ANALYSIS: Qantas's foray into Asia taking shape amid Emirates deal

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While its new alliance with Emirates should help Qantas in Europe, a series of recent moves show that Australia's dominant carrier is equally intent on building its presence in Asia.

Indeed, approval by the Australian Competition and Consumer Commission (ACCC) of the Emirates alliance actually advances part of Qantas's Asian strategy. By allowing the airline to relocate its European hub from Singapore to Dubai, Qantas can now convert Singapore, Bangkok, Kuala Lumpur and Hong Kong into Asian gateways in their own right instead of stopovers en route to Europe.

Qantas has already started this conversion by retiming its Singapore and Hong Kong flights to match the preferences of Asian passengers and opening a new lounge at Singapore's Changi airport. Qantas has also formed a working group to study ways to coordinate its revamped Asian service with its growing Jetstar joint ventures in Asia.

These ventures received a big boost a few days before the ACCC's decision on the Qantas-Emirates deal. In a decision that drew far less attention, the commission approved a comprehensive plan that allows Singapore-based Jetstar Asia, Vietnam-based Jetstar Pacific, Jetstar Japan and Jetstar Hong Kong - which has not yet been launched - to coordinate fares, schedules, marketing and resourcing decisions with each other, and with Qantas and its low-cost subsidiary, Jetstar International. This plan also allows Jetstar Japan to coordinate with Japan Airlines (JAL), Jetstar Pacific with Vietnam Airlines and Jetstar Hong Kong with China Eastern Airlines.

The ACCC's wide-ranging approval does not extend to coordination between the partner airlines in these joint ventures. For instance, under this decision, Qantas cannot coordinate fares and schedules with JAL, even though both are partners in Jetstar Japan. Neither can a Jetstar unit, such as Jetstar Japan, coordinate with the partner airline of another Jetstar unit, such as Jetstar Pacific's Vietnam Airlines. But the ACCC's decision does not affect codesharing between Qantas and these partner carriers. Indeed, codeshares, reciprocal loyalty programmes and lounge access agreements already exist between Qantas and its Asian Oneworld partners - JAL, Malaysia Airlines and China Eastern.

Qantas and China Eastern have just expanded their alliance. The two carriers now codeshare on 17 weekly nonstop services between Australia and China, and on 11 domestic routes within China. Andrew Hogg, Qantas manager for China, describes this as part of the Qantas plan for a broader Asian presence. Qantas and China Eastern are also working to launch Jetstar Hong Kong, but recent changes in the governments of both Hong Kong and China have pushed back the launch target from mid-year to sometime in the second half of 2013.

It has been almost two years since Qantas chief executive Alan Joyce declared that "Asia must be part of the rebuilding of Qantas International". He cited forecasts that 16% of the world's middle class will be located in Asia within 20 years. Australia's government calls this "the Asian Century" and has launched a number of initiatives to build closer ties with Asia. Several Asian nations are already among Australia's leading trading partners. As Joyce says: "No Australian company can afford to ignore these opportunities."

When its ambitious plan for a premium carrier fell apart a year ago, Qantas shifted its Asian strategy to low-cost joint venture airlines. It is now the biggest rival to AirAsia in this region and sector, a feat even more remarkable because Qantas is based in Australia, not Asia. In its application to the ACCC to coordinate Jetstar units, Qantas asked the commission to extend the approval to any future Jetstar units and their partner airlines. The commission was unwilling to go that far, but it may not matter. Jayne Hrdlicka, Jetstar's chief executive, wants to throttle back Jetstar's expansion and concentrate instead on consolidating gains.

Jetstar Hong Kong may be the last new venture on her agenda. If China Eastern can help it gain routes into China, which is never an easy process, it has the potential to bring low-cost services to one of the world's biggest markets.

All these come at a cost. Qantas does not release results on individual Jetstar units, but earnings for the group fell in the first half of this financial year. Singapore-based Jetstar Asia is doing the best, while Vietnam-based Jetstar Pacific is transitioning to an all Airbus A320 fleet and about to launch its first cross-border routes. Jetstar Japan is still a start-up, and Jetstar Hong Kong is currently recording expenses and no revenue.

Full-service Qantas also faces challenges. Dropping the onward sectors from Singapore to Europe frees up 40% of its capacity on Australia-Singapore flights. Retiming these flights will boost traffic by an estimated quarter, but this still leaves empty seats to fill. Qantas officials concede it will take some time to fill them. But Joyce insists that these short-term costs are simply the price to pay for an essential long-term presence in Asia.