Qantas' promising continental shift

One of the undervalued benefits of the Qantas alliance with Emirates is the impact it will have on its route map and schedules. Today Qantas declared that dividend from the deal.

Qantas International chief executive Simon Hickey unveiled a series of changes to the group's Asian network, announcing greater frequency of flights, more region-specific schedules and greater capacity on the routes into Singapore and Hong Kong.

It plans to increase its own capacity by about 10 per cent on the Hong Kong route and 40 per cent on the Singapore route, beyond the access to the Emirates network.

Hickey also announced improvements to the product – the cabins, in-flight entertainment and lounges – and an expansion of the network through partnerships with local carriers like Japan Airlines, China Eastern, Jet Airways, Cathay Pacific and Malaysia Airlines.

He's also looking at increasing the number of Asian destinations into which Qantas flies, with Beijing, Mumbai, Seoul, Delhi and Tokyo-Haneda being considered.

Until the alliance with Emirates (still awaiting final approval from the Australian Competition and Consumer Commission) was struck, Asia was regarded as simply a transit region for flights to Europe and the Qantas schedules reflected that, with flights tailored to the convenience of travellers going to Europe producing inconvenient schedules for business travellers into Asia.

Once the arrangements with Emirates are up and running Qantas will hand over passengers heading to European destinations, other than the UK, to Emirates at Qantas' new hub in Dubai, in effect creating a vastly expanded virtual European network by accessing Emirates' capacity and network.

That will enable Qantas to redeploy capacity within Asia and restructure its schedules to suit travel to and from the region, as well as building better links with carriers operating within the region and coordinating its schedules with its own existing Jetstar network.

The added capacity and the consideration Qantas is giving to adding new destinations to its Asian coverage provides a glimpse of a more rational strategy for Qantas within an overcrowded international industry, as far more of a regional carrier than it is today.

That would move it beyond its existing, vulnerable position as an end-of-the-line carrier trying to compete with newer, bigger, lower-cost carriers operating from natural hubs between the Australian market and Europe.

Qantas has already shrunk its loss-making international network in response to the emergence of the Middle Eastern carriers. While it retains the Kangaroo route the only other European destination it still flies to is Frankfurt, although it had previously foreshadowed its withdrawal from that route, too. Today it brought forward that withdrawal by six months, to April.

The reorientation of the Qantas network away from Europe and towards Asia gives it some prospect of an international future that leverages off its core assets and competitive advantage within the region, the strength of its domestic franchise, its brand and its frequent flyer program.

The alternative, with or without the Emirates alliance, would almost inevitably be a virtual Qantas International on all but the trans-Pacific routes and, perhaps, a slimmed down presence on the Kangaroo route.