tip off

First hint of trouble as Qantas and Emirates cosy up

It is both wrong and unfair to use the first full month of traffic statistics in April for the Qantas-Emirates business partnership to say that it is failing. But it is both correct and fair to say that if the figures for May are comparably bad, then there may be a problem.

Repeat may.

The Qantas-Emirates partnership came into effect on March 31. The lowlight of the April 2013 figures compared with the same month in 2012 is that Qantas international passengers were down by 7.2% as a head count, and down 8.5% when measured by “passengers times distance flown”. The available capacity fell by 3.5%, for which Qantas has some good but perhaps strategically unsound excuses, and the load factor in terms of paying passengers dropped by more than the capacity reduction from 82.1% to 77.8% for a decline of  4.3%.

This during unprecedented strength in Australian outbound travel.

What will happen now that the Australian dollar appears to have headed south to more realistic exchange rates?  Inbound tourism cannot be seen as benefiting from the more competitive pricing of Australian visitor experiences because many of the source countries of such visitors are in seriously depressed economic circumstances.

Which makes this the key line in the April traffic update Qantas filed with the ASX:

If yields are down right across the group’s activities, Jetstar’s continued growth is not what investors might want to read as the company heads for what could be its fifth straight full financial year without declaring dividends.

Despite the hyping of improved and increased timetables to Singapore and Hong Kong following the Qantas-Emirates partnership coming into effect on March 31, total capacity through those airports fell because of the transfer of Qantas A380 services to London through Dubai and the termination later in April of the daily Singapore-Frankfurt Boeing 744.

But these physical changes to the disposition of Qantas fleet may not go to the real problem, which is the loss of visibility of the Qantas brand as it retreats into becoming a code-sharing agent for Emirates, urging its Europe, Middle East and central Asia customers to fly on a carrier that in no way resembles anything that Qantas sought to associate with its strongly national identity.

There is no Qantas international service of any significance for such flights from Brisbane, Adelaide or Perth, and even from the eastern cities, Qantas is offering Emirates flights that stop in south-east Asia to its customers in additional to its own reduced capacity when now counted as end-to-end Australia-Asia traffic.

The glaring weakness of the Qantas to Asia offering, of having no control over any full service on carriage beyond Singapore or Hong Kong or Shanghai, is obvious. If Qantas seriously expects such traffic to down-gauge to the Jetstar experience at Singapore or Hong Kong, it is unworthy of credibility.

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