Qantas still trying to hold onto SYD/LAX route domination

Discussion in 'Open Discussion' started by QF WP, Sep 22, 2003.

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  1. QF WP

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    The lack of airline seats on the Qantas-dominated Sydney to Los Angeles route is discussed in this article.
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    Whilst competition is fine, QF need healthy profitable loads with the correct number of flights per week, otherwise it'll become like some of the US-based carriers. I don't think that too many carriers (maybe Emerites and SQ) truly want to fly the route (or should I correctly say, can afford to from a balance sheet viewpoint).

    I leave it open to debate...
     
  2. straitman

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    Re: Qantas still trying to hold onto SYD/LAX route dominatio

    Interesting Lindsay. :D

    When you look at UA and their precarious financial position you have to wonder. The reality is that the trans pacific route is one of the few areas where they are actually doing very well for themselves. Like QF they have high load factors and even more importantly they have high yields on this route. The problem, I guess is that (as always) in aviation the difference between the top of the pile and the bottom is a VERY fine line.
     
  3. QF WP

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    Because of the perfect mix (high loads, profitable route), we know that other USA carriers would love to fly it again - Continental, etc. but as you stated Bill, most are precariously placed and probably have some constraints given their Chapter 11 position or Government bailouts.

    It is a wonderful time to see QF taking the delaying tactics to the market, whilst I think it may be inevitable, as long as they can hold out, the better bottom line it delivers. I'm all for that (as I'm a QAN shareholder after all) and I think the US-based carriers had it too good for too long - now it's our turn...(call me biased, one-eyed :wink: )
     
  4. straitman

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    I whole heartedly agree Lindsay. QF needs the competition to keep fares under control for the likes of you and me however not so much as to cause them too much grief. I often wonder why UA has cut their services so much on the pacific when they had/have the opportunity to provide significant competition in such a lucrative market.
     
  5. QF WP

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    Just like AMP, the call to provide service to the home base made a much louder call (particularly from Chapter 11 Bankrupcy, Congress and the Board of Directors) than expand (or maintain) long haul routes. Once they are out of Chapter 11 (if...), then perhaps they will be better recapitalised and be able to venture back into the routes that with hindsight (foresight) they should have maintained to achieve profitability. However, saying that, the AUD has strengthened against the USD over the past year (particularly earlier on), so that would have diminished overall returns unless they hedged the exposure.
     
  6. drron

    drron Enthusiast

    Jul 4, 2002
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    Think outside the sqare.Us queenslanders for years have had to put up with the inconvenience of changing planes in sydney to go overseas.
    So now flying to the states I choose JAL and get AA points which I can redeem on QF.
    Have just returned from LAX on QF business class.Paying full fare with wife on ff ticket we had a real fight getting to sit together.Yet on JAL on discount tickets on last flight met up with friends at JFK and JAL had no problems sitting 7 people together.
    As well even though a life member of qantas club in LAX when flying to brisbane you cant get into qantas club you are sent to the JAL lounge!
    So at 8000+ for QF and 5700 forJAL quess who is going to get my business.
    As well if flying to the east coast of the USA JAL gets there before QF even going via japan.
     
  7. arun

    arun Member

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    I like this post - think outside the square.
    I agree there might be a lot of options. This board serves to expand our thinking. Keep sharing your ideas.
     
  8. MIKE

    MIKE Newbie

    Jan 12, 2004
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    My wife two children & I am flying to the San Francisco next month with UA. Upon collecting out tickets last week we were informed that the aircraft is virtually empty. Now it may me just the timing but to me this does not sound like an airline based on this flight that can be doing all that well flying the pacfic. I think i did see an article recently were by Qantas has about %75 of the market the other%25 is between UA & AIR NZ.
     
  9. straitman

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    Hi Mike,
    When I made my post (Sept 22nd) the Pacific runs were amongst the most profitable routes that United operated. -- Aviation Week & Space Technology and other Aviation publications.

    Obviously a lot has changed since then :!: My company has negotiated rates with both UA and Qantas and currently QF has the best fares and consequently gets the business.
     
  10. MIKE

    MIKE Newbie

    Jan 12, 2004
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    Hi Bill, yes a lot has changed in deed. I guess with UA in chapter 11 they are keen to keep there yeilds up, having said that though we got a very good deal (tourists) in which we only paid an extra $100 aus dollars to fly anywhere on there network in the US. Syd-SanFran-Orlando return $1699 :D Qantas/AA wanted $2250 :( . I guess in the current enviroment though most tourists going to the US prefer to fly Qantas.
     
  11. MIKE

    MIKE Newbie

    Jan 12, 2004
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    I noticed a small report in the Sun-Herald last Sunday that Qantas is increasinf there number of Australia- LAX flights from 25 weekly flight to 37 a week.
     
  12. davidculliver

    davidculliver Newbie

    Mar 26, 2004
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    Re: Qantas still trying to hold onto SYD/LAX route dominatio

    bollocks. can anyone name a route that QF flies that really does lose it money? i imagine it flies a few that might be border line in order to feed people into its more profitable routes and enable it to retain a sense of a national network, but really loses money. i'd be surprised. as i understand it, this is sort of information that qantas doesn't make public. it won't even reveal its passenger numbers per route.

    the idea that what ever is good for qantas is best for the australian paying public is rubbish. i've never seen why we should allow QF to restrict the supply of seats and thereby pay more for them, all in the knowledge that the seats are those of an australian company.

    qantas is not a public service provider. it's a profit maximising company. something its nationalistic advertising is always at pains to help us forget. why should the passenger from MEL/SYD/BNE - LAX subsidise the passenger traveling from some regional town to another?

    if we as a society wish to help out those wishing to travel to or from commercially unprofitably areas, then we should do so directly through some sort of government subsidy. we already do this for tasmania by way of enormous subsidies for the ferry services. it's incredibly inefficient to do it by protecting one large carrier on a series of routes on the basis of its meek claim that it then uses these profits to run otherwise commercially impossible sectors.

    by having an "open skies" system there would be much more competition in aviation. fares would be cheaper and more people would be able to travel more often. the positive flow on effects of these increased efficiencies would be very significant.

    airlines might well come and go more often as a result. so what? why are airlines any more special than other enterprises?

    ultimately the result of not opening up aviation competition will result in australia increasingly losing business as other countries develop comparative advantages through cheaper costs associated with transporting people.

    this has nothing to do with the safety of "our" skies, but everything to do with QF protecting its near monopoly priviliges in this country. yes, it should have its foreign ownership restrictions removed, but even without i'd be very surprised if its long term longevity were threatened by having SQ, EK or anyone else flying from australia to LAX. and even if it were, i wouldn't mind a bit.

    i look forward to choosing to fly SQ and EK from MEL-LAX and i think given a free choice, many people currently forced to choose only between QF or UA would do the same. We can speculate all we like about whether they "truly want to fly the route", but let's give them the option and see. write to Federal Transport Minister, John Anderson now!
     
  13. michaelblain

    michaelblain Junior Member

    Jun 20, 2002
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    David

    QF make something like 80% of its flying business's operating profits from the SYD-MEL, SYD-LAX & SYD-LHR routes. Accepting that and assuming that all routes are contributing to overheads on the basis of ASK's (Available Seat Kilometres) then their must be many routes that are marginal or loss making. These routes might be profitable or break even on the basis of variable costs directly attributable to the route but overall they aren't profitable. However QF is a network airline and must accept this as part of its network policy.

    I agree with the principle arguments in your post.

    However whilst Qantas is restricted by ownership and the type of capital in can source through the limitations of the Qantas Sale Act how can it be right that the government lift the shackles of competition limitations and provide full access to one (or any) of its primary markets without Qantas receiving a benefit or opening of some other type. I am not sure of the governments policy reasons for not amending the Act but on the surface it looks like it could only be justified on a quasi social need basis.

    The Australia-US route is available to any airline from Australia, NZ or USA that wish to operate on it. Why does only one airline from the biggest economy by GDP in the world operate a small number of flights on this route compared to one airline from AU operating 30 odd frequencies. Many American (& Air NZ) have tried and failed to sustain an operation. Comeptition is fine but only if it is sustainable competition. Why aren't North West, Delta, Continental, American Airlines operating on this route (besides being from the third world)? What can SQ/EK do that they can't? Why did NZ pull out?

    The other restriction is that all Australian airlines should be given equivelant access to a foreign countries air routes if a airline of a foreign country can cherry pick routes from Australia. I know this is not an issue for United Arab Emirates as it has a completely open skies policy. I am not sure of the situation for Singapore.

    I am for the complete 100% liberalisation of the global aviation market - the sooner the better.
     
  14. rormad

    rormad Junior Member

    Jan 10, 2003
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    Whatever the reasons for the existence of this duopoly I think it is bad for tourism to Australia - potentially our biggest export earner. Many Americans I know are turned off by the highly priced tickets to Australia (that and the long flight time of course!) Another route which is a de facto duopoly is Australia-Japan. As I recall (correct me if I'm wrong) only QF and JAL fly this route at exorbitant fares. Having visited on several occasions I find that even Japanese consider it very expensive to fly and are more likely to go to Hawaii.
    I think if we want to re-capture some tourism (and screw some $$$ out of rich tourists :wink: ) something needs to be done. Even a subsidy would have to pay off overall for Australia - not that I advocate that. Everywhere I have ever been people always seem to say "I'd love to come to Australia but it's too expensive and too far". We can't do much about the latter - until the Scramjet goes commercial :shock: - but the former is feasible.
     
  15. QF WP

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    rormad, there are only two forms of subsidy:

    1. a subsidy only attracts the weak businesses that can't compete in the global marketplace (if you were going to give subsidies to businesses here in Australia), or
    2. charge the rich tourist - that'll only make it more expensive and mean fewer would afford it. The loss of the masses of budget tourists versus the uplift taken from the lesser number of rich tourists; counter-productive, wouldn't you say??

    The reason it is so expensive for them to come to Australia is the strong exchange rate at present. Whilst it's cheaper for us to visit the USA and UK/Europe at present (another reasons I've been going there for holidays/work lately and will continue to do so), it's the reverse for the travelling world population to visit Australia.

    As you said, either getting a faster form of transport (still within bugetary reach of the travelling popoulation) or towing Australia closer to USA or UK would really break the nexis. Neither are feasable in the short term...
     
  16. rormad

    rormad Junior Member

    Jan 10, 2003
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    Lindsay you are right re subsidies - I was only throwing tha tone up in the air to see who would shoot at it. But what's wrong with subsidies? Look at the benefits the European Union has given the world with their agricultural subsidies - you can buy Italian tomatoes here for cheaper than local product... not to mention those poor starving sugar growers in NQ who spend half the year fishing, about 2 weeks planting and harvesting and the rest of the year bleating for more government handouts!! Sorry to get off the track...
    So if these routes were "opened up" to the Ryan Air/Southwest type airlines they wouldn't be interested anyway? It's kind of sad - I think we are missing some major export dollars and the foreign tourists are missing out on this great country. My comments about expensive go back even to the 47c dollar.
    On the distance factor it's always a laugh to hear Yanks and Euros whingeing about flying across the Atlantic! Try flying from here to Brazil!
    BTW which two major cities would take the longest to travel between by air? Christchurch to Reykjavik? Should put this one as a separate topic!
     
  17. QF WP

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    After doing a lot of Economics in my time, I believe that subsidies only continue to prop up the weak and unsustainable producers...if they aren't good enough to compete in the global marketprice (whether the determinant is cost, quality etc), then they shouldn't be in the game.

    Personally, I try and buy Australian produced, manufactured and owned; but I'm aware that isn't always possible (runs true for airlines as well). If I see a product that is far superior to the Australian product within my budget, then I'll buy it (lets use the analogy of QF v BA WT+ on Kangaroo Route - I'll never fly to SIN, BKK or LHR using QF's Y product whilst BA's WT+ is within my budget and thankfully it is whilst they give deals like they are).

    But the reverse is also true - even if the Australian product is more expensive, I'll seriously consider buying the more expensive product. Price therefore isn't always the most important factor when I buy...quality and where it's made weigh in there as well.
     
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