Singapore_Air From United Kingdom, joined Nov 2000, 13753 posts, RR: 18 Posted (14 years 5 months 1 day 23 hours ago) and read 2596 times:
This is one of the best articles I've seen for some time
Ansett scarred in latest air-fare battle
Canberra Times - Australasia; Mar 5, 2001
BY PETER CLACK
The first casualties have been revealed in Australia's newest air-fare war and, while Qantas was announcing how many jobs are to go in the coming months, it's Ansett looking the most battle-scarred.
The airlines in Australia have had a good past few years. Qantas, in particular, has rebounded strongly from the Asian economic crisis, with each half-year result eclipsing the last as its best. But that ended as the carrier announced a 22 per cent reduction in its half-year result to December 31. Notwithstanding the reduction, their colleagues at Ansett could only have hoped for a result as good as the $263m Qantas announced. On the other side of the Tasman, Ansett's new owners, Air New Zealand, told a story of woe.
High fuel prices, reduced market share, increasing costs, lower productivity and a slower-than-expected integration between the carriers marked the last six months as a horror period for them, coming as it did on top of a maintenance oversight which grounded their Boeing 767 fleet, and a wide perception that their Olympics sponsorship was not worth what they paid for it.
But why has it been such a horror period for the two airlines? The answer lies, principally, in the hands of two, starkly different, people - Gerry McGowan, a quiet former truck driver from Newcastle, and Sir Richard Branson, a flamboyant billionaire from England.
Since Impulse airlines, under Gerry McGowan's stewardship, started one of the most aggressive and astute business ventures in Australian aviation history by setting up a war chest, buying new Boeing jets and starting services between Sydney and Melbourne, the landscape has changed. McGowan has added another 3 117-seat Boeing 717 jets to his existing five, and is now operating 19 return flights a day between Sydney and Melbourne, giving him big capacity, high frequency and, using one of the most efficient passenger jets available, a very cost-effective operation. Frequency gives him the ability to steal some of the lucrative business market from Ansett and Qantas, while capacity lets him offer discounted fares on all his flights to steal the leisure market. In addition, he's now running 10 return flights a day between Brisbane and Sydney and, unlike the old fare wars, his schedule of flights to Canberra from Sydney and Melbourne gives locals access to that new market. On the other side, Branson breezed into Australia and thumbed his nose at the establishment, promising a discount airline with a good route network and some of the flair which marks his Virgin empire around the world. Despite a shaky start, with a delay to his commencement of operations caused by a lack of certification from the Civil Aviation Safety Authority, in just six months, Branson has started operations to Brisbane, Sydney, Melbourne, Adelaide and Townsville. Perth and Canberra are also on the radar screen.
The effect of this on Ansett and Qantas is felt in two ways. Firstly, market share for both carriers is down as the growing market is split among four carriers instead of two.
This is far more dangerous for Ansett, which was also losing the market war to Qantas.
Industry analysts suggest Ansett's market share could be as low as 40 per cent now - the lowest it has had ever. And while Qantas has lost market share because of the entry of new participants, it still has well over 50 per cent, and is doing well in the corporate and business market.
But the second effect is far more invidious. Yield is down for the airlines. Yield is quite literally the amount of money an airline earns per seat on a flight. Airlines traditionally support their ability to offer cheaper, holiday fares because of the higher yields earned on business fares, particularly by business and first class passengers. As more businesses see the quantifiable savings of the introduction of new carriers, the demand for premium services, at higher cost, is being tested.
Although there is a market for that travel, Qantas' decision to use newer aircraft on their domestic services is giving them the market edge over Ansett.
So while Ansett is losing customers from the leisure market to Impulse and Virgin, it is also losing customers from the front-end to Qantas. That's why this war is likely to claim far more casualties at Ansett than the 1470 Qantas announced on Thursday.
Lurking in the wings remains the other new player in the Australian aviation scene - Singapore Airlines. The financial strength of Singapore Airlines is the envy of every Australian airline: the carrier has announced aircraft orders in the last six months totaling $A26b, to be funded from cash flow, and announced its own half-year results to 30 September 2000 late last year, returning a $1.1b half-year profit, up 94 per cent on the previous year. Even after extraordinary items are taken out, and fuel prices included, the result is still up 38 per cent on the previous year.
Last year, Singapore Airlines completed a transaction to purchase 25 per cent of the Ansett Air New Zealand group. Last week, Air New Zealand chairman Sir Selwyn Cushing admitted that his company paid too much for Ansett. The irony is it was well-known that Singapore Airlines wanted to buy Ansett, and is probably the one airline which could have afforded to pay too much for Ansett. But it was astute enough to defer to Air New Zealand, then buy 25 per cent of that company for a far more reasonable sum. Analysts point to a growing concern in government and industry circles in New Zealand that Air New Zealand may have over-committed itself in its acquisition of Ansett, and by doing so, cannot afford to service the equity, which could lead to both brands running down.
