Australia's Qantas cuts routes in Asia and the Pacific
Updated
Australia's biggest airline, Qantas, says some jobs will be lost when it axes all its domestic flights in New Zealand. Qantas is shifting its entire New Zealand domestic business to its low budget subsidiary Jetstar. The announcement comes just weeks after Qantas reported a big fall in its first half profit, and includes cuts to its China and India services.
Presenter: Karon Snowdon, Finance Correspondent
Speakers: Bruce Buchanan, chief executive, Jetstar New Zealand; Tom Ballantine, chief correspondent, Orient Aviation Magazine
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SNOWDON: The fallout comes a few weeks after Qantas posted a 66 per cent drop in first half profit to just US$136 million.
From June the Qantas budget carrier, Jetstar, will take over the domestic New Zealand routes linking major cities in the North and South Islands.
There will be fewer flights overall, but Jetstar says it will increase capacity by using larger planes.
The changes are indicative of tough times for airlines everywhere, but Jetstar New Zealand chief executive Bruce Buchanan is upbeat about his airline's outlook.
BUCHANAN: We've got a lot of aircraft coming into the market place and we think that's a really exciting opportunity.
SNOWDON: Bruce Buchanan says Jetstar is among the best budget performers with a cost base 40 per cent lower than its rivals.
It posted a before tax first half profit of US$46 million. That was a fall, however, of 48 per cent from the previous year and yet he believes further growth is possible even in the current recessionary times.
BUCHANAN; Two critical drivers a discretionary spend on low cost carriers, interest rates and petrol prices, and both of those are at historical lows. We're very confident. Our profitability is strongly afford, our bookings are strong, and we're seeing very strong demand for our products.
SNOWDON: Qantas management says New Zealand remains a key market for the total Qantas group and the changes will consolidate the airlines presence.
Internationally there will be increased flights between New Zealand and Australia and from Auckland to New York.
At the same time Qantas will stop direct flights from Australia to China's capital Beijing in order to focus on fewer direct links to Shanghai.
In future, its service to that other previously growing market, India, will operate from Singapore.
Tom Ballantine, chief correspondent for Orient Aviation Magazine, says Qantas has joined a long list of airlines, announcing cutbacks in recent weeks.
BALLANTINE: Singapore Airlines just announced yesterday that it's cutting 17 per cent of its entire fleet and that's a bit step.
SNOWDON: Well, Qantas has cut direct flights from Australia to Beijing completely. That coupled with the cuts to the India service, both previously I would suggest growth areas, now being cut back?
BALLANTINE: Well, that's right the two power houses of growth in Asia, India and China, but that is simply not the case at the moment. That has a direct impact, particularly business traffic, travelling from Australia, into Asia into China, up to India and people who are going on holidays, so leisure traffic, they are taking shorter trips now.
SNOWDON: Tom Ballantine believes the Qantas group is one of the strongest airlines operating and the best placed to weather the recessionary storm.
BALLANTINE: A lot of airlines, particularly around Asia-Pacific region, who are in big trouble at the moment. Qantas remains financially healthy, so it is in a better position to get through these problems than a lot of other airlines, but it is going to be a long haul. No one expects the turn around here to be happening short term. The talk at the moment is possibly the end of the year, even into next year, if that.
SNOWDON: No Qantas executive was available for comment and a spokesman said there were no figures on possible job cuts available at this time.
For customers, Jetstar's announcement of very low start up fares in New Zealand will set the price war hairs running. The changes put Virgin's Pacific Blue, along with Air New Zealand, under renewed pressure.
