Labor fought to protect Qantas’ Europe business — but it’s an illusion

The closer one looks, the worse the government’s Qantas protection racket — blocking Qatar and others from the lucrative Europe business in favour of the 10-year-old Qantas/Emirates alliance — looks. It also casts a light on the collapse of Qantas’ own international network, under the stewardship of departed CEO Alan Joyce.

Qantas’ alliance with Emirates took effect in 2013, with Joyce crediting it at the time with having “revitalised” his carrier’s position on the so-called Kangaroo Route. But insiders at Qantas refer to the European business, largely run by Emirates from an actual flights point of view, as a “virtual airline”. 

“The combined Qantas and Emirates network provides one of the most comprehensive international networks in the world, offering customers a wide range of travel options between Australia and New Zealand. Choose from three hub options – Dubai, Perth and Singapore, and enjoy seamless connections to destinations across Asia, Africa, Europe and the Middle East,” Qantas boasts on its website.

Here, the casual Australian traveller would think, is their travel answer: my “national carrier” will fly me all over the Western world — and even to Africa. The truth is chastening. Dig a little deeper and one discovers that Qantas only operates a fig leaf of seven flights to London — via Singapore — from Sydney each week and seven from Melbourne via Perth to London.

Apart from three times a week during July-October to Rome (from Perth), that is the sum total of Qantas’ European business — so only 14 flights a week. Its “partner” Emirates, on the other hand, offers 91 flights a week out of Australia.

Qantas’ European service is simply smoke-and-mirrors ticket clipping, akin to a travel agent. The Australian company takes a percentage, thought to be about 10% of the ticket price — the usual Qantas financial transparency applies here, as it won’t divulge the true amount — for marketing the Emirates service.

It’s virtual, and virtually risk-free, profit. Customers using these flights have become used to the superior Emirates inflight service and on-time aircraft. Sure, codeshare customers still get Qantas points that they can use domestically or in Asia — when they can find a flight — but Qantas has largely lost them to Emirates’ superior “product”. The deal means Qantas effectively sent, and is continuing to send, an increasing number of jobs to Dubai during the course of the deal.

Conversely, having allowed Qatar to send dozens more flights in and out of Australia would have brought thousands of jobs to Australia in terms of tourism, and at a time when Qantas is actively offshoring its flight attendants jobs to cheaper places, such as New Zealand, the United Kingdom and Thailand, and continues to push engineering work offshore.

Indeed, the Emirates deal even extends to New Zealand. This suits the Middle Eastern carrier as it can park its planes in Christchurch overnight, a much cheaper prospect than leaving them in Sydney. That is also the one part of the deal that the Australian Competition and Consumer Commission (ACCC) — when it approved another five years for the airline alliance last month — said it will continue to monitor.

Indeed, when ticking off the deal, the ACCC ignored the strenuous objections of Australian travel agents, who are currently also furious about the nixing of Qatar’s bid for more flights, now the subject of a Senate inquiry.

“If authorisation is provided, an authorisation period beyond five years would be presumptive in circumstances where massive transformations are occurring across the industry in a rapidly evolving post-pandemic landscape,” the Australian Federation of Travel Agents said in a submission.

“There has not been sufficient evidence provided by the applicants to support the continuation of coordination on distribution strategies for passengers and agents. Aligning these activities appears to have the impact of limiting choices for consumers on how they shop and book travel.”

For all former CEO Alan Joyce’s blather about wanting to fly to Frankfurt, Paris and elsewhere in Europe with the new long-range A350s — due to start arriving in about three years — a decade or so ago Qantas was indeed flying more to Europe. This is before, as one pilot noted: “Joyce destroyed the international network, cutting daily flights to Frankfurt, flights to Rome, as well as daily [flights from] Sydney to London via Bangkok and Hong Kong.” 

It was not just Europe, as Joyce also ended the popular network that linked Asian cities such as Singapore, Bangkok, Hong Kong and Jakarta. By doing this he ceded passengers — and Australian soft power — to the likes of Singapore Airlines, Cathay Pacific and Thai Airways, pilots said. British Airways took up the slack on the Hong Kong-London leg. 

In its place, Joyce created a Jetstar Asia network that has not at all gone according to plan. It looked great on paper — a group of four companies based in Singapore (Jetstar Asia), Vietnam (Jetstar Pacific), Japan (Jetstar Japan), and the pièce de résistance Jetstar Hong Hong, designed to serve the Chinese mainland, using a low-cost carrier mode. 

But Joyce and his team fundamentally misread the regimes in Vietnam and Hong Kong/China, the speed the market would grow, and the rapid emergence of Asia’s homegrown low-cost carriers. The Vietnamese airline was the subject of a firesale after two of its executives were detained for five months. Jetstar Hong Kong never even began. These were all abject failures that should have killed Joyce’s career.

Qantas retains only minority shareholdings in the Singapore and Japan-based companies, of which the connecting arrangements with the handful of Qantas planes working Asian routes are clunky and often unworkable. 

So, to the new (old) plan of more flights to Europe, this time using direct long-range A350s. To make the lengthy journey, these planes will have to carry considerably more fuel, as well as fewer passengers, pilots said. This means higher fares for customers — by about 30% — for a time saving of only two hours.

Indeed, analysis done internally by Qantas showed that it was more cost-effective for the company to fly to these destinations via certain cities in Canada and the USA. The planes will also burn more fuel, denting Qantas’s long-term green-washing efforts. But you won’t have read any of this in the Qantas spin for Joyce’s most outrageous vanity project.

The A350s, along with the other dozen new planes belatedly arriving to replenish Qantas’ ageing fleet, are already hitting Hudson where it hurts, on the bottom line, as the Australian dollar continues to slide. This is also adding countless millions to offshore engineering costs in an industry where almost all contracts are in US dollars.

Joyce’s international strategy — slash flights, increase codeshare, send jobs offshore — is a classic example of a short-term, shareholder-focused, bonus-achieving strategy. It’s what happens when the government privatise taxpayer-owned assets with no obligations to service routers, customers or staff — or with no industry-specific regulation for the company involved. Yet that is something the Albanese government appears to be determined to let roll on.

Vanessa Hudson has just stepped into her job as Qantas CEO, but is being tested immediately. She is now staring at rising costs completely out of her control due to currency fluctuations, and meanwhile the unions are restless. This week, the High Court will also hand down its decision on whether Qantas illegally sacked 1700 baggage handlers, the ramifications of which could be extraordinary.