You are here

Qantas rekindles Changi romance, deepening rivalry with SIA

Australian carrier will run its non-direct London flights through Singapore instead of Dubai, and add more flights at Changi

2016-02-22T230201Z_1523755813_GF10000319325_RTRMADP_3_QANTAS-RESULTS.jpg
Qantas Airways may be rekindling its London connection with Changi Airport after a five-year fling with Dubai, but the Australian carrier's make-up bouquet of additional flights through Singapore could raise a rash for Singapore Airlines (SIA).

Singapore

QANTAS Airways may be rekindling its London connection with Changi Airport after a five-year fling with Dubai, but the Australian carrier's make-up bouquet of additional flights through Singapore could raise a rash for Singapore Airlines (SIA).

Qantas will reroute its non-direct London flights to fly through Singapore instead of Dubai from March 25, 2018 "in response to growing demand" in Asia, the carrier said on Thursday.

The move is a reversal of a decision taken in 2012, when Qantas moved the connection for the "kangaroo route" between Australia and London to the Middle East under an alliance with Emirates.

sentifi.com

Market voices on:

Qantas has previously unveiled plans to start a London-Perth direct flight in March 2018 as well.

But the carrier will not just tweak this one route; it is also adding more flights at Changi. It will maintain a second daily service between Singapore and Sydney, and upgrade its existing 10 weekly Melbourne-Singapore Airbus A330 flights to a double daily service operated by A380 and A330 aircraft.

In all, Qantas will add 11 weekly services and 7,194 one-way seats to Australia and London from Singapore, bringing its weekly capacity at Changi to 49 services and more than 17,600 one-way seats.

The biggest beneficiary will undoubtedly be Changi Airport. The number of seats to Australia will go up by 5.5 per cent, and to London, by 18.3 per cent across all airlines.

Changi Airport Group managing director for air-hub development Lim Ching Kiat said in a statement: "This development secures Changi Airport as the most connected international airport to Australia, both in terms of the number of city links and seats, and strengthens our position as the region's leading air hub."

But all those extra flights could weigh on SIA, which currently derives about 14 per cent of its system-wide revenue from the south-west Pacific, OCBC analyst Eugene Chua said.

"We believe Sydney-Singapore-London remains a significant route for SIA, and with Qantas shifting its transit point for its daily Sydney-London flight to Singapore, coupled with the increase in Melbourne-Singapore service next year, competition is set to increase for SIA.

"While it remains early to determine the impact, we believe the result will likely be greater yield pressure for SIA on these routes."

For SATS, the airport ground-handling and catering-services provider, Qantas's move offers an opportunity, Mr Chua said.

"If SATS wins the Qantas contract for catering and gateway services, we expect it to provide positive upside to SATS's earnings from FY19," he said. "Qantas's low-cost carrier unit, Jetstar, is already a customer of SATS, but that said, there is still no visibility over whether SATS will get the contract. We estimate SATS to have about 75 per cent to 80 per cent market share at Changi Airport while its peer, dnata Singapore, has the remaining market share."

SIA shares closed flat at S$10.31 on Thursday; SATS gained 0.8 per cent or 4 Singapore cents, to S$4.83.

SIA said "competition is not new in this industry", and that the airline will continue to compete on innovation, connectivity and service standards.

The carrier added that it has also been growing its Australia-Singapore capacity: "SIA Group airlines have been increasing capacity into and out of Australia in recent years to meet growing demand. For example, from Aug 22, we increased frequency on the Singapore-Brisbane route to 28 flights per week from 24. We will continue to look for opportunities to boost capacity in line with our long-term commitment to growing the Singapore hub."

Qantas said that its route decisions five years ago and now are based on market dynamics: "We don't want to sit still while traffic flows, technology and consumer preference shift around us."

Passenger traffic in the region grew at more than 10 per cent a year in 2015 and 2016, and could maintain a similar pace this year, said the International Air Transport Association (Iata). It expects the Asia-Pacific to contribute more than half of new passengers around the world over the next 20 years.

UOB Kay Hian analyst K. Ajith said Qantas may also be reacting to concerns about regulatory and political volatility regarding having a hub in the Middle East.

"They're hedging their bets and focusing on Singapore," he said.

Powered by GET.comGetCom