Bluntly signalling where it sees the economy going, Qantas this morning said it was cancelling flights to Beijing from 17 April and shunting services to Mumbai through Singapore from mid May.

Melbourne gets a Shangahi disconnection from the end of March, but those flights will then start in Sydney.

And in the New Zealand market, Qantas also took steps which could drive Air New Zealand out of the game.

It will launch domestic NZ flights with Jetstar from 10 June, making it the other half of the pincer attack on the carrier in its home market launched by Virgin Blue subsidiary Pacific Blue more than a year ago.

Pacific Blue has already destroyed the effective monopoly pricing of Air NZ’s domestic routes.

Qantas has always wanted Air NZ dead, stuffed or merged. The ‘stuffed’ scenario looks stronger this morning, with merging ruled out years ago by the competition authorities in both countries.

While the rest of the world’s air transport market goes into shock, with Singapore Airlines announcing what is a total 19% cutting of capacity by the end of March next year, Qantas has gone after the struggling NZ flag carrier with massive force.

It will upgrade its Auckland-Los Angeles flights, put new full service 737-800s on the trans Tasman, (flown by its lower cost Auckland unit Jetconnect) and add even more Jetstar flights from Australia, thereby linking two domestic networks versus only the one available to Air New Zealand.

Qantas says it will increase its payroll in NZ, no doubt drawing from a pool of experienced unemployed workers from the national carrier, which in the aftermath of the fiasco of its failed investment in Ansett, is now 80% owned by the government in Wellington which has no interest in refinancing or expanding its operations.

It is the perfect time to take Air New Zealand out, or force it into some form of submission.

In its announcement Qantas CEO Alan Joyce says; “We are reluctantly making changes to our China and India schedules, but will continue to offer significant capacity into both as they remain important business and leisure markets.”

Well, they do remain important, but they aren’t performing.

Qantas will have more to say about the hard realities of air transport at home and abroad in the near future and Virgin Blue has indicated it is drawing up plans to match capacity to demand, which could mean sending more jets to New Zealand where its Pacific Blue operation includes some so-far profitable regional Pacific operations.

Singapore Airlines has signalled further shakeups too. It has not ruled out deferring new jets including more giant A380s, and analysts not resident in the nanny state are asking how long it can handle the dismal performance of its Tiger low cost franchise investment, particularly in Australia where it is on the figures, a costly failure.

Reading between the lines of Singapore Airline’s announcement of possible pay cuts, starting with its management, and a range of measures it has put to its unions, its vulnerability to the global crisis also underlines a decade long failure to make headway in investments in non-Singaporean airlines.

In the conditions it currently faces, Singapore Airlines is much more exposed to shrinking demand than competitors like Qantas, which has options to play with in its domestic market and a weakened NZ flag carrier to push around.

Peter Fray

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