But those analysts would be wise to cast an eye north, where the extraordinary developments in aviation in this country are being watched by arguably one of Asia's most astute businesses.
Singapore Airlines won't play in this war, but you can guarantee they'll be ready to pounce on the survivors to boost their already-impressive portfolio.
Singapore_Air From United Kingdom, joined Nov 2000, 13753 posts, RR: 18
Reply 1, posted (14 years 5 months 1 day 21 hours ago) and read 2433 times:
I've just read it through. I think it was a great article. I think in the end, it's going to be who will survive the impact of the newcomers and at this point in time, it's QF. I think Ansett could survive if they had more international routes. Unfortunately this isn't the case and therefore they're losing out miserable. The OZ market is hardly really much. It's the international routes that are important and QF has spotted that. If SIA can dump their A340s on AN, then maybe there could be a revival if AN can match the product of QF. I dunno th prodcut of AN so I'm assuming they're not as good as QF and not as good as SQ.
Aussie_ From Australia, joined Dec 2000, 1767 posts, RR: 4
Reply 2, posted (14 years 5 months 1 day 21 hours ago) and read 2427 times:
excellent article from one of the better newspapers in Australia
Singapore_air: I don't think I will draw to much criticism when I say that the AN product is far superior to the QF product, even more now that they have revamped inflight catering, and the AN Int'l services is on a par if not better than SQ (tough call I know). However they have awards to show for it.
I think the problem is AirNZ who were simply narrow-minded and frankly selfish in stealing 50% of AN from SQ. I'm sure they are regretting it. AN sure is.
Pleeeaaase stay afloat AN...... To the rescue SQ!!!!!
Ryanair From United Kingdom, joined Jul 1999, 654 posts, RR: 0
Reply 3, posted (14 years 5 months 1 day 21 hours ago) and read 2426 times:
Actually AN is far better than QF, but QF feed tourists and foreign business travellers onto domestic flights, which are a big part of the market. Also QF offers a one stop shop for corporate customers, which without the global network AN can't, pushing the Star Alliance so hard hasn't worked.
Having said that, I see problems for QF in the future. Using the 763's won't work, it piles on the cycles which will devistate their resale, increases the frequency of maintaince (which is more costly with bigger planes) and so on. I don't think they can ride the middle road while competition is so direct, AN when the 762's go I think will be better placed with the 180 seater they talk about, question is can NZ get the house in order, personally I doubt it.
I for one hope SQ steps in, the more I hear, the more I think NZ are in way over their head. I read a book today from 1994, saying SQ could never try and become the worlds major long haul airline (What ever that means?), if you take VS, SQ, AN and NZ I wouldn't be too quick to agree!
Miami1 From Australia, joined Feb 2001, 706 posts, RR: 0
Reply 4, posted (14 years 5 months 1 day 17 hours ago) and read 2411 times:
Having flown on both Ansett International and Qantas and having friends at both airlines I can honestly say Ansett has definately a very superior inflight product. I think that what holds the Qantas product together is its crew who work very hard to please constantly unhappy passengers, its certainly not their food or seat pitch or broken inflight entainment system that keeps pax coming back, I like the way the australian crews work they really do a good job. I hope all airlines in the australian market survive but looking at the experience we have had here in the states its hard to know whats around the corner, however I can see that Ansett unless given a cash injection through purchase by SQ and carefull international expansion will have a very hard time competing with a much bigger QF. I dont think QF dumping excess capacity on the domestic market will solve thier problems either!
Aviasian From Singapore, joined Jan 2001, 1489 posts, RR: 13
Reply 5, posted (14 years 5 months 1 day 17 hours ago) and read 2409 times:
I guess it is a case of hindsight being perfect eyesight.
If Air New Zealand had not blocked the sale of 50% of Ansett to Singapore Airlines, it is conceivable that Ansett would have been injected with immediate growth at a crucial point in time.
Air New Zealand's purchase of all of Ansett stifled that, brought nothing new to Ansett's value and the end losers are Ansett, Air New Zealand and to a certain extent - Singapore Airlines.
I hope that AN quickly (but systematically) plan a strategic direction in growing her international network and look to trans-Pacific flights as well as improve her coverage of Asia (and perhaps also coming through Asia to Europe).
Wpr8e From , joined Dec 1969, posts, RR:
Reply 6, posted (14 years 5 months 1 day 17 hours ago) and read 2402 times:
It is nice to see the good ole Singaporean ego in full effect.
Well if SQ had been allowed to buy AN, then Dr. Cheong would have saved the day and Ansett would be the biggest airline in the world by now.
Don't give SQ that much credit. AN had some major problems well before NZ bought them. Also NZ did not forecast that fuel would have doubled in less than 6 months. Timing is everything and this was timed badly.
