Tuesday, September 7, 2010

Qantas navigates a return on routes ceded to Jetstar #aviation

QANTAS is poised to return to some routes currently only served by its budget subsidiary Jetstar.

This comes as the Qantas Group moves to recalibrate its operations to take advantage of a rebound in business travel demand.

In an extensive interview with The Australian, Jetstar chief executive Bruce Buchanan said the move would reflect the group's confidence that it achieved the best results by deploying both brands on key sectors.

"You may see some announcements where they come on to markets that we are on, and likewise you will see growth of ours on them and we are constantly looking at ways to optimise the markets," Mr Buchanan said.

"We get the best outcome as a group when we deploy both brands on a market. Both brands are massively complementary. The overlap we have between customers is very small."

Qantas and Jetstar now fly together on 30 routes across the group's domestic and international network and the group has the flexibility to scale up domestic capacity by up to 15 per cent this year.

Currently 23 per cent of that growth is targeted to come from Jetstar, while 8 per cent is from Qantas. But given Qantas is on a bigger base, that amounts to the same number of seats for both carriers.

The best example in the past year of Qantas returning to what had become a Jetstar-only route is Hamilton Island in the Whitsundays.

Qantas has also been adding wide-bodied aircraft capacity on the Brisbane-Cairns sector, at the same time as Jetstar has also been adding capacity.

It is believed Jetstar is also looking closely at starting services to Broome, operating from Perth and east coast destinations. Qantas has also been adding capacity to Broome.

Qantas is determined to maintain its domestic market share at 65 per cent and fend off the new challenge from arch-rival Virgin Blue in the lucrative corporate market.

Virgin is undergoing a major transformation aimed at driving the airline's share of the business market up from 5 per cent to 20 per cent in the next few years, guided by former Qantas executive John Borghetti.

Virgin recently struck a new international alliance with the Abu Dhabi-based Etihad Airways and has announced plans to operate its first domestic wide-bodied aircraft between Perth and east coast destinations.

Jetstar is also looking to dramatically expand in Asia and has introduced a scheme to allow pilots to move between its Australian and overseas operations.

The scheme allows pilots in countries from which the low-cost carrier operates to apply for positions with other businesses around the group. Jetstar currently employs around 1000 pilots worldwide, almost 600 of whom are based in Australia.

Each time the airline introduces a new narrow-bodied service (that is an Airbus A320 or equivalent), it employs 10 new pilots. For a new wide-bodied international service, it needs 16 new pilots.

But the move is also about allowing Jetstar to compete in Asia by calibrating its cost base to the country in which it is flying.

"If I sell a ticket in Singapore to a Singaporean, I need to do it on a Singapore cost base. We don't make any apology for that. That is what we need to do to be successful and we are not going to go down the path of other failed business models of the traditional legacy carriers where you have one homogenous proposition," Mr Buchanan said.

In Australia, the group is using one of its existing and previously unutilised subsidiary entities, Jetstar Group, to employ overseas pilots who want to fly the airline's planes in Australia.

"When you move to something that is unknown, there is always uncertainty. Anyone in their existing contract, they don't need to move," Mr Buchanan said.

"We have cut down the walls that existed previously between the different pilot groups. They have always been entirely separate up until now.

"We have just had 10 or 11 captains go out of Australia to take command opportunities in Singapore. So that creates opportunities in Australia."

However, the Australian and International Pilots Association -- the peak Qantas pilots union -- a fortnight ago backed a no-confidence motion in Mr Buchanan over the changes, claiming a move to allow overseas pilots to fly in Australia would cut their conditions.

"A no-confidence motion from the Qantas pilot union is to be expected. They see Jetstar as a threat. We are focused on our guys, our business," Mr Buchanan said. "There has been a lot of talk from them on what they are going to do to our business.

"I think we just continue to communicate on our guys to make sure they are comfortable with what is going on."

Jetstar's Australian pilots are employed under an existing five-year EBA that runs until March 2013. It is in party with the Australian Federation of Air Pilots and the Jetstar Pilot Council.

AIPA is not a party to the agreement but has reasonable coverage within Jetstar.

The Jetstar Pilot Council is due to meet today to discuss the issue but the pilot group cannot take protected industrial action until the EBA is up for renegotiation.

Pilots in the Jetstar Group in New Zealand, Singapore and Vietnam are all employed on separate agreements.

Mr Buchanan denied the new arrangements were a precursor to employing pilots on new terms to fly the new generation Boeing 787 aircraft across the Qantas Group.

Qantas has firm orders for 50 of the 787 Dreamliners -- 15 as 787-8s and 35 as bigger, longer-range 787-9s.

The first aircraft is due to be delivered to Jetstar in mid-2012.

"It doesn't drive any thinking on the 787s. The guys that will fly the 787s will be the guys flying our wide-bodied aircraft today," Mr Buchanan said, adding that they would be employed on the same contracts as they are today.


Read More Aviation News http://www.theaustralian.com.au/

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