquisite, and a step above what Emirates now provides. The airline does not offer lounges in Australia, and could use Qantas lounges in all major cities – another way to keep passengers engaged with Qantas product.
3 – Avoiding Sydney-centric pain
Qatar services avoid Qantas’ Sydney-centric operation. Passengers hate it, but Qantas continues to consolidate on Sydney. People in the Qantas ivory tower seem unwilling to acknowledge that forcing passengers through an airport they do their best to avoid does not keep them coming back.
Qatar’s offer of services to non-curfew airport cities of Melbourne, Perth and potentially Brisbane, which Qantas has neglected for years, could deliver Qantas passengers connections they have been screaming out for, while providing the flexibility to schedule complementary connections.
Yes, Emirates also services these cities with multiple daily services, but with relatively few services a week, there is little chance of Qatar cannibalising the Qantas passenger base. Ideally, Qantas would complement these services with their own daily service from Sydney to Doha.
4 – Oneworld
Qatar already codeshares with Malaysian Airlines, which will join Oneworld in 2012, sponsored by Qantas. It is known Qatar is in discussions with British Airways and IAG about developing a comprehensive relationship; the carrier recently abruptly cancelled its code sharing arrangements with United, and it is strongly believed Qatar will choose to join Oneworld when it announces a choice of alliance grouping later in 2012.
Qatar potentially possesses relationships that Emirates can not offer, has shown no interest in developing, and which would avoid setting in motion a potentially destructive breakup of Oneworld, should Qantas partner with Emirates.
5 – Equity
Qatar has never directly stated it is against equity partnerships, similar to those in which Etihad has engaged. Qantas is known to be lukewarm on the equity partnership front, and Emirates has consistently stated publicly that it has no interest in equity.
Qantas is in desperate need of innovation, starting with a viable network strategy that complements its shrinking international operation. There is no guarantee that with Emirates’ already dominant presence, Qantas won’t continue to haemorrhage once-loyal passengers it could carry itself to Emirates. But in Qatar, Qantas could find a glamorous partner that might just keep the loyal passengers that remain interested for the few years it would take to innovate its own product.