26-May-2014 10:32 AM

British Airways adjusts its post-Qantas JSA Asian network and partnerships; Qatar Airways to be next

Analysis

Asia was the storied stopover point on British Airways' services to Australia, which for 18 years from 1995 until 2013 were operated in partnership with Qantas under a Joint Services Agreement (JSA). But markets and allegiances change. As the JSA lost emphasis, and ultimately was dissolved, BA has moved to adjust its Asian network. Whereas BA in 2000 had 40% of its 60 weekly flights to Asia/Australia covered by the JSA, in 2014 it has only 8% of its 120 weekly Asia/Australia flights in a joint venture - and these are now to Japan, in partnership with Finnair and Japan Airlines.

BA's Asian points are now almost entirely point to point destinations, although some stopover traffic persists. Since ending of the JSA with Qantas, BA has reduced Bangkok from a 747-400 to 777-200 service, while Singapore will change to a daily A380 and 777-300ER flight and Hong Kong a daily A380 and 777-200 service. BA reports that in six months it has seen a GBP30 million improvement on its Sydney route, the second most improved route in the BA network. But this is due to a number of factors - aircraft and crewing - not related to the end of the JSA.

Like others, BA will rely increasingly on partnerships and JVs, Cathay (and still Qantas) included. And opportunities with its new oneworld partner, Qatar Airways, are yet to be exploited.

Bangkok, Hong Kong and Singapore key hubs in JSA with Qantas

British Airways and Qantas operated Europe-Australia flights via Bangkok and Singapore while Qantas also operated flights via Hong Kong.

Around 2000 during one of the renewals of the BA-Qantas JSA, BA and Qantas mooted the possibility of BA flying from Hong Kong to Australia as well as Japan to Australia, but neither ever materialised.

British Airways is down from three daily flights in Australia to just one - and the only European airline remaining in Australia

For about eight years British Airways has served only point in Australia, Sydney, after ending Melbourne services in 2006 and Brisbane and Perth in 2000. Towards the end of the JSA BA served Sydney twice daily with a 777-200 from Singapore and a 747-400 from Bangkok, and ultimately a 747-400 from Singapore.

BA in 2014 will have about 100,000 annual seats to Australia, a sharp decrease from the 440,000 a decade ago. Flights have fallen from 1,100 a year in 2004 - about three flights a day - to 365 in 2014.

British Airways Australia capacity: 2004-2014

While BA has seen a sharp fall in Australian capacity, it is still at least standing, a feature of its corporate profile needs; with Virgin Atlantic's May-2014 withdrawal from Australia, British Airways becomes the only European carrier to regularly serve Australia.

BA's Sydney route sees GBP30 million improvement - but not strictly due to exit of Qantas relationship

BA in Nov-2013 reported that in the six months following the BA-Qantas JSA ending in Mar-2013, BA's Singapore-Sydney routes managed a GBP30 million profit improvement year-on-year (exact profit/loss was not disclosed). This is no small sum. In comparison, Virgin Atlantic said its Hong Kong-Sydney route was losing around AUD10 million (GBP5.5 million) a year.

BA was eager to promote its ability to stand on its own after the Qantas partnership, but this figure includes other ingredients, as BA made structural changes to the route that impacted profit. This included switching from 747-400 to 777-300ER equipment, so that capacity decreased 11% but unit revenues improved by 29%. BA's 777-300ER seats the same as the 747-400 it used, but with a much lower operating cost. First and economy class have the same number of seats while the 777-300ER has fewer business seats and more premium economy seats.

BA 747-400 and 777-300ER configuration comparison: May-2014

	First	Business	Premium Economy	Economy	Total
747-400	14	70	30	185	299
777-300ER	14	56	44	185	299

BA also deployed its Mixed Fleet cabin crew, which brought cost savings, and negotiated discounts with Singapore Changi and Sydney airports, according to BA Director of Strategy and Business Units Lynne Embleton. BA also had greater control over Australian sales whereas at the end of the JSA it was primarily Qantas managing ex-Australia passenger flows. So substantial improvements to the route were not possible only because the JSA ended.

As for BA's access in Australia, its own Singapore-Sydney fares remain very low while codeshares on Qantas, including to other Australian cities, significantly increase the price; it can be cheaper to purchase a separate Singapore-Sydney BA ticket and Qantas domestic flight than using a Qantas codeshare. BA maintains codeshares from Singapore and Bangkok to Australia on Qantas, except for Singapore-Perth, which Qantas is discontinuing. BA also has codeshares via Hong Kong with Cathay Pacific.

British Airways Australia network options: Jun-2013

BA will increase Singapore capacity by 12% with the A380 deployment

BA from 28-Oct-2014 will deploy its A380 to Singapore three days a week, replacing existing 747-400 service. Should BA keep this schedule in 2015 (and not go daily with the A380), this will result in a 12% increase in capacity, giving BA its largest capacity between London Heathrow and Singapore in recent times.

BA's London-Singapore flights had been fed by its own Singapore-Sydney service as well as an extensive Qantas network between Australia and Singapore, which has since diminished.

