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Qantas fears opening skies
to Singapore Airlines
By
David Fullbrook
BANGKOK - Singapore
Airlines (SIA), arguably the world's best, is
likely to fly busy routes between Australia and
the United States, snatching a pretty penny or two
from Qantas Airways. Having faced little
competition on this lucrative route, Qantas is
screaming foul, despite flying Singapore to Europe
for decades. For passengers, however, opening the
route means lower fares and more comfort.
Singaporean officials are asking their
Australian counterparts to open up trans-Pacific
routes for SIA, arguing that Qantas has long
enjoyed Singapore's generosity, flying between
Singapore and Europe, especially London. Agreement
is almost certain as Australia previously
concurred that at some point these lopsided
arrangements need fixing. "Seems fairly clear
they're going to extend a framework for further
rights to Singapore Airlines, including the
Pacific. It will probably be staggered, without
access being given until at least 2006," says Ian
Thomas, an analyst with the Center for
Asia-Pacific Aviation.
But Qantas warns
that allowing SIA to fly between Australia and
Singapore will cut its profits by A$44 million
(US$35 million), or about 5% of its annual profit.
Less profit may mean job cuts, something Qantas
hopes the Australian government will keep in mind
while freeing the skies. However, if the
Australians put off the inevitable, things could
get nasty for Qantas, which flies three, sometimes
four times daily between Singapore and London, for
example. "How can they prevent Singapore Airlines
getting flights between Australia and the US west
coast? If they do, Singapore might ask Qantas to
cut back its flights between Singapore and
London," says Jim Eckes, managing director of
consultancy Indoswiss Aviation.
Qantas
argues that allowing SIA to fly across the Pacific
is no quid pro quo as people traveling between
Australia and Europe have to stop somewhere, but
for those traveling between Singapore and the US,
going via Australia makes no sense. Perhaps, but
Qantas has done well out of Singapore's largesse.
If Australia does not reciprocate, Singapore might
decide to offer those flight rights to other
airlines, such as Virgin Atlantic - 49% owned by
SIA and a partner of Australian low-fare carrier
and Qantas's arch-rival Virgin Blue. United
Airlines, the US carrier regularly flying the
route, is not jumping up and down, flailing its
arms around. With sales offices and flights across
the US, it stands a good chance of keeping its
airliners full.
Were it not for the
turmoil engulfing the airline industry over the
last few years that caused SIA to incur its first
ever loss, Singaporean officials might have
pressed the case earlier. SIA is running out of
profitable routes. To grow further and generate
more profits for its shareholders, of which the
largest by far is the Singapore government, it
needs access to more routes. With more aircraft,
including the 550-seat Airbus A380 on order, that
need is becoming more acute.
Singapore
welcomes airlines that wish to fly to other
destinations, known as fifth freedom rights in the
industry. More flights mean more visitors spending
money in the city-state. An open-door economy has
been crucial to Singapore's stunning development
over the last four decades. Air travel remains one
of the world's most cosseted and regulated
industries, with bilateral agreements often
defining which aircraft and how many flights and
seats are allowed between countries.
If
these quaint arrangements - a hangover from the
days when steamships conveyed people around the
world - were consigned to history by throwing the
skies open, as they have been in the European
Union, lower fares, greater convenience and leaner
airlines would, in most cases, be the result.
However, many governments loathe doing this as
national pride still garbs airlines, putting them
beyond the pale of reality. In many countries,
airlines are bloated job-creation schemes, often
riddled with corruption and inefficiency. Tearing
down these barriers - and there is no sign of this
happening any time soon - would foster a dozen or
so global airlines.
Instead, passengers
get alliances, like Oneworld and Star, as
half-baked proxies that do little to cut fares,
but do help regular travelers accrue a nice nest
egg of frequent flyer points. Were travelers to
use all these points, many airlines would go
bankrupt. Thankfully for the airlines, most
travelers simply do not have the time. This
situation has helped Qantas thrive. "I think what
we've seen historically is that Qantas has been
heavily protected by its government," says Eckes.
Despite that, SIA is already Australia's
No 2 international carrier, partly because its
service sets the gold standard. Even economy-class
passengers enjoy dozens and dozens of movies,
television programs and radio on-demand, plus
arcade games and other distractions provided by
personal televisions. That service, often at good
prices, is going to make life difficult for
Qantas. "I expect it to be a significant negative
and that's why they're fighting it very hard. The
reason is that Singapore Airlines would stand a
good chance of picking up a disproportionate part
of the premium market on that route," says Peter
Negline, an aviation analyst with JP Morgan.
SIA is almost certain to enter the route
with pocket-friendly fares to draw passengers,
betting word will soon spread about its service.
Airlines often sell cheap tickets on flights not
originating in their home port. SIA also enjoys
another advantage. Already flying to US west coast
cities from Singapore means it has all the
infrastructure in place to handle flights from
Australia. Such flights also give it a triangle of
routes between three wealthy countries, which at
the very least will allow it to offer some
interesting deals for tourists.
Opportunities might one day extend beyond
the US. "I don't think Mexico would generate much
traffic, Vancouver might. I think they'll want to
get up to 14 flights a week to the US west coast,
before looking at Vancouver," says Eckes. Expect
Qantas to whine and howl if that comes up for
discussion. It is, however, not all bad news as
SIA already feeds many passengers into Qantas's
domestic network. More SIA flights will inevitably
mean more domestic passengers for Qantas, though
whether they will offset losses from SIA's move on
to the Pacific golden routes is questionable.
Qantas's only option is to revamp its
product, improve service and cut costs. Just how
well it does that will determine whether it wins
or loses. The evidence so far points to defeat.
(Copyright 2005 Asia Times Online Ltd. All
rights reserved. Please contact us for information
on sales, syndication and republishing.) |
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