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203 Coward Street
Mascot NSW 2020
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- Sydney Kingsford Smith Airport
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Qantas Airways is operated as part of the publicly listed Qantas Group. It is the national airline of Australia with major hubs in Sydney and Melbourne and secondary hubs in Perth and Brisbane. Using a large fleet of narrow and wide-body Airbus, Boeing and Bombardier aircraft, Qantas operates an extensive domestic and regional network within Australia as well as international services to New Zealand, North America, Asia, South Africa and Europe. Qantas is a founding member of the oneworld alliance.
Location of Qantas Airways main hub (Sydney Kingsford Smith Airport)
Qantas share price
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Plans by Emirates to introduce service from Dubai to Chicago O’Hare in Aug-2014 continue extensive expansion by the three large Gulf carriers into the United States in 2014. Chicago becomes the ninth US market for Emirates, and the fourth market in the country where Emirates, Qatar and Etihad will compete on services from the Middle East.
Chicago also is the second American Airlines hub where its partners Qatar and Etihad will operate alongside Emirates, who has been courting American, but has yet to persuade the carrier to launch a partnership. Qatar and Etihad are both adding service to American’s Dallas/Fort Worth hub in Jul-2014 and Dec-2014, respectively.
The partnership dynamics in both Dallas and Chicago among American, Etihad and Qatar create ample connecting opportunities and traffic flows for all those carriers. But on a pure scale basis Emirates is still larger than its Gulf competitors, transporting more than double the passengers of Etihad and Qatar during 2013.
One of the world's great de facto duopoly markets came to an end five just over years ago on 27-Feb-2009 when Virgin Australia (as it is today) commenced long-haul operations and entered the Sydney-Los Angeles market, ending the Qantas-United Airlines stranglehold on the routes. A short while later Delta Air Lines also entered Los Angeles-Sydney, subsequently partnering with Virgin, while Qantas strengthened its partnership with oneworld partner American Airlines. There was over 50% growth in Australia to mainland US non-stop passengers between 2006 and 2012. Australian carriers benefitted most, but from a tourism standpoint there has been far greater growth in outbound Australian travel to the US than inbound US visitors to Australia as the US economy faltered.
The liberalisation anniversary celebrations were muted as the date exactly coincided with Qantas' half-annual results, exposing a very large loss and substantial planned staff cutbacks. A day after the anniversary, Virgin also reported a loss. While there was considerable volatility after Virgin and Delta entered the trans-Pacific market at the depth of the GFC, the market largely settled down over the past three years until United recently announced overdue changes. United will replace 747-400 services (known more for inexpensive fares than quality) with 777-200s while de-coupling Melbourne from Sydney as Australia's second largest city receives non-stop service with 787-9s. United's overall Australian capacity remains flat with less than 1% growth, but will rise to 6% growth in 2015 with an extra weekly service. In comparison, Qantas has grown capacity and market share.
A record first half (six months to 31-Dec-2013) result of NZD180 million (USD151 million) before taxation, representing a 7.7% margin, was Air New Zealand's reward for finding better balance: exiting from loss-making routes, higher trans-Tasman load factors than competitors, and a more streamlined fleet. Air NZ increased profitability on flat revenue despite decreased capacity.
CEO Christopher Luxon is not resting on his laurels and is committed to growth in capacity and revenue while decreasing costs, although cost targets are for now opaque.
The domestic and Pacific Island networks are stable while trans-Tasman shows the wear from the weakening Australian dollar. But Air NZ has the advantage of efficiency with the highest load factors in the market. International has shown a strong improvement following exits from loss-making routes. Further gains will come from growth, creating scale and reducing unit costs, and partnerships, such as with Singapore Airlines.
Amid the smoke and noise of Qantas’ reporting of its 1H2014 results, Virgin Australia’s announcement of a pre-tax loss of AUD50 million for the period went almost unnoticed. Most media columns covering Virgin came from Qantas, in the context of their contrasting models, foreign ownership and the utter silliness of the Qantas Sale Act.
As it was, Virgin Australia’s loss was pretty much as anticipated, although involving several dimensions in the year-on-year comparisons, given the carrier’s apples and oranges situation, with AUD18.4 million (USD16.4 million) loss-making Tigerair Australia (now 60% owned) joining the group in Jul-2013 and as “business transformation and other expenses” accounted for another AUD69 million (USD61.6 million). During the first half of the FY2013, Virgin had also acquired Skywest, further clouding financial performance comparisons.
As CEO John Borghetti implied in his presentation, these first half results for Australia’s industry were however about more than merely dollar figures, given the strategic upheavals prefaced in the political debate currently raging: “I believe this is an important crossroad in our industry's history”.
It is certainly one of them – but it won’t be the last in what promises to be a turbulent decade for Australia’s airlines.
A surge of domestic and international capacity have largely contributed to Qantas' underlying PBT loss of AUD252 million in the first half, traditionally the stronger period. With 5,000 full-time jobs to be eliminated and 50 aircraft to be cut or deferred, it is a larger restructure than previous momentous changes, but the conditions are not just heightened but, according to CEO Alan Joyce, the worse the company has seen in its history.
The conditions have also galvanised Qantas to make over-due changes. After bringing needed efficiency to its front line employees, Qantas was left with a bloated back office. Overall, Qantas staff are paid more than at Virgin Australia but are less productive.
There are capacity adjustments and a single route cancellation (Singapore-Perth) to the international network, which are needed. A380s will be deferred – again – but it has become difficult to eventually see a home for them. Likewise for Jetstar's last three 787s that it will defer; Jetstar is focusing on short-haul flying, wise as more efficient long-haul LCC capacity ramps up. Jetstar remains in tact – including growth at Jetstar Japan and continuing to work to launch Jetstar Hong Kong.
The Qantas Loyalty programme remains part of the group, overall smart moves that Mr Joyce will no doubt be heckled by his unions (and some investors) for. Qantas will receive AUD112 million from an agreement with Brisbane airport, while in coming days Qantas is expected to have its debt guaranteed by the government.
Australian flag carrier Qantas will on 27-Feb-2014 report a loss of around AUD300 million for the first half of the 2013/14 financial year; it will also announce a 2-3,000 reduction in staff numbers. There is an atmosphere of crisis at the airline – which is (at least partly) justified. Its smaller homegrown competitor Virgin Australia will the next day also announce a loss in what has become a fiercely competitive domestic market.
Qantas faces two main challenges to its future: (1) its classic legacy model is extinct, notably internationally; and (2) domestically it is overweight and ill-equipped to deal with the competition that Virgin Australia has generated since its metamorphosis from LCC to full service airline.
The first is a long term problem that requires major surgery; the second is a pressing one that has to be addressed immediately, including perhaps even a change of strategy. Staff reductions and a level of restructuring at Qantas may help reshape the short term; more complex solutions are required to resolve its dinosaur dilemma.
Qantas Airways Fleet Summary: as at 10-Mar-2014
|Aircraft||In Service||In Storage||On Order*|
Qantas Airways projected delivery dates for aircraft purchased from OEMs and leased from lessors new aircraft order pipelines as at 10-Mar-2014
Qantas Airways fleet as at 10-Mar-2014
Qantas Airways fleet breakdown for aircraft as at 10-Mar-2014
Qantas Airways average fleet age
Qantas Airways fleet by manufacturer as at 10-Mar-2014
Qantas Airways owned vs leased for aircraft (at 10-Mar-2014)
Most popular aircraft types
Qantas Airways seats per aircraft
Qantas Airways average sector length (10-Mar-2014 to 16-Mar-2014)
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