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Qantas to fly to Europe via Dubai, bypassing S'pore

Publication Date : 07-09-2012

 

From April, Qantas will bypass Singapore when flying from Australia to Europe but analysts say Changi Airport should not worry too much about the move.

One reason is these flights to Europe - twice a day from Singapore to London and daily to Frankfurt - form just a sliver of its 4 per cent overall share of the Singapore market.

The other is that they foresee the Australian carrier growing its Asian operations even as it shifts the hub of its European flights to Dubai.

Its chief executive Alan Joyce said as much at a news conference in Sydney yesterday when he announced the move to Dubai, which is part of its new tie-up with Emirates airline. The partnership is for 10 years. He said the change will allow Qantas to restructure its Asian network, including adding more flights from Australia to Singapore.

It now has 90 flights a week between five Australian cities - Sydney, Melbourne, Perth, Brisbane and Adelaide - and Singapore.

Qantas also plans to re-time its flights to Singapore and Hong Kong to let travellers make more convenient connections to the rest of Asia, he said.

The Qantas-Emirates deal, in which both carriers will align their ticket prices and flight schedules, is an attempt by the struggling Australian carrier to turn around its loss-making international business.

High oil prices and tough competition led to a loss of A$245 million (US$251 million) for the year to June 30. It is Qantas' first full-year loss in almost two decades.

Russell Shaw, an analyst with finance house Macquarie Group, said in a note to clients that the Emirates tie-up could add between A$80 million and A$90 million to Qantas' annual earnings before tax. Its pre-tax earnings in the last financial year was A$95 million.

The partnership will also give Emirates, which has long shunned commercial tie-ups with other carriers, an increased presence in Australia.

This comes as its rival Etihad Airways, based in Abu Dhabi, cements ties with Virgin Australia with a 10 per cent stake in the Australian carrier.

UOB Kay Hian analyst K. Ajith thinks Changi Airport need not be "too worried" about Qantas' latest decision. He expects Qantas to work closely with its subsidiary, low-cost carrier Jetstar Australia, to grow its Asian operations.

Singapore is a key long-haul base for Jetstar Australia and home to Jetstar Asia, which is 49 per cent owned by Qantas and 51 per cent by Singaporean businessman Dennis Khoo.

Together, the two Jetstars operate 520 out of more than 6,200 weekly flights to and from Changi - four times Qantas' 130 weekly flights.

Analyst Brendan Sobie, in assessing the impact on Changi from the shift to Dubai, said the bigger challenge for the Singapore airport could come from Hong Kong, the base for Jetstar's next joint venture carrier.

"Changi must position itself to make sure it does not lose out to Hong Kong in Jetstar's Asia expansion plans," said Sobie, a Singapore-based analyst at Sydney's Centre for Asia Pacific Aviation.

Ajith believes the answer lies in making Singapore more attractive as a destination. "By doing so, it will also boost the airport's hub status."

As for Singapore Airlines, analysts say the tie-up between its two key rivals is unlikely to hurt the carrier in the short term. But in the long term, SIA could suffer as rivals team up and grow from strength to strength, they added.

 

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