Qantas CEO: Why we pulled out of Perth

By David Flynn, May 1 2014

Qantas CEO Alan Joyce says the airline's axing of year-round international flights from Perth was driven by harsh economics which made the route a revenue sink-hole at the same time the airline is trying to cut costs and claw its way back into profit.

"Unfortunately we can't insulate WA from the need for hard decisions" Joyce said in a speech to the Chamber of Commerce and Industry of Western Australia yesterday, two weeks ahead of the closure of Qantas' sole remaining international flight from Perth.

Joyce cited increased competition owing to "a giant wave of airline capacity that has reshaped Australian aviation", partnered with  "ongoing record fuel prices", as key challenges confronting Qantas.

"I recognise that Perth has been affected by the withdrawal of some Qantas International routes – routes that were unprofitable," Joyce said, explaining that "we have had to rationalise our international network in some areas."

Describing Qantas' efforts to slash $2 billion in costs over the coming three years as "one of the biggest reform programs in corporate history," Joyce warned "there is a lot more hard work ahead before we can be satisfied with our cost base."

Qantas will shutter the Perth-Singapore flight QF77/78 from May 12th, leaving travellers to Singapore in the hands of low-cost offshoot Jetstar Asia, although the airline will temporarily resurrect the service from July 3-21 to cater for additional demand over the peak holiday season.

Qantas will also run a twice-weekly Perth-Auckland flight from December 5th 2014 to April 26th 2015, although from October 15th this will go up against Air New Zealand's new Boeing 787-9  – a plane which may not be flying in Qantas colours until close to the end of this decade.

Air New Zealand's Boeing 787-9 is one of many Qantas challengers aiming to woo and win Perth travellers
Air New Zealand's Boeing 787-9 is one of many Qantas challengers aiming to woo and win Perth travellers

But while Joyce praised Perth for "the pace of development and the sense of energy and optimism that comes with it" and predicted that "WA will continue to play a lead role in the Australian economy", Qantas will for the most part leave its alliance partner Emirates to ferry rusted-on Red Roo travellers to the rest of the world.

The Middle Eastern airline has big plans for Perth, with a daily Airbus A380 tipped to take over one of the three daily flights between Perth and Dubai.

Virgin Australia partner Etihad Airways will also commence daily flights between Perth and its Abu Dhabi hub from July 15.

Singapore Airlines and Cathay Pacific are expected to increase the promotion of their daily flights from Perth to Singapore and Hong Kong and the onwards connections to Europe, while Thai Airways will debut its first Boeing 787 service between Perth and Bangkok on July 1st this year.

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David

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

Qantas - Qantas Frequent Flyer

25 May 2012

Total posts 582

Qantas has essentially shot itself in the foot in regards to its international withdrawal from Perth. It has irreversibly damaged its WA customer base even if the recent QFF devaluation dealt a lighter blow to its Perth based members.

Virgin's coast-to-coast services make easy competition of Qantas' offering. On the international front, the number of services & destinations out of Perth which are available to Velocity frequent flyers again makes a mockery of Qantas' offering, with several daily services to Singapore, New Zealand, Bali, and Phuket, with the Etihad hub of Abu Dhabi soon becoming available.

07 Aug 2012

Total posts 197

"available to Velocity frequent flyers"? That's a bit misleading. The only VA services are to DPS or HKT.

QF frequent flyers have plenty of non-QF options too - JQ to DPS/SIN/CGK, EK to DXB, QR to DOH, CX to HKG, MH to KUL.

Not defending QF's withdrawal from PER, but VA international is hardly better. 

09 Nov 2011

Total posts 88

Exactly the point - the options are all non Qantas

Qantas - Qantas Frequent Flyer

25 May 2012

Total posts 582

JQ also has services to Lombok.

Velocity's leading advantage in Perth is SQ's 4x Daily services, which offers a great amount of connectivity to Asia and Europe. My point was not limited to VA's International services. The other advantage is that the penalty for flying a Velocity partner airline (eg SQ/EY/NZ) is not near as great as the penalty is (and will further become once the new earning tables take effect) for flying a QFF partner airline (eg MH/CX/QR).

Qantas - Qantas Frequent Flyer

13 Sep 2011

Total posts 182

I think you hit the nail on the head with your comments Peter, I have made many similar comments on these comment blogs since a long time before the demise of the final QF international service.  The QFF status devaluation, albeit lighter on sand gropers, has done nothing to ease the sense of betrayal by Joyce in the west.  I know of many people who are QFF Platinum who will simply move their business to CX, attain Marco Polo Emerald and use that for lounge access domestically in Australia. 