Slow calculated growth is the best way forward. All airlines that try to overexpand end up losing big time. NZ is doing the right thing.
Funny thing about that article that was posted, as it is not possible to pull it off the Canberra Times website, and the tone of the last bolded paragraphs is totally different then the beginning ones. Sounds like an editorial rather than a factual article.
Wpr8e From , joined Dec 1969, posts, RR:
Reply 10, posted (14 years 5 months 17 hours ago) and read 2337 times:
Singapore_Air, I am not sure who you were calling the drama king, you or me. Frankly it doesn't matter. I used to get very upset about how pro-SQ you are but now I just laugh. It is so ridiculous it really doesn't matter.
SQ from a service perspective is quite good, but they have some other problems to deal with. One is their ego is always getting in the way. The have some of the lowest yields in the world since the have way too much capacity. They maybe making alot of money, but that is through controlling costs rather than through higher fares. They pay their employees in the head office crap.
The NZ dollar problem, coupled with oil prices, new compeition on OZ and a general downturn in the economies is making life very difficult for the ANZ Group. NZ was destined for mediocrity without AN and they made the right move for the long term. It may hurt now, but Ansett will prove a good acquisition.
Also check out this article.
ANZ restructuring leaves senior managers out in cold
Dateline: Tuesday March 06, 2001
Five senior managers have quit or plan to leave Air New Zealand under a comprehensive executive restructure
Executive GM-Commercial Allister Paterson, Air New Zealand International GM Grant Lilly and the head of Ansett International, Gary Kingshott, are on the departure list. The revamp was ordered by new Chief Executive Gary Toomey, who arrived at the airline group in January, to accommodate the integration with Ansett.
Paterson, a former Canadian Airlines executive, will remain with ANZ for a time to assist in bedding down the new structure. Lilly, Kingshott, CFO John Dell and GM-Operations Services Ian Diamond are leaving immediately.
ANZ has been reorganized into seven new divisions: Group Sales & Distribution; Customer Services; Group Strategy, Network & Marketing; Operations; Worldwide Services; Ventures, and Business Enhancement. Other units such as Finance, Human Resources and Organizational Change; Corporate, Government & International Affairs, and engineering unit ANNZES remain largely unchanged.
Looks like Mr. Toomey is going to put in his own people. Good luck ANZ
Airnewzealand From New Zealand, joined Oct 2000, 2549 posts, RR: 6
Reply 11, posted (14 years 5 months 7 hours ago) and read 2316 times:
AirNZ have all ready layed off about 1800 employees. You just did not hear about it in the News. My sister was lucky to stay. But they needed her as she is a Hard worker.
I also think it is Mean of AirNZ not to tell Ansett staff what is happening. But when this plan happens all of you guys saying that AirNZ will crumble to Qantas will be Stuck for words. One thing i can say though is that it involves SQ!!
Qantas747-sp From , joined Dec 1969, posts, RR:
Reply 13, posted (14 years 4 months 4 weeks 19 hours ago) and read 2277 times:
hahahahaha, well well well.
Looks like I got here just in time. You know, all this sabre ratteling and denial. Qantas is absolutely superiour to Ansett. Have you guys ever flown Ansetts Business/First!!!!What a joke! Qantas First Class on the other hand is absolutely fantastic, and i can't wait to see the new improvements come the new aircraft. There is also marketing campaigns here to buy Australian......Qantas, well, at least most of it is owned by Australians. And look, I don't get why you all absolutely hate Qantas. Theyre a damn good airline, far better suited for survival into the future than their Singaporean, New Zealand and fellow Australian (including domestic) counterparts. Why do i always find I'm talking like a child, maybe its reflective of the author of this post. I have better things to do than answer this.
Dalecary From , joined Dec 1969, posts, RR:
Reply 16, posted (14 years 4 months 4 weeks 16 hours ago) and read 2267 times:
give me a break. As if Toomey would tell all NZ staff of the grand plan for NZ/AN. These things are always boardroom secrets and while there may be som e rumors, until it is officially announced nobody really knows anything. Of course the grand plan must involve SQ. They are the only ones with money and aircraft. NZ spent all theirs on the AN purchase instead of doing the sensible thing and going 50/50 with SQ. AN and NZ are totally cash strapped and will rely immensely on big brother SQ to get them out of a hole and I expect that will come at a cost. Certainly SQ will want a bigger share of AN if they are going to pour enormous resources into an ailing carrier and they will want more power altogether. Back to Toomey telling all his plans for NZ/AN. It could only have been in general terms. At QF they knew the A380 was going to be ordered and some derivative of the A330. I can tell you the 744LR and A333 orders surprised a lot at QF. The A332 was by far the most desired derivative by those working at QF. They still don't know where these planes will be maintained. QF keeps their decisions very close to their chest, as do most airlines and businