Events during the past 24 hours are not proving kind to Qantas’ ambitions in Asia.
In Hanoi the state-controlled English language media is reporting Jetstar Pacific, a domestic Vietnamese venture 27% owned by Qantas, is being folded into the communist state’s much larger flag carrier, Vietnam Airlines, to save it from bankruptcy.
In Kuala Lumpur, Malaysia Airlines announced major changes in strategy, including full membership of the OneWorld alliance, and the creation of an unnamed new premium single-aisle brand, but with scant reference to Qantas, which has been portraying itself as facilitating the former while trying to set up its own version of the later.
A Qantas-controlled, narrow-body, ultra-premium, short-to-medium-range airline exercising the privileges of being either a Malaysia or Singapore flag carrier was announced by Qantas CEO Alan Joyce in June, and again in more detail, in August, as the investment that would save the Qantas long-haul brand from terminal decline, and linked to an immediate decision to cut London flights in half next year and shed 1000 jobs.
There are some obvious disconnections in the Qantas-Asia-saves-Qantas-International plan as advanced and explained by Joyce, which have long been discussed in Crikey and Plane Talking reports, including the purchase of up to 110 Airbus A320s to renew and expand the existing Jetstar franchises and the new premium carrier. (Malaysia has chosen not to use A320s for its new venture but Boeing 737-800s).
The relegation of possible Qantas involvement in its future to vague references by Malaysia Airlines yesterday doesn’t improve the outlook for a Malaysia solution for Joyce, and the notion he has advanced that hand holding the Malaysians and leading them into Oneworld is patronising, as they are perfectly capable of achieving membership without Joyce as a door opener.
The Malaysia Airlines realities as of today are that it’s strongest commercial link to Australia is indirectly through a recently confirmed commercial loyalty agreement with Virgin Australia alliance partner, Etihad. Jetstar’s larger and more successful rival in Asia is AirAsia, whose founder Tony Fernandes is now a cornerstone investor in Malaysia Airlines, and who has Virgin Australia’s largest shareholder, Richard Branson, as a 20% partner in his long-haul Air Asia X brand, which is successfully developing low-cost links to Australia, and onwards from Kuala Lumpur to Europe.
To be cruel but correct, Air Asia flies rings around Jetstar and Singapore’s Tiger franchise when it comes to low-cost carrier growth and success.
In short, Qantas has to first sort out where its Asia premium carrier is going to be based, and then it has to make it succeed, as Joyce claims it will, in making so much money it can cross subsidise the losses of the Qantas long-haul brand, which has arguably been severely impacted by incompetent Qantas management of its brand, fleet and network.
In Vietnam the Jetstar Pacific saga has been four years of failure, including the prolonged country detention of two Australian executives accused of forex fraud who were for months prevented from returning to Australia, official complaints about safety abuses by the Vietnamese aviation regulator and staff, and threats to cut off its fuel because of its chronic tardiness in paying its bills at Vietnamese airports.
Jetstar’s offshore franchises include Jetstar NZ, and Singapore-based Jetstar Asia, both of which are enjoying modest financial success. It is also a 30% equity holder in Jetstar Japan, which will begin operations next year, and it has for some time been trying to persuade China airline group HNA to rebrand and presumably recapitalise its 45%-owned subsidiary Hong Kong Express as Jetstar Hong Kong.
Few would argue that Qantas needs to find ways to participate in the opportunities presented by the world’s richest emerging air travel market in the Asia-Pacific. But so far it hasn’t found them, indeed not even Singapore Airlines has found any major success in it efforts to escape its own borders, and it may be a case of back to the drawing board.