09 Nov 2011

Total posts 88

Qantas the 'Australian airline' - hmm - they have a very strange idea of the Australian map - no Perth, no Adelaide, reducing Brisbane. Looks like Melbourne and Sydney are now up for grabs. Let's see how long it takes to razor those routes as well. Placing an A330 configured god knows how in business class on to a route to NZ where the competition will have a new 787-9? I know what I would choose. The QF 77/78 flights were often the only available offerings for reward seats as well. Qantas complains about the route not being profitable and that hte competition is harsh - do something about it and face these challenges head on. Qantas strategy is now centred around defeat and withdrawal.

Qantas - Qantas Frequent Flyer

20 Sep 2013

Total posts 469

Right on Tonywills,

Qantas is a Sydney and Melbourne based carrier with an International division which has long neglected the other Australian ports you menchion. Along with the worlds highest operations costs is destined for an abrupt failure.

Qantas - Qantas Frequent Flyer

13 Sep 2011

Total posts 182

Qantas, the Australian Airline??? Good point Tonywills.  I seem to remember been subjected to that awful Qantas advert with the kids singing I still call Australia home.  Only if you live in Vic or NSW now as far as Qantas is concerned. 

07 Oct 2012

Total posts 1229

Have I missed something in relation to the reduction of BNE services? I was under the impression that BNE has received increased services.

09 Sep 2012

Total posts 140

You jest, surely. The Queensland and Northern Territory Aerial Service has provided the state of its birth, which has a population of close to five million compared with Victoria's almost six million, with appalling service for decades.

 

Qantas - Qantas Frequent Flyer

23 Mar 2012

Total posts 210

It could be argued that the loss of QFi flights from Perth would not be as bad if there were not enormous penalties for flying with partner airlines apart from EK. It is disingenuous at best for Alan Joyce to claim QFi values the west and its WA based QFF members or indeed anywhere except NSW and Vic, when its only response to competition is to raise the white flag and surrender. No innovation, no improved product (apart from announcements with huge lead times). Why would anyone choose an airline that continually reduces its product offering.

Qantas - Qantas Frequent Flyer

13 Sep 2011

Total posts 182

Mitchimus, I agree with you on all your points.  I've said it before, I'll say it again,  how does Alan Joyce expect Qantas International to make money if it does not fly anywhere????  He has basically forced those outside VIC and NSW to basically ditch QF and spend money with the competition rather than innovate, engage the customers and try and make a go of it.  And despite what some commenters have said in the past, he has done nothing for the finacial side of the company.  Time for him to go.

07 Oct 2012

Total posts 1229

QF should be codesharing with Malaysian and Cathay.

Qantas - Qantas Frequent Flyer

02 Jul 2011

Total posts 1380

I think QF has tried with both...

Unfortunately QF can't offer CX much, and I think the Malaysians got offsided by the RedQ proposal

07 Oct 2012

Total posts 1229

Not talking about joint business agreements (where there is revenue sharing arrangement), QF would be gifting CX/MH passengers.... but keeping relationship with their passengers.

QF/MH had a falling out over QF's deal with Emirates. Which is stupid because MH needs all the help it can get... and so can Qantas.

Why is it that Singapore AIrlines, Scoot, Jetstar and Tiger can operate multiple services out of Perth each day but Qantas can't?  And don't tell it's because QF is more expensive than SQ. Often SQ is more pricey than QF! Something is terribly wrong there...

And I'm waiting for the announcement of the closure of the Perth International Q Club... I can't imagine they'll keep it if there's no QF services out of Perth anymore...

Qantas has done so much to damage its' relationship with loyal customers in Perth...

07 Oct 2012

Total posts 1229

Everyone needs to consider that SQ is flying you to their single airport hub and then dsirtubuting to a very large network. Qantas cannot do that at SIN and its needs to be O & D traffic. The LCC's are a different ballgame.

However, I would think QF should be able to operate a daily flight to SIN from PER.

Virgin Australia - Velocity Rewards

19 Feb 2014

Total posts 451

True, but a lot of the traffic was/is Europe bound.  They put the QF77 service into the coffin when they routed SYD/MEL services through DXB.  They even halved the services when the LHR and FRA routes went through SIN.

07 Oct 2012

Total posts 1229

True. But they made a decision (rightly or wrongly) to fly European services through DXB. Without those services, they have limited feed at Singapore. The right plane/management should make Singapore work to a degree, but it is SQ's sole hub home port and they will always dominate on frequency on that route.

Qantas - Qantas Frequent Flyer

24 Mar 2013

Total posts 66

Scoot and Tiger are SQ. You also didn't read about the intl QF club remaining open.

Virgin Australia - Velocity Rewards

19 Feb 2014

Total posts 451

I have never seen SQ cheaper than QF, yet they can seemingly make FOUR flights a day profitable.  Like always, I think Joyce hasn't let us in on the other half of the secret.

07 Oct 2012

Total posts 1229

In fairness we actually don't know if SQ's four flights from PER are profitable or not. They may just be able to sustain those in order for maximum network benefits or could be making a monza.

