Scientia Professor John Roberts from the UNSW Business School discusses the implications of the challenges facing Qantas, as it changes routes and will return to flying to London via Singapore.
“Is it any surprise that Qantas has made a dramatic turnaround in its routes, and will return to flying to London via Singapore, and axe the unpopular route via Dubai it started five years ago?” says Scientia Professor John Roberts from the UNSW Business School.
He argues that every now and again companies are brought back to the reality of John Wanamaker’s adage: ‘The customer is always right.’
“Not every time, not every customer, but in the long term a company that ignores the voice of the customer forever does so at its own peril”, says Professor Roberts. “Customers like spacing out their stop on the way to Europe. The splitting of the kangaroo route into a 14 hour hop to Dubai, followed by a 7 hour one to London did not add up. Dubai could never match the charms of Singapore, Bangkok and Hong Kong as stepping stone to Europe. The competitors that Qantas encountered on the Middle East routes through Dubai, Abu Dhabi and Qatar were playing on a battleground that much better suited them than its traditional ones through South East Asia. The synergies with high growth, high volume markets throughout Asia made Singapore a much more scalable hub.”
He questions whether the Dubai decision a poor one. “Strategically, it was never going to be a long term winning play. But tactically, it may have made sense. Qantas abandoned its long-held and popular Sydney-Singapore-London route in 2013, and ditched an alliance with British Airways, to team up with Emirates,” says Professor Roberts. “We don’t know the benefits that Qantas derived from the Emirates code share, just as we don’t know the leverage that walking away from the Kangaroo route shared with BA gave it with the latter airline. It may have made sense commercially in the short term as a migration strategy to a better position, but customers just didn’t take to it and that was perfectly foreseeable.”
The famous QF1, using an Airbus A380, will now depart Sydney in the afternoon, to reach Singapore late evening, and then continue to London for an early morning arrival.
“I think it’s a good move and expands passenger travel options. Dubai seems to have less appeal these days as a stopover,” he adds. “Australian customers love stopping in the Lion City, and it’s geared around the traditional Kangaroo route. That’s why British Airways always flew, and carried on flying, via Singapore to Sydney.”
“If passengers really do want to fly via Dubai, and really want to collect their Qantas frequent flyer points while doing so, there will be a Qantas code on Emirates flights, and from there passengers can fly on with just one connection to other parts of Europe. But passengers never really seemed to take to stopping off in the middle of the night in Dubai. There are far more shops and restaurants at Singapore airport, and the huge Qantas Club at Singapore was rebuilt just before the switch especially for passengers to use it as a transit hub, as it will be once again.”
Qantas will however offer direct flights from Perth to London. “It’s not well known, but this direct flight actually starts in Melbourne, offering Perth as another one-stopover point to London. And London is by far where most Aussies want to fly to. That’s why Qantas is opening a new Qantas Club there.” Professor Roberts’ optimism about the Perth route is considerably less than that of Allan Joyce, the Qantas CEO. “Perth faces many of the same challenges as Dubai as a stepping stone to London from Sydney and Melbourne; it is small and thus is not a great aggregation point, it has limited functionality as a stop in its own right, and most importantly it divides the Kangaroo route into two very unequal chunks.”
In terms of its global strategic position, the decision to revert to the traditional Kangaroo route does give Qantas a lot of opportunities. Qantas can become Emirates’ de facto extension into much of South East Asia. Qantas can continue to clip the ticket on Emirates flights through Dubai into all of Europe. And it can continue to get scale in the highly attractive South-Eastern Asia market. “All it has to do is work out how to handle its arrangements with its One World Alliance partners. The American Airlines relationship still offers great synergies. But, once again, the BA relationship will remain a pesky one. Frenemies are so much harder to manage than either friends or enemies,” he says.
Professor Roberts can discuss the implications of the challenges facing Qantas, as it changes routes.
For further comment call John Roberts on 02 9385 9698, 0421 078355, or email j.lorkin@unsw.edu.au