Qantas and BA halve London-Australia direct capacity

Today's announcement from Qantas is ominous for those who like having a choice of through services between London and Sydney or Melbourne on Qantas and British Airways.

At present there are four direct one-stop Qantas/BA services between London and Sydney, and two direct one-stop Qantas services between London and Melbourne.

The London-Sydney route is operated via Singapore and Bangkok, with Qantas and BA each flying a service through each airport.  The Singapore route has Qantas operating an A380, with BA operating a 777-200ER.  The Bangkok route has Qantas and BA both operating 747s.

The London-Melbourne route is operated via Singapore and Hong Kong, with Qantas operating an A380 via Singapore, and a three-class 747 service via Hong Kong.

The changes will see:

- The termination of through London-Bangkok-Sydney services by both Qantas and BA, although Qantas will maintain a Bangkok-Sydney service, and BA a London-Bangkok service, these will connect, so whilst passengers can still travel Qantas/BA via Bangkok, they will not get the same airline the whole way.

- The termination of through London-Hong Kong-Melbourne services, although again Qantas will maintain a Hong Kong-Melbourne service, and BA its frequent London-Hong Kong service (increasing in frequency).

- The single remaining BA service to Australia (LHR-SIN-SYD) will be upgauged to a 747.

- The two remaining Qantas services to London will both be full time four-class A380s via Singapore.

- Qantas will install a new First Class lounge at both Singapore and Hong Kong airports.

Effectively with Qantas cutting two daily flights to London and BA one to Sydney, it is a halving of the current six daily to three daily.  Qantas will obviously try to avoid concerning frequent flyers by still selling tickets London-Bangkok-Sydney as a codeshare, and the same London-Hong Kong-Melbourne and Sydney.  Yet it has implications for different classes of travel:

First Class:  Both Qantas and BA have new First Class products, but these will only be available for sure on the direct routes.  The indirect routes may or may not have first class cabins on the Qantas side, as Qantas has said it is removing First Class on all aircraft except A380s.  This would appear to be a reduction in first class capacity on the Kangaroo route.

Business Class:  Both the Qantas A380 and BA have lie flat seating in Business, but will the Bangkok/Hong Kong services by Qantas have the fully lie flat Skybeds that are on the A380s? Qantas has announced a refurbishment of some 747s to install this, but it appear they are intended for routes to the Americas.  The lack of fully lie flat products on connecting services would be a negative.  It may also be considered a negative for passengers to have considerably different products between BA and Qantas.

Premium Economy:  Qantas is generally considered to have the superior product because of newer seating and having a distinctive catering offering, unlike BA which has economy class service in its World Traveller Plus cabin.  This means connecting services will be different for passengers.  Although it may be expected that BA's refurbished World Traveller Plus cabin might be made available on the route, it will still be inferior soft product to Qantas.

Economy:  Little real difference should be noticed here as the airlines have broadly similar products.

It is obvious that by cutting the second leg of three daily flights, the airlines can save a lot of capacity.  Qantas can make four aircraft available (as it takes three aircraft to maintain a daily service between Australia and London), BA will have two free (although one will be used to boost London-Hong Kong).  The cost savings in capital, and in staffing will be considerable, and in an age when they compete with state owned airlines with bottomless pits, low tax structures and far more flexible labour conditions, they need to make such savings.

Yet it will mean both are a shadow of their current selfs at both ends. BA once flew to multiple Australian airports, and will be down to one daily flight - like its chief rival Virgin Atlantic.  Qantas with its current four daily flights, sees Heathrow inundated with three A380s/747s at once.  It will be down to half of that, only slightly more than Air NZ (which is double daily four days a week), from a country with a sixth of the population.

However, if you only have 18% of the outbound international market from your home country, you do need help, especially since the once lucrative Pacific route (where it was only Qantas and United a couple of years ago) now has two new competitors.

American Airlines in 2011 : it's ok...

With the formal alliance between BA and American Airlines now allowing codesharing and reciprocality in frequent flyer points, it is now more attractive than ever before for UK based flyers to choose AA. Of course, other OneWorld frequent flyers have long had AA as their option for flying in North America.

Its major upgrade as of late has been improvements to its lounges at Heathrow Terminal 3, but its on board product has been unchanged for sometime. Its long-haul business class is still touted as “new” although it was launched in 2006. Its long haul products are not extraordinary.

The First Class Flagship Suite is a fully flat bed, but with a small entertainment screen that is not competitive.

Business Class is an angled lie flat seat, adequate (and was chosen to maintain seat numbers so AA could still offer enough upgrades to frequent flyers) but increasingly less competitive, not just with Asian and British carriers, but even US ones like United/Continental and Delta. Entertainment only on the longhaul Boeing 777s includes an on-demand system.

In short, it is about time AA got a refresh, at least for economy and first in long haul, and be planning when it should have business class that is competitive.

So what is there?

