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Jun 7, 2011

Qantas to suffer as Virgin gets it on with Singapore Airlines

The contrast between a floundering Qantas management and Virgin Australia at the International Air Transport Association (IATA) conference in Singapore is painful to watch.

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

The contrast between a floundering Qantas management and Virgin Australia at the International Air Transport Association (IATA) conference in Singapore is painful to watch, even from here.

This morning Virgin Australia announced a global merging of routes, loyalty programs, lounges, and very importantly, sales and promotion resources with Singapore Airlines, from August 1, subject to ACCC approvals.

The previous evening Qantas CEO Alan Joyce hit the replay button on his “rogue unions” mantra, and gave interviews variously threatening no further investment in Qantas long-haul international and no new aircraft.

For Joyce to go to an IATA conference among his peers in Singapore and criticise his own full-service brand and attack the unions,  a day after the Qantas share price tanked, (and continued to fall in early trading this morning) is a severe case of “wrong place wrong message”.

Joyce is in a place where he is surrounded by hungry, competent, and much more successful airlines than his, all politely nodding their heads as he tries to control questions about how he is going to move Qantas offshore into their space, and (polite cough) take their customers away.

His former rival at Qantas, and now Virgin Australia CEO John Borghetti,  joined with Singapore Airlines in a sweeping alliance that will deprive Qantas of its preferred domestic Australian connections status with Singapore Airlines, something that was delivering it substantial volumes of higher-yielding business travellers and that provides it with exceptional connections into China and India as well as adding to the one-stop European connectivity already secured with an earlier alliance with Etihad Airways.

More to the point, it may explain where Borghetti expects to get the additional jets for trans-Pacific and northern Asian flights, as he has previously outlined ambitions for additional Virgin Australia non-stop flights on such routes while saying he didn’t see an immediate need to order more Boeing 777s.

Qantas has been low-hanging, ripe fruit for the likes of Singapore Airlines, Emirates and Etihad for longer than the two years Joyce has been responsible for the Qantas/Jetstar group, yet on his watch the group has shed market share, failed to pay dividends and made amateur hour errors such as launching supposedly time-saving non-stop flights to Dallas-Fort Worth that leave passengers without luggage, flying in a second-rate cabin, in a 747 that can’t reliably do the route with a full payload.

And the labour issues are farcical. The company failed to make a timely resolution of enterprise agreements that it has allowed to expire, resulting in pilot and engineer unions balloting their members for protected industrial action with the approval of Fair Work Australia, but which neither has yet taken.

The core issue, the plans Qantas has to outsource jobs and jets abroad, contrasts at IATA with commitments by Virgin Australia to bring more jobs into Australia by growing the international action that Qantas is overtly allowing to shrink under a management that constantly attacks its own full-service product.

The question at IATA is clear. Which is the more Australian airline, and who has the best Asia and Europe networks?  The factual answer, once the Singapore Airlines deal kicks in, is Virgin Australia.

In the bigger picture, today’s announcement of the Singapore Airlines alliance, makes it clear that the relationship between the Virgin-branded airlines and the Singaporean flag carrier is taking on a new life. Singapore Airlines owns 49% of Virgin Atlantic, which is 51% owned by Richard Branson who also owns 25% of Virgin Australia and a smaller stake in Virgin America.

From an investor perspective, Virgin Australia is poised to participate in globally branded airline rationalisation on a scale that continues to elude Qantas, and doing it with an intimate involvement with two of world’s most powerful brands, Virgin and Singapore Airlines

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2 comments

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2 thoughts on “Qantas to suffer as Virgin gets it on with Singapore Airlines

  1. zut alors

    Ben, there’s a Seinfeld episode where George Costanza assesses his life, realises his decisions are inevitably flawed and resolves to do the opposite of whatever he normally would.

    Suddenly, he’s transformed into a version of Gladstone Gander (a vintage Disney cartoon character, Donald Duck’s lucky cousin). George’s fortunes change completely, his world becomes charmed, everything he touches turns rosy, he’s a winner. And all because George resolved to do The Opposite.

    Alan Joyce, it’s time to do The Opposite.

  2. Peter Bayley

    The Hungry Beast ad http://www.youtube.com/watch?v=kji8arr7l0U says it all! race to the bottom, Alan, and you just might get there!