29-Jul-2010 10:05 AM

Qantas hoping to expand to China; expanding Business operations

Qantas CEO, Alan Joyce, stated the group hopes to operate from Australia to Europe via China in the future, by developing a Chinese hub, as there is a “huge” potential in the Chinese market (AAP/Sydney Morning Herald, 28-Jul-2010).

  • China-Europe plans: Chinese authorities have given approval for such operations, but some European authorities are yet to. The group expects the arrival of its B787 aircraft to assist its expansion into China. Qantas plans to take delivery of its first B787 in mid-2012, to be operated by Jetstar. However, he did note that the carrier’s routes from Australia to China had lost Qantas “a lot of money” during the global financial downturn. But he also commented that the carrier’s freight services from China to the US have been performing well;
  • Asia: the CEO also stated Qantas and Jetstar could launch bases in a number of Asian cities, after Jetstar selected Singapore as its main Asian base earlier this year;
  • Business strategy: Qantas is planning a multi-million dollar upgrade of its Business operations to counter challenges from Virgin Blue and Tiger Airways Australia (Bloomberg/The Australian, 28-Jul-2010). The carrier plans to refurbish its airport lounges, food menus and Business class cabins, following the implementation of its new frequent flyer check-in system. Mr Joyce meanwhile commented that the group’s two-brand strategy have provided it with an advantage over other carriers, criticising Virgin Blue Group’s plans to target both leisure and Business passengers. He stated Qantas will prevail in the Business market;
  • Core asset sale: The divestiture of its 46% stake in Air Pacific will be the last of its non-core asset sales;
  • Mergers: Mr Joyce commented that mergers in the Asia Pacific region will not take place until governments relax their ownership rules and other regulatory barriers (Dow Jones, 29-Jul-2010). He added consolidation is the “right thing” for the global aviation industry;
  • Jetset Travelworld: the group expects Jetset Travelworld to win regulatory approval for its proposed merger with Stella Travel.

Qantas: “It is not the issue with the Chinese, it is actually the Europeans. There's traffic rights on the Chinese's bilateral to fly from China to Europe, the issue is that on the European bilateral there isn't those rights. The Australian government has that on the agenda, they are obviously part of the ongoing discussions with the Europeans and we are hoping that at some stage that will be facilitated…The 787 in particular opens up that range and spectrum for routes that we wouldn't see as economic today… I'm a firm believer that the middle of the road strategy is not a great strategy. You could end up as road kill if you sit in the middle of the road for too long… It’s about raising the bar for what business travelers can expect. This isn’t a defensive strategy, it’s about setting the pace to keep our customers…The way we've been looking at it is to say we play our best game and it doesn't matter what the competition will do; Qantas will prevail. The advantages that we have in our very strong corporate position in the domestic market are our network, so we're absolutely continuing to grow that,” Alan Joyce, CEO. Source: AAP/Bloomberg, 28-Jul-2010.

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