Long Haul First Class:    

A flash presentation of both long haul first and business classes

Business Class

Focus on angled-lie flat business class

Economy Class

Wifi on domestic US flights

Premium dining on long haul flights

Flagship lounges and Arrival Lounge at London Heathrow

Lounges at London Heathrow

2011 - what will it bring?

Happy New Year all.  To start the year off, I thought I'd summarise what I think will be the highlights and themes for the airline industry, in terms of customer experience, for 2011.  These are not centred on any particular markets, but trends I am observing more widely, plus events to be watched.

Connectivity:  Internet access, live news and other broadcasts (e.g. sport), email, SMS and phone calls are going to be the order of the day.  Whether it is driven by domestic business travellers (US) or long haul, the big issues are going to be managing bandwidth, regulating content (e.g. how many don't want to be sitting beside someone accessing adult content) and most of all the nuisance aspect of mobile phone use in the air.   Let's hope security also does not become a problem.

Low cost airlines chase premium traffic:  It is already seen now with Air Berlin becoming a full service carrier, Virgin Blue with premium economy and lounge access, and Easyjet offering fully flexible fares.  As business travel re-emerges, but low cost leisure travel remains flat, the low cost airlines will see more potential in taking on full service carriers where viable.  Watch Aer Lingus pursue premium traffic as it joins a major alliance, again.

Low cost long haul finds a niche:  Low cost long haul airlines have come and gone before, but Air Asia X may have found a model for niche players.  Flying from secondary hubs to secondary hubs.  It requires a very low cost base, but also a competitive premium product offering business class seating at premium economy prices.  Jetstar is adopting a similar model to replace Qantas on lower yielding routes, but don't expect it to take off under the current market environment.

Mergers and alliances continue:  Following United/Continental, it looks like others from SAS to Virgin Atlantic are next for full takeover.  Expect more alliance membership from Asia, Africa and Latin America.  Lone full service carriers have a more limited future outside the Gulf carriers, but also watch airline alliances change on the edges, as carriers start switching.  Some of the most intense competition between carriers is within alliances.

Boeing 787:  The first majority composite airliner, which for passengers will herald in flights with higher humidity, higher air pressure and bigger windows.  ANA should have put the first into service by the end of year (fingers crossed), and if passengers really do notice the difference, it will be a noticeable step up in long haul flight comfort.  However, for airlines they will care far more whether Boeing can address rather serious weight and range issues.

Cuddle Class:  Air NZ's revolutionary new "flat bed" in economy class on its new Boeing 777-300ERs will be launched on the Auckland-Los Angeles route in the next month or so.  If successful, expect Air NZ to expand it on its long haul fleet and for others to follow.  It might work for couples winning to spoon, or families, but most importantly it is the biggest leap forward in economy since personal TVs.  As a side note, expect Air NZ's introduction of freshly cooked food to see in flight catering become a new attraction, if successful.

Premium Economy grows and improves:  Whilst established for some years in the UK and Japan, it has more recently been successful for Qantas, Air NZ, SAS and Air France.  Expect more European and Asian airlines to adopt it as a way of winning long haul premium leisure customers,  and business customers knocked back by travel budget cuts, as well as being able to plug the gap between cattle class and flat bed business class and be a step ahead of the Gulf carriers (none of which offer it).  Carriers in the Americas are most likely to fear it will cannibalise business class.   Premium economy will get better catering, more recline, more legroom, more privacy and will look a lot like business class did 20 years ago...

First Class continues to disappear from more and more routes:  Quite a few carriers have upgraded First Class, whilst dropping the routes which carry it.  Beyond the vanity factor for some carriers, first class as a product has to provide outstanding privacy, catering and ground service to compete with the best fully flat business classes.   However, few routes have enough very high yield travellers who demand this privacy.  Even the Beckhams are known to use Air NZ Business Premier between LA and London.  In other words, business class is looking in many ways a lot like first class did 10 years ago. 

Fuel efficiency above all else: Oil prices will keep slipping skywards, putting more pressure on new engine technology and for the composite fuselage aircraft to deliver.  The Airbus A320 NEO will put pressure on Boeing to decide on its next project once the 787 programme is bedded down, it will be driven by whether it thinks it can get more of a fuel efficiency advantage from updating/replacing the 737 or the 777 first.   However, don't expect Boeing to move fast whilst it want to make the 787-9 work and launch the 787-10.  Airbus will seek to make the A350 the 777 killer, meanwhile the A340 and the 747 will both be a bit less common as both are replaced by more fuel efficient alternatives.

Finally, Boeing 747-8i appears in service:  Boeing's final version of the 747, for passenger service, has had very limited interest (with only Lufthansa, Korean and a handful of VIP orders).  However, the proof will be in the flying.  Lufthansa is expected to launch its fully lie flat business class on this aircraft, which isn't extraordinary in itself (more "about time" really), but the bigger proof will be whether Boeing can meet and exceed expectations of fuel efficiency and overall performance.  If it goes well, it might just pick up a few more orders, which are desperately needed.