Qantas resizes network; grows closer to home

Last week brought about a spate of bad news from Qantas, which over last few years has been tried by a combination of high fuel prices, unfavourably strong currency rates, industrial actions, increased competition and weakening demand. As the struggles to turn around its loss-making international division, Australia’s flag carrier last week posted the first full year net loss in 17 years. The airline then announced the withdrawal of its firm order for 35 787-9s as part of a turnaround plan. anna.aero, which regularly analyses the Australian market, decided to scrutinize Qantas’ network in more detail.

Traffic growing marginally

The airline’s historical traffic figures show that domestic segment has proven more resilient to the difficulties faced by the airline and maintained an upward trend over the last decade despite a number of economic setbacks. However, the troublesome international segment continued to decline since the 2005 peak when Qantas carried 9.4 million passengers on its international routes. In 2010, only 5.9 million used Qantas’ international network. In both 2011 and 2012 (of Qantas’ financial year ending 30 June), the numbers managed to climb back to the six million level, but even then remain at two thirds of the peak volumes.

International sector length goes down

As Qantas tries to restructure its international network, virtually no new long-haul routes were launched in the last year. The only exception being the thrice-weekly services to Santiago de Chile, which in fact signified a capacity shift from the previously offered, also thrice-weekly routing to Buenos Aires via Auckland. This change allowed Qantas to connect better with its alliance partners LAN and American Airlines. In Europe, however, the airline has indicated plans to pull out of Frankfurt, leaving only its London Heathrow service still operating to the continent – for now. However, it has been speculated that Qantas’ new partnership with Emirates will lead to the end of all of its European operations.

A combination of capacity reductions and route withdrawals, mainly in Europe, New Zealand and India, means that Qantas is refocusing on international markets closer to home. Notably, the western Australian city of Perth seems to be the relative winner of the reshuffle in the last year, as it has seen Qantas increase capacity on its routes to both Hong Kong and Singapore.

Qantas’ new and dropped international routes
Origin	Destination	WF	Competition (WF)
New routes
Sydney	Santiago de Chile	3
Dropped Routes
Auckland	Los Angeles	7	Air New Zealand (14)
Hong Kong	London Heathrow	7	Cathay Pacific (28) British Airways (14) Virgin Atlantic (7) Air New Zealand (5)
Bangkok	London Heathrow	6	Thai Airways (14) British Airways (7) EVA Air (5)
Bombay	Singapore	3	Singapore Airlines (19) Air India (7) IndiGo (7) Jet Airways (7)
Sydney	Buenos Aires	3
Brisbane	Queenstown	1
Melbourne	Queenstown	1	Jetstar (3) Air New Zealand (2)
Source: anna.aero route database, Innovata for w/c 3 September 2012 and 5 September 2011

Domestic capacity grows 7%

In spite of stiff competition in the Australian domestic market, Qantas has increased in the domestic market, where the airline has had a better financial performance. Frequencies on many of its domestic routes are up, including on eight out of its ten busiest services. Here, only services from Sydney and Melbourne to Canberra maintained constant frequencies compared with last year.

Notably, Qantas expanded its domestic presence with three new routes since September last year. While two of those were low-frequency services, the airline also began flying from Perth to Geraldton, also in Western Australia, with 12 weekly frequencies.

Qantas regional route changes
Origin	Destination	WF	Competition
New routes
Perth (PER)	Geraldton (GET)	12	Skywest (19)
Townsville (TSV)	Moranbah (MOV)	2
Brisbane (BSE)	Port Hedland (PHE)	1
Dropped routes
Townsville (TSV)	Horn Island (HID)	1
Source: anna.aero route database, Innovata for w/c 3 September 2012 and 5 September 2011