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Business, Opinion

Airlines > On A Budget

I must admit, that when I fly domestically, I’m more of a price driven consumer. I’ll often pick the cheaper option, usually between Virgin or Qantas. But when it comes to long haul flights, Qantas is my preferred choice.

I try to reward myself with an overseas holiday once a year. For the past three years for example, I visited North America. The first time was on a V Australia junket. The second and third, on Qantas as a price war drove fares to extreme lows. Remember those $999 return tickets?

This year, again I’ll be flying Qantas to Europe, but for intercontinential flights, I’ve picked the cheapest budget carrier, with what I felt had the best safety record. In this instance, Vueling.

Why? Because Qantas doesn’t fly directly to my first port of call, Ibiza.

Admittedly, while I’m a budget conscience flyer, my preference for Qantas, which wasn’t the cheapest, came down to its safety record, familiarlity, its frequent flyers program and its connection with Australia.

But the industry is changing dramatically as the global economic slowdown impacts on the industry players’ bottom lines and more people choose to fly other airlines, especially low cost budget carriers. Hence, Qantas’ recent decision to scrap a number of unprofitable routes, choosing to concentrate more on the Asian region, particularly with its budget operation Jetstar.

What many airlines are doing, is minimising its long haul international operations to only a few major destinations, to then use either its own low cost carrier or partner up with other airlines to then transfer passangers to their final travel spot.

Singpore for example is a desirable location, moreso as a transitional point for passangers. Many travellers stop over on the island city on route to another destination.

In fact, numbers out today, showed passenger traffic at Singapore’s Changi Airport rose 12 per cent in January as more people celebrated the lunar new year holidays.

Changi is Asia’s second biggest airport behind Hong Kong, and is the world’s fifth busiest airport.

The more interesting statistic is that while almost 47 million people passed through the airport in 2011, a rise of close to 11 per cent, one in four passangers travelled on budget carriers, up from one in five the previous year.

The newest carrier on the scene, Singapore Airlines’ Scoot, will commence flights from Singapore to Sydney and Gold Coast from June or July. Today, it told Bloomberg that it plans to fly to at least five cities, which may include spots in China and Japan, by the end of the year as it tries to compete with the likes of Jetstar and AirAsia X.

But the budget space is quickly becoming very crowded, especially from Changi, which also sees Indian carrier IndiGo and Philippines’ Cebu Air operate.

Only a few days ago, Brisbane based airline, Air Australia went under, although there are suggestions that failure was more of mismanagement than fundamentals.

Jetstar CEO, Bruce Buchanan says that he expects more niche low cost carriers to either fail or be swallowed by bigger players as the airline business gets tougher.

Jetstar has been a star performer in the sector, recently recording a $147million half year profit before tax, up $4million. It was able to achieve that despite a $138million increase in fuel costs.

Annual growth rates are expected to fall from about 8 to 5 per cent, but it’s still growing.

Meanwhile, it’s parent company, Qantas saw an 83 per cent fall in profit as fuel costs, industrial disputes and a struggling international business crimped its bottom line.

It’s also conducting a sweeping review which will include the loss of 500 positions, many of which have been made redundant because of new technologies.

What I find interesting is the backlash Qantas received for its moves. I’ve said it before. Many Australians seem to feel some sort of ownership of Qantas, as if it were a government entity. Well it’s not. It ultimately belongs to shareholders, with a majority Australian ownership, and unfortunetly that means cost cutting to keep a lean portifable operation, and that sometimes means job losses.

It’s a public business, and it needs to make tough decisions to keep in the skies.

I just feel, if Australians or the media make a big fuss about these job losses, then I’d hope they’re supporting Australian jobs by flying an Australian airline, and not chosing other competiting carriers. That would hypocritical wouldn’t it?

Let me make one thing clear. I’m not either for or against Qantas, nor a Qantas shareholder. What I am against though, are those people who unfairly and publically rubbish an Australian brand or a business in genreal, yet personally decide not to support its operations anyway. Fly with the other carriers if you so choose, there’s nothing wrong with it, that’s what competition is all about. Just don’t bag out an Austrailan company when its ulimately working for its predominately Australian shareholders and workforce.

For the record, as of November 23rd 2011, 31 per cent of Qantas was foreign owned.



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