Category: Personal

There’s been a lot of recent media attention surrounding Qantas, thanks to Qantas, but because Virgin Australia has been undertaking an aggressive capital raising exercise. I find the talk interesting, and I’m not going to weigh in on whether I think Qantas should or should not be seeking to do about its own capital problem, but I do want to have a whinge about Ben Sandilands.

Mr Sandilands is a distinguished aviation reporter based in Sydney, and has been interested in aviation since Qantas was landing flying boats in Sydney Harbour. He has, may I say, lots of “street” cred. However of late he’s been bashing Qantas for reasons I think are unfair, and in recent days it’s gotten a bit ridiculous.

Qantas handled the industrial disputes of 2011 disastrously, says Ben Sandilands

You may remember that Qantas CEO Alan Joyce grounded the entire Qantas fleet in October 2011 because of ongoing industrial disputes. Mr Sandilands is of the opinion that this was foolish, and has irreversibly damaged Qantas. I take a different view. I was caught up in the rolling Friday work stoppages that were going on in the months before the shutdown, and that was damaging Qantas. Forward bookings were down because of the uncertainty, and the image of perfect safety was being eroded by having to pull management staff in to work on the ramps. I recall one morning waiting an hour for my already delayed fight to leave the gate because volunteer management staff had not closed a cargo door properly, and someone needed to help them do it.

This was happening every Friday. If you were a Qantas passenger, and you put up with this rubbish (as I did) you were either stupid but loyal, or just stupid.

When the shutdown happened, no one saw it coming. For 55 hours, thousands of people were seriously inconvenienced (including a friend of mine who was visiting). Yes, it was a disaster if you were booked to travel between 5:00pm AEDT Saturday 29 October 2011 and 11:59pm AEDT Monday 31 October 2011. But think about the quantifiable damage that was being done to Qantas by the ongoing stoppages:

• 70,000 affected passengers
• Over 600 flights cancelled
• 7 grounded aircraft
• $15 million in damage every week

Some perspective is required to get a sense that something urgent had to be done, and Alan Joyce did it. He forced the unions to the table and got a binding outcome. For a workforce that had been enterprise bargaining for nearly 20 years, this was an outcome that seemed impossible, but Joyce did it. Qantas is now a great passenger airline again, and I am thankful for it. Qantas employees didn’t damage Qantas, board members didn’t damage Qantas, Alan Joyce didn’t damage Qantas – militant union leadership tried to, and failed.

Qantas is giving away its routes to Emirates, says Ben Sandilands

In August 2012, a long-rumoured tie up with Emirates was finally confirmed by Tim Clark and Alan Joyce in a joint announcement. It finally took flight in April this year and looks to be going quite well so far.  This is another area where I think Mr Sandilands has misjudged the impact.

For a long time now, Qantas has been bleeding routes, no doubt about that – but they have largely been bled from Asia, in order to sustain unsustainable European routes. Here’s a list to jog the memory (with a little help from the Fin Review):

• 1997: Qantas withdraws from Seoul, Taipei and Kuala Lumpur during the Asian financial Crisis
• 2000: Qantas mainline withdraws from Kuala Lumpur, and has yet to return
• 2009: Sydney-Beijing and Melbourne-Shanghai are cut
• 2009: Direct flights to Mumbai now served via Singapore
• 2011: Japan services scaled back
• 2012: Mumbai services via Singapore withdrawn, cutting India altogether
• 2012: Onward London legs from Hong Kong and Bangkok withdrawn

Having an Australian airline fly European routes in favour of destinations closer to home meant that Qantas was always going to shell out big dollars for one of two reasons:

• either you fly fuel tankers, or passenger planes: done as long direct sectors, you have to take off with extra fuel taking up weight that could have been taken up by paying passengers and cargo.
• you fly via an intermediate city: Singapore had been the intermediate port of choice, but stopping introduces costs of its own. Filling seats on all sectors adds to the cost of acquiring passengers, an especially hard ask when they’re poorly timed like these Qantas flights were.

Past Qantas boards have tended to put these expensive European routes ahead of Asia for various reasons. These reasons may have been economic and strategic realities in the past, but they are no longer the case. Europe is in the doldrums, fuel prices are high and the only aircraft able to do the routes profitably are not in the Qantas fleet. Reality bites.

When the Emirates deal was announced, those of us who clung to the few remaining Asian routes jumped for joy. Finally, we could land in Singapore at a sensible, connectable time rather than a time that suited onward European connections. There are now more seats available for us, too – and prices have come down considerably. Flying Qantas to Asia is now possible. And this has come about not because Qantas has “handed its European routes to Emirates” as Mr Sandilands would say, but because Qantas was losing money on Europe and losing money (and patronage) on Asia. Something had to give. The only route to Europe that Qantas is no longer operating is Frankfurt, which has since freed up an aircraft to serve Singapore. In fact, in tying up with Emirates, Qantas is free to explore a whole bunch of regional routes that are exceedingly profitable. Just ask Singapore Airlines, Cathay Pacific and Air Asia X.

