How is Qantas going to compete with Emirates on routes they both run?

3 replies

spinoza

Member since 01 Feb 2012

Total posts 218

How is Qantas going to compete with Emirates on routes they both run? Sorry to continue this discussion, I'm sure everyone is tired of it. But, my understanding is that they will both operating their own metal on routes such as Sydney-Dubai and Dubai-Heathrow. So apparently Qantas will get commissions even when the flight is Emirates operated, if the flight is booked via Qantas. However, my question is, in the long run, how can Qantas be competitive with Emirates?

The only long haul route I can find currently that both airlines operate is Sydney-Bangkok. At a glance, it looks like Qantas is about $200 more expensive for economy and $2000 more expensive for business class. Based on these economics, wouldn't it be sensible to prophesy that 3-5 years form now, Qantas will just give up flying any routes that Emirates covers?

chrisjrn

Member since 09 May 2011

Total posts 177

On SYD-BKK, Emirates fly 777s, with their ultra-crammed 3-4-3 economy layout (the plane's designed for 3-3-3, so they cram an extra seat in there).  Their flight SYD-BKK arrives at stupid-O'Clock (1:30am) – once you factor in immigration, that means you'll get into Bangkok at 3AM. Qantas, on the other hand, has a standard A330 layout (2-4-2), and the flight into BKK arrives at 7PM - much better.

In business class, both airlines use an angled lie-flat seats, but Emirates has a 2-3-2 layout (so there's a middle seat in there, which you might get, and that also annoys two of the aisle seats). Qantas has a 2-2-2 layout (no middle seat!). That makes a better business class service for Qantas as well.

So Qantas charges more for a better product – better seating in both Economy and Business; a better arrival time in Bangkok. That would probably justify the cost to anyone who knows their stuff.

When the QF-EK joint venture starts up, you can be pretty certain that their prices on routes covered by the joint venture will be coordinated, so you'll get pricing incentives based on the aircraft (i.e. is an Emirates route operated by a 777 rather than an A380) or timing (does this arrive in the evening, or in the middle of the night?).

You just can't determine these things on price alone.

TheRealBabushka

Member since 21 Apr 2012

Total posts 2,059

I think what you will see is that EK and QF flights will be priced pretty much the same. i.e. EK fares will go up and QF fares will go down marginally. That is generally what happens when competition is reduced. It will not be very pronounced (to ward against accusations of unfair competition by regulators) but prices would generally move upwards slowly year on year.

I use the BA/QF fare as a basis for this conclusion. There is no logic for BA fares ex SYD to be unnatarully high and QF fares to LHR ex SYD to be unnatrually low, if not for the JSA, which forces alignment of fares.

Now that EK and QF will be a price maker on the Australia/Europe trunk (on account of their scale), I wonder if there will be a general upward price increase across the board. I'm quite sure airlines like SQ/MH/CX would be pleased to see some breathing space as a result of this tie up.

Consequently I suspect China Southern would be the new "Emirates" (i.e. cheap, value for money fares) on the European trunk routes out of Australia.

 

spinoza

Member since 01 Feb 2012

Total posts 218

Interesting comments. Based on the prices I saw for Bangkok - Sydney I was extrapolating that Emirates' costs are significantly lower than Qantas (which ought to be the case since they have better operating margins). You are probably right about better seating and better times, but my guess is that when both airlines are running Sydney to London via Dubai, Emirates will be equal or better than Qantas on comfort, time, and still have lower costs.

So while the prices will be aligned, over time unless Qantas can bring their costs down to match Emirates', it will still be unsustainable. Whatever price they set, Emirates will make more money than Qantas. If the price rises too much and there is other competition, eventually they will just decide together it makes no sense for Qantas to be running any international routes at all.

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