I have seen SQ cheaper than QF. But currently, QF (from east coast) to SIN is very cheap.

Thai Airways International - Royal Orchid Plus

15 Jan 2013

Total posts 279

It's the same with South Australia They have virtually handed the Singapore Market to SIA ON A PLATTER which is excellent if like me you belong to both Thai Royal Orchid Plus or Velocity to earn the miles but not so good for people loyal to only Qantas.

Qantas - Qantas Frequent Flyer

04 Mar 2014

Total posts 112

What is also annoying, is that booking on oneworld partners BA and AY to Europe is now non sensicle as the connecting flight from SIN is now JQ which stops in DPS, not even a direct flight.

 

11 Mar 2012

Total posts 294

Oh well I'm sure he'll enjoy seeing a reduced activity on WA Frequent Flyers.  Given Rio Tintio recently switched over to Virgin, the ditching of WA might make sense to AJ.

Certainly hope they change the airline name to SAMAS, ie Sydney and Melbourne Air Service real soon.

Virgin Australia - Velocity Rewards

19 Feb 2014

Total posts 451

Albeit smaller, Newcrest Mining recently switched from QF to VA too.  Fair bit of business lost there...

Virgin Australia - Velocity Rewards

19 Feb 2014

Total posts 451

Albeit smaller, Newcrest Mining recently switched from QF to VA too.  Fair bit of business lost there...

Qantas - Qantas Frequent Flyer

27 Feb 2014

Total posts 7

How many bad decisions can a CEO make and still keep his job? 

26 May 2012

Total posts 150

Perth:

Upgrade all coast to coast flights with A330s with a proper 'Coastal Service' including dinner in the Business Lounge first (once one has been created in PER), beds, blankets and matresses etc. 

Daily Qantas 737 to Singapore. Weekend 737s to Bali. Perhaps even a A330 to Hong Kong. 

Eventually 787 to Dubai leaving the in evening to hit forward EK connections to Europe.

It can be done, Al!

Qantas - Qantas Frequent Flyer

07 Mar 2014

Total posts 73

If QF sent a 787 to DXB they could always kick on to Doha as well to connect with QR flights the following morning. Get back in touch with One World carriers

Qantas - Qantas Frequent Flyer

01 May 2014

Total posts 1

We booked flights for Perth to Singapore return in January for a family holiday this coming July. As we are going in the last week of school holidays we are flying there with Qantas but coming home, they have bum steered us to jetstar. So as we booked and paid for a full service flight, we expect a full service flight on our return.But No is the answer we get from Qantas. No complimentary drinks and no entertainment equipment. But we do get a hot meal maybe a pie and sauce and a $10 voucher to buy one drink. If I wanted to fly a cheap service carrier then I would expect limited services but as far as Qantas are concerned they will take your cash for a full service flight but wont deliver at least the same service you would expect. Looking forward to the long flight home on Jetstar. I hope the pies are hot.

You'd be lucky if you get a good quality pie, the food on JQ is SHOCKING!!!!

Thai Airways International - Royal Orchid Plus

15 Jan 2013

Total posts 279

I don't know much about the JQ food but If It's as bad if not worse than a Hospital I am safe I don't fly them.

Instead of ditching daily PER to SIN flights, how about reintroducing the daily Perth - Singapore - Hong Kong flights (like back in the day when QF did operate this route)? I mean, it's certainly no harm doing so, as some passengers from the East Coast who are flying to Singapore may also want to travel to Hong Kong as well! 

Qantas - Qantas Frequent Flyer

25 May 2012

Total posts 582

They'd be better off dropping PER-SIN in favour of a flight to Kuala Lumpur where they can then leverage MH's network to connect passengers onwards to North Asia, or an hour's flight back down to Singapore.

Unfortunately, they can't see beyond their Orange Star-shaped glasses and realise that connecting onto Jetstar Asia isn't helping the route, but hindering it.

07 Oct 2012

Total posts 1229

If you want to work with Malaysian, you can't go about competing against them by launching a route against them. They would be better off selling QF seats on MH.

A couple of well fitted out A321's (like Americans coast to coast offering) would be competitive and low cost on routes like PER-SIN.

Qantas - Qantas Frequent Flyer

25 May 2012

Total posts 582

That's correct, except for the fact that AirAsia X and Malaysian have used up the majority of their capacity quota between Australia and Malaysia (at least between the ports restricted by the agreement, including from/to Perth).

Malaysian simply can't add any more capacity between Perth and Kuala Lumpur (and neither can AirAsia X).

Qantas isn't affected by this restriction as no Australian airline is flying between the two countries and therefore the quota for Australia remains unused.

07 Oct 2012

Total posts 1229

I wasn't aware that AUS-Malaysian agreement was near capacity (on the Malaysian end).

What plane is MH currently using to PER? Can they upgrade? Perhaps a QF code to start with, followed by a service on QF metal.

I'd also focus MH on south asian and se asian routes. With CX for north asia.

Anyway, it all sounds good, but not with current QF mindset.

Virgin Australia - Velocity Rewards

19 Feb 2014

Total posts 451

A333.  Switched from 772 a few months back.

aow
aow

Jetstar Airways - Qantas Frequent Flyer

02 Feb 2012

Total posts 17

I agree - whay not QF from PER to KL, Darwin to KL , Bris to KL and Cairns to KL.  time the arrivals and MH could double the size of their KL-LHR or other european capacity

Qantas - Qantas Frequent Flyer

07 Mar 2014

Total posts 73

CX fly SIN - BKK so if QF could share seats on this service and if it was well timed, adding that single QF flight to HKG via SIN opens up 3 major Asian cities for Perth flyers too

Qantas - Qantas Frequent Flyer

11 Jun 2013

Total posts 7

If you use Newcastle as an example of where Qantas see's itself, 1.2M PAX per year in/out of  NTL 70% JQ ,  29%  VA  1% Qantaslink  0% QF

if you want to fly via NTL, you will probably end up on a  FULL JQ flight. 

I know this is currenty NOT an international airport, but from what I understand it a very nice  $$$$ earner for Qantas via Jestar..

I have no doubt the bean counters @ QF are going to look at these types of ports as a  benchmark, and be very comfortable not having any QF jet services and making good $$$ 

 

Qantas - Qantas Frequent Flyer

04 May 2011

Total posts 29

I know we all want wide-body, but couldn't they have downgraded to a 738? or was the route performance really that bad?

I reckon have a mini hub out of PER. PER - SIN, CGK and KUL... using the newer 738's if possible. :D

Thai Airways International - Royal Orchid Plus

15 Jan 2013

Total posts 279

I agree.Now with the 767's almost on the way out There soon will be nothing smaller to cover those sectors out to Perth to Asia.A 738 is still better than having the people defect to Singapore Airlines,Virgin Australia or Garuda Indonesia(Bali).Maybe off the topic a little British Airways should retime their BA11 out of London back to Daytime getting into Singapore around 7am and continuing onto Perth 9am getting in around 2pm and returns around 5pm back to the UK via the same routing.It gives WA another wide body choice using either a 747 or a 777 to Asia and Qantas Frequent Flyers their abilities to earn points plus their usual Asian Stopover for those of us who fear Dubai.

Qantas

07 Mar 2014

Total posts 9

This action by by Qantas means I will move my Business from Qanats to Singapore Airlines and Virgin for Domestic Travel

22 Jul 2011

Total posts 98

Alan Joyce's logic is not sound. He says that Perth-Asia services were unprofitable. But with the Emirates model, Perth-Asia wouldn't exist so much, but rather it would be Perth-Dubai if they rejigged services in a similar fashion to SYD/MEL. And Qantas hasn't tested this strategy, so it'll never know how the economics of it would have been. This could have improved the economics considerably, especially if they got strong demand in the premium cabins. Their strategy seems half-cooked. We'll fly pax from Sydney and Melbourne to Dubai/Europe, but the rest can fly.. well probably on another carrier.

06 Feb 2014

Total posts 93

A classic example of Qantas' utter contempt of the Perth market it their recent decision to drop Per- JNB code share with SAA and say to Perth people "please fly 10 hrs to our Dubai "hub" and be no closer to JNB and jump on an Ek flight. Whilst Qantas may blame the ACCC for the loss of the code share tell me why they couldn't revert to a SYD-PER- JNB flight in their own right as they did before the code share began. The flight distance is only marginally longer and allows Perth to hub all east coast of Australia. And the product offering of Qantas relative to SAA is pretty good. Low and behold someone from Sydney having to transit as I have to do when I fly to LA, Santiago or any other place in the pacific from Perth. The economics may even be better given the ability to carry more freight too...

Thai Airways International - Royal Orchid Plus

15 Jan 2013

Total posts 279

I agree.The PER-JNB offering with SAA provided Western Australia with not only a good connection to all of Africa but also to Europe.

Qantas - Qantas Frequent Flyer

22 Jan 2014

Total posts 4

They can blame everyone else as much as they want but Qantas' problems are of their own making. Plain and simple. 

Qantas

07 Mar 2014

Total posts 9

This is the last time on the Qantas / Jetstar network for me. Booked a Jetstar returned flight Perth Singapore. Arrived at the  the flight delayed by 4hours plus, no text or email to inform of the delay. Then Jetstar would not accept bags until 9.40 am a 3 hour wait and no apology just told you booked thru a travel agent. I am now off to Singapore Airlines and will change to Virign may be the Qantas CEO will stop flying to Perth totally. 


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