Elsewhere, you’re on the money, Mr Sandilands

It’s not all roses and champagne. I am disappointed that Qantas has decided not to leverage its oneworld partnership with Malaysia Airlines. Qantas was in fact the sponsor that brought Malaysia Airlines into the oneworld alliance, but the falling out resulting from a failed regional Kuala Lumpur-based partnership soured the relationship in 2012. Qantas needs to fly to Kuala Lumpur in order to makes its full-service Southeast Asian offering truly viable. Right now, Qantas will put you in Singapore and expect you to continue to Phnom Penh, Hanoi and Yangon on its low-cost carrier, Jetstar Asia. That’s not an acceptable proposition for business travellers.

Additionally, I am disappointed that that they have cut routes from Perth and Adelaide to Asia, but understand why this is happening. In fact, it’s the same reason why I’m disappointed that the Asian expansion has not opened or expanded more routes – Kuala Lumpur, Beijing, Shanghai, Chengdu, Guangzhou, Mumbai, Delhi and Seoul. It’s down to aircraft, and this is one where past boards are probably more at fault.

Faulty Fleet

In the early 2000s, Qantas ordered 6 of what was to be the second coming of the Boeing 747-400 – the 747-400ER (the ER signifying Extended Range). Because of policy and trans-Pacific routes, one can understand why they did this – at the time, ETOPS restrictions would not have allowed Johannesburg or South American to be operated profitably by anything other than a quad-jet. The ER variant also meant that trans-Pacific routes could be done with maximum payload. But how many other airlines ordered the same passenger plane? Exactly none.

It may have seemed like forward-thinking at the time, but it turns out that Qantas underestimated the new line of 777s being launched by Boeing – the incredible 777-300ER (or 77W in shorthand) and 777-200LR (77L). Qantas has perpetually underestimated the 777 – it is the only member of the Working Together group (that collectively designed the 777) to not buy a single one. The second generation 777s were announced at roughly the same time that Qantas inked the 747-400ER deal and have since formed the backbone of many airlines that actually make money on long-sector routes. It is absolutely true that in the 2000s no 777 variant could have done Sydney to Johannesburg or South America profitably; Virgin Australia tried Melbourne to Johannesburg and failed because of roundabout ETOPS-compliant routings.

However in 2011, the 77W and 77L were granted ETOPS 330, extending the radius in which they could stray from emergency airfields and effectively wiping out their Achilles heel. I note that Qantas is still flying its oldest (non-ER) 747 on its Johannesburg routes regularly. About the most expensive way you can do it.

Qantas also strategically blundered by giving its Airbus A330s to Jetstar to operate long haul routes from Australia to Asia and Honolulu; the A330s would have been the ideal aircraft for Qantas mainline to rebuild its Asian presence, but many of these are going to be completely tied up with Jetstar until they are given back. Now this is partly excusable because their replacements – the Boeing 787s – were so heavily delayed. Had the 787s been on time, Asia would have been better served by Qantas – but again, this was a long-term planning issue for which past boards should have hedged, but failed to do so.

So what’s the point of Qantas bashing?

There isn’t one. Qantas is doing relatively well in the face of industrial action, consistently high fuel prices, multi-directional competition and botched fleet planning by past boards. The current board should instead be judged on what it does next. Questions that yield useful answers might look something like this:

• Where will Qantas mainline deploy its A330s when they are returned by Jetstar? As 787-8s are delivered to Jetstar, the plan is for returned A330-200s to be deployed to the domestic Australian network, allowing retirement of ageing 767s. In my eyes, committing them to the domestic network is silly, when a properly configured A332 can used by both domestic and international operations, and let’s face it – international is where aircraft are desperately needed, and the long range A332 is a very suitable plane for operations to North Asia and India.
• What are Qantas mainline going to do with 787-9 options that mature a year from now? With a shortage of aircraft now, and many long-haul airframes to be retired in the next 10 years, not converting these options to firm orders would be an unexpected decision.
• If it converts the options, where will it deploy aircraft? This is a rather open-ended question because a lot can happen in 3 years, but I would hope that the focus on Asia would be maintained. The 787-9 is supposed to be a very capable long-range aircraft, but it is yet to be proven and it has some ETOPS problems to overcome before it can even approach the reputation of its big brother, the 777.
• What aircraft are going to be ordered to replace the 747s post-2020? Will the 777 continue to be ignored, in spite of Emirates ordering 150 of the 3rd generation 777 a couple of weeks ago?

My final thought to offer Ben Sandilands is this: judging the board and management of an airline while it sits is short-sighted and unfair, when much of what they do only yields results long after they’ve left. Asking them to resign? Hysterical.

I have the greatest respect for Ben Sandilands, but on these few points he really should give Qantas a break.