London Heathrow (LHR) - Singapore (SIN) from 28 October 2014

Flight number	Route	Timing	Days of operation	Aircraft Type
BA11	LHR-SIN	19:20-15:55*	Tue, Thu, Sat	A380
BA11	LHR-SIN	19:20-15:55*	Mon, Wed, Fri, Sun	B747-400
BA15	LHR-SIN**	21:55-18:40*	Daily	B777-300ER

Singapore (SIN) - London Heathrow (LHR) from 29 October 2014

Flight number	Route	Timing	Days of operation	Aircraft Type
BA12	SIN-LHR	23:10-04:50*	Wed, Fri, Sun	A380
BA12	SIN-LHR	23:10-04:50*	Mon, Tue, Thu, Sat	B747-400
BA16	SIN-LHR	23:15-05:20*	Daily	B777-300ER

Source: British Airways
*arrives following day

Overall London-Singapore capacity has been down since Qantas moved its Australia-London flights from a Singapore stopover to Dubai, but this is difficult to judge since much of the previous capacity was used for continuing service to Australia. Singapore Airlines has grown its London capacity about 24% from early 2012 levels.

BA may see further demand or alternatively the A380 deployment could later be joined by down-gauging the 777-300ER service.

London Heathrow Airport to Singapore Changi Airport (seats per week, one way): 19-Sep-2011 to 9-Nov-2014

The changes will see BA's first class and business class exposure drop while premium economy will be about steady, and economy will increase.

British Airways London-Singapore capacity mix change: 2012-2014

	First	Business	Premium Economy	Economy	Premium Share
747-400 & 777-200 (2012)	5%	23%	13%	59%	28%
747-400 & 777-300ER (2013/2014)	5%	21%	12%	62%	26%
747-400, 777-300ER and A380 (2014/2015)	4%	21%	13%	63%	25%

BA returns Hong Kong to 2009 capacity levels with the A380

BA operated an all-747-400 service to Hong Kong last decade except from 2009, when it started using both 747s and 777-200s. BA in Oct-2013 commenced daily A380 services, with the A380 replacing one 747-400 service and a 777-200 replacing the second 747-400 service.

The impact has been a 16% increase in capacity. Hong Kong has experienced similar class changes as Singapore: decreases in premium with growth in premium economy. Unlike London-Singapore, London-Hong Kong has seen a slight decrease in economy capacity.

British Airways London-Hong Kong capacity mix change: 2012-2014

	First	Business	Premium Economy	Economy	Premium Share
2x 747-400	5%	23%	10%	62%	28%
777-200, A380	4%	21%	14%	61%	25%

London Heathrow Airport to Hong Kong International Airport (seats per week, one way): 19-Sep-2011 to 9-Nov-2014

Source: CAPA - Centre for Aviation and OAG

However, BA's capacity growth merely returns it to 2009 levels, and 2014's capacity is still down from pre-2009 levels. BA is able to offer more capacity year-round in 2014 with fewer frequencies (718 in 2014 versus 917 in 2009), enabling growth elsewhere from BA's congested Heathrow hub. The impact of fewer frequencies is minimal; most of the time BA's three flights departed within a narrow time window.

British Airways Hong Kong capacity: 2004-2014

BA's has historically had more capacity to Hong Kong than Singapore. This reflects the larger Hong Kong-London market, as well as its then-JSA partner Qantas having a lower exposure on Hong Kong-London (one daily 747-400 flight, until its cancellation in Mar-2012) than Singapore-London (two daily A380 flights). This enables some additional flying for BA, although Qantas had a smaller network into Hong Kong than Singapore while BA did not operate Hong Kong-Australia flights.

BA decreases Bangkok capacity - possibly with more to come

BA's Bangkok operation has been more consistent with a daily 747-400 (low density business configuration) service until late 2013 when BA replaced it with a smaller 777-200, resulting in a 34% decrease in capacity. BA also changed the time of the service.

British Airways Bangkok capacity: 2004-2014

London Heathrow Airport to Bangkok International Airport (seats per week, one way): 19-Sep-2011 to 9-Nov-2014

Source: CAPA - Centre for Aviation and OAG

However, Mr Embleton said in Nov-2013 (after the introduction of the 777-200) that BA had yet to "right size" Bangkok, foreshadowing further changes. Bangkok achieved the lowest feed from Qantas of the three JSA cities (Bangkok, Hong Kong and Singapore). Without the JSA Bangkok became too small and leisure-heavy for BA, even when using a configuration with fewer business seats and more economy seats.

Since the change from 747-400 to 777-200, first class has been eliminated, a solid if obvious move on a leisure route where paid bookings will be minimal. Business class share does increase but overall premium share is down while economy cabins are up. More critically, overall BA has reduced daily capacity (337 seats on the 747-400 to 275 on the 777-200).

British Airways London-Bangkok capacity mix change: 2012-2014

	First	Business	Premium Economy	Economy	Premium Share
747-400	4%	15%	11%	70%	20%
777-200	0%	17%	9%	74%	17%

Source: CAPA - Centre for Aviation and BA

An Asian network re-shaped by partnerships; Qatar Airways' role is yet to be exposed

The longstanding British Airways-Qantas JSA may have faded relatively amicably, but there were still large network impacts and BA continues to work through them. No longer does there exist an obligation to have perhaps over-capacity in some markets like Bangkok, but this comes with the challenge of finding a right solution.

And nor in this example is BA alone, with Lufthansa also struggling in Asia's leisure markets - although in its case the German flag carrier is talking of a perhaps rather unlikely solution applying a sub-fleet of higher-density A340s.

BA's network is standing on its own, although there are still partners - Qantas in Singapore and Bangkok and Cathay in Hong Kong. Sydney has reportedly seen improvements, but these are not exclusive to the JSA ending.

And as the new oneworld partnership of BA-Qatar Airways is elaborated, there will undoubtedly be more Asia-Pacific changes to come.