Qantas took a lot of flak from financial analysts over its faltering Asia initiatives last week, making this week’s aggressive business travel initiatives by Virgin Australia and a left-of-field grab for its shrinking UK and Europe market from China Southern even more stressful for a brand that can be seen as having lost its way.
At home, Virgin Australia confirmed what is only the first substantial addition of wide-bodied A330 capacity to key interstate markets that it will make in the nearer term.
By mid-May there will be daily double Virgin Australia A330-200s between Melbourne and Perth, and an initial morning peak-hour rotation of the large Airbus between Melbourne and Sydney.
Less widely known is the ambush the Virgins will spring on the Canberra routes next month, with a new business-class on all of the Embraer E-jet services to the national capital, as well as to Hobart, which Qantas neglects in favour of Jetstar, and on important Adelaide and Perth routes among others.
This is not a matter of gratuitous Qantas bashing but a simple matter of geometry and cabin amenity. The Qantas domestic configured A330s and aged 767s are, in terms of space and style, inferior in internal specs to the Virgin jets, whether up front or in the main cabins.
The head scratcher for Qantas observers, and quite a few insiders, is why Qantas allowed this to happen, since it knows anything material that is decided within Virgin Australia faster than most of those working for it.
The not-so-funny joke within Virgin Australia and before it Virgin Blue, was that Qantas knew more about how its challenger was tracking than it did, because it invested more in the analysis of its operations than Brett Godfrey or Richard Branson could afford.
Yet the result is Qantas conceding a superior configuration for business travellers that it has taken no steps to counter, and in Canberra, the use by Virgin Australia of a truly spacious small jet with no middle seats that makes Qantaslink turbo-props seem like riding hard class.
Maybe Qantas kept believing the hype
about the 787 Dreamliner, which turns out to be late and heavy and for some of the purposes it originally had in mind for it, close to useless.
Compared to the very young fleet of jets flown by Virgin Australia, through a policy of churning leases, Qantas is burdened with aged 747s and 767s that drag back the gains it has made with A380s, A330s, and some recently delivered and much improved 737-800s.
Most of the emphasis in Qantas in recent years has been on the development of the Jetstar low-cost franchise, a product that Qantas full service customers despise, giving ex-Qantas executive GM John Borghetti rich pickings in his new role as CEO of Virgin Australia.
On Sunday night, at the Sydney Festival for which it has become a major sponsor, China Southern’s ruling cadre, in the form of president and CEO Tan Wangeng and executive vice-president He Zongkai rocked up to declare open season on what’s left of the Qantas kangaroo route services to London and Europe, declaring that a "Canton route" would provide additional frequent capacity to London, Amsterdam and Paris, via their shiny modern airport at Guangzhou, which they intend to make even larger than Singapore, Bangkok and Dubai.
It is China Southern’s policy to eclipse the size of today’s stake in the Australian international market held by Emirates by the end of 2015, an ambition that is already provided for in the Australia-China air traffic agreement and the mind-boggling consequences for air travel demand of 1.2 billion people making a new long march to their place in the sun in the Asian century.
This comes amid persistent rumours that Qantas will quit its services to Frankfurt, its last destination in Europe, following its decision last year to slash London flights in half in order to invest in a single-aisle carrier somewhere in Asia that would make so much money that it in five years it could start reinvesting in the long-haul Qantas brand CEO Alan Joyce says the airline can no longer afford to support.
The obvious logical disconnections in this policy have recently started to alarm finance sector analysts, especially as there is no sign of such an airline in that form taking shape, and the shareholders are in their third year without dividends and wearing a pathetic share price.
It is all converging on Qantas. Unhappy shareholders, unhappy customers, shrinking services, and sharp competitors, at home and abroad, who are making much smarter moves in terms of fleet, product and network without resorting to hiring a lingerie model to lift (!) brand perceptions.