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In Partnership with American Airlines

A PROPOSED alliance with American Airlines will cut fares to almost two-thirds of US destinations and $700 off the cost of flying to four major ports, Qantas has told the Australian Competition & Consumer Commission.  

The airline says its proposed joint business arrangement would also allow a “Walkabout Pass” for those travelling to the US from Australasia on joint Qantas/AA flights.

A table included in the airline’s submission to the ACCC shows Philadelphia, Minneapolis, Indianapolis and Detroit as the cities that would benefit from a $700 reduction on current fares but shows Seattle, Washington DC, New Orleans and Boston as destinations that would see lesser price cuts.

“The refined structure will be simpler to manage and communicate to consumers and trade,” the submission says. “It will result in fare reductions for 64 per cent of US destinations and will allow a broader offering of discounted tactical fares to an increased number of destinations as well as expanded stopover options between gateway cities in the US and end destinations.”

The joint business agreement, flagged in January, would be similar to the long-standing joint services agreement Qantas has enjoyed with British Airways and comes a day after Virgin Australia’s alliance with Delta Air Lines received a provisional tick from the US regulator.

As well as more competitive fares and new products, the airline says the joint business arrangement would allow joint strategic planning and management of services across the Pacific as well as in North America and Australia-New Zealand.  Other benefits would include improved marketing, flight schedules, frequent flyer offering, frequencies and connection times.  Qantas is making its application from a position of competitive strength, with 46 per cent of passenger market between Australia and the US when Jetstar flights to Hawaii are included.

Although Qantas’s market share has fallen from 58 per cent in recent years, it is more than double the 17 per cent expected within two years for the Virgin-Delta alliance and an estimated 22 per cent for United Airlines.  According to AA, it has no intention of entering the route and the airlines argue this means it is not a true competitor and there is no detriment to competition from the deal. They argue that an enhanced relationship is needed to reinvigorate competition and say they would continue the existing codeshare if the alliance is rejected, but it would have “inherent limitations”.

They note also that they would be the only direct carriers on trans-Pacific routes that are not part of an immunised alliance.

“Without immunity, the applicants would continue to act independently and duplicate each other’s marketing and sales effort while offering an inferior network, schedule, capacity and frequent flyer offering and a less efficient procurement process,” it said.  The airline wants the agreement to apply to services between the US and Australia/New Zealand, within the regions and beyond to third countries such as Canada and Mexico.

It said the deal would result in significant benefits to consumers and allow the airlines to maximise the benefits of Qantas services to AA’s major hub at Dallas Fort Worth. Four services a week start from Monday.  Qantas has filed an application for authorisation of the joint business arrangement with the ACCC and will file an application with the New Zealand Minister of Transport. The US Department of Transportation will review the agreement.

At present, Qantas offers 41 scheduled round trip flights a week between Australia-New Zealand and the US.

These include 33 weekly flights to Los Angeles, four weekly flights to Honolulu and the four weekly flights starting next week to Dallas Fort Worth. Qantas also offers six weekly flights to New York via Los Angeles.

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Qantas Airways has announced a new partnership Singapore Telecommunications Ltd subsidiary Optus as part of a revamp of the national carrier’s frequent flyer loyalty program.

Under the agreement, customers will be able to earn frequent flyer points through purchasing Optus products and services.

A number of Optus products and services will also be purchasable though redeeming Qantas frequent flyer points.

The expansion of the frequent flyer program will also see more points made available through Jetstar services, and the addition of a new, highest tier of frequent flyer recognition, “Platinum One”.

“We are delighted with the prospect of welcoming Optus to our stable of partners and are excited about the opportunities this presents…,” Qantas chief executive Alan Joyce said.

The actual launch date and details of the rate at which customers will acquire points remains under wraps but Optus will be a key Frequent Flyer partner, alongside companies such as Woolworths. Four hundred brands in total are part of the program.

Qantas chief executive Alan Joyce said the company’s research had shown its Frequent Flyer members were looking for new ways to earn additional points.

“We think this will once again set our program apart from the rest,” Mr Joyce said.

The company also announced a new level of platinum membership, Platinum One, targeting ultra-frequent flyers of the ilk of the Ryan Bingham character played by actor George Clooney in the film Up in the Air, who fly at least three times as often as the Platinum average, or as much as 60 times a year.

Optus chief executive Paul O’Sullivan said Frequent Flyer members would be able to redeem Optus products for points as part of the alliance.

Marketing chief Mike Smith said the program was an extension of other transactional rewards arrangements the telco has in place, such as offering movie tickets.

“We believe that it’s vital that we find ourselves differentiated in the area of customer experience,” Mr Smith said.

Both Qantas, which has 8 million Frequent Flyer members, and Optus, which has 9 million customers, are expecting the alliance will attract new customers and well as encourage additional spending from existing customers.

“I think this will be one of the cornerstone pieces of work we’ll do this year in terms of talking about reasons you should come and join Optus,” Mr Smith said.

Others include marketing the FetchTV alliance to provide an internet protocol television service, which was announced last week.

Qantas Asian expansion plans on a crash course with unions

In what has come as a surprise recent development and cost cutting measure Qantas Airways is planning to launch a premium airline based in Singapore. The move is aimed at boosting Asian growth and circumventing staff costs putting the airline on a crash course with its Australian employment unions, according to a news report released by the Australian Financial Review on Friday.

According to the secretive plans, Qantas would base as many as 20 aircraft in Singapore to secure a lucrative Singaporean airline licence. The nature of the aircraft are said to be narrow body A320’s which suggests that the plan is to focus on servicing the short haul Asian market pitting the airline directly against Singapore Airlines and Cathay Pacific who currently dominate the premium sector. It is understood that the new venture is not allowed to be called Qantas but will have the same look and premium feel as the current International services operated by the Airline.  

Qantas has denied reports it had applied for an air operator’s certificate in Malaysia but said a range of options were on the table to try and recover its dwindling international market share.

However it has been confirmed that an internal team of employees has been set up to focus on how to reverse the airliner’s recent struggles, and have sought ways to duplicate the successes experienced by the low-cost carrier, Jetstar, that Qantas launched in 2003.

The new Asian airline would take direct aim at Singapore Airlines and Cathay for premium Asian market share, and risks inflaming strained relations between Qantas and its unions over the company’s plans to develop a lower-cost offshore base in Singapore with a local partner to increase flights to underserviced Australian hubs, such as Adelaide and Perth according to the AFR. The base could also be used to lunch an expanded European network.

“A project team has been established to look at Qantas’ international product and service, possible new routes and ways to reinvigorate our offering,” an airline spokesman said. “The team is considering a range of options but no decisions have been made about the direction Qantas will be taking at this stage. Recent media stories are purely speculation and based on rumour.”

The rationale behind the new offshoot is clear: Qantas needs to cut costs and expand into Asia without losing its high quality profile by damaging its brand. By moving its major International operations to Singapore it will be able to dramatically cuts costs, most notably in the area of staff where it is suggested that it will employ rotational regional crews. Flights for instance from Singapore to Bangkok would be staffed by Thai crew, where as a flight to Australia would be serviced by a Singaporean crew. This sets up an enormous battle with Australian unions and has even drawn the Prime Minister into the discussion.

The move has angered unions which were already threatening industrial action at the carrier. Aircraft engineers on Thursday called off plans to strike on Friday but there are plans for further industrial action next week.

Qantas says its international business has not been meeting expectations and market share had fallen in recent years but says it is too early to offer any details on what a taskforce has recommended to fix the airline’s ailing international operations “severe structural challenges”.

Qantas has a low-cost subsidiary Jetstar Asia which operates out of Singapore.

Look out for a more detailed report in the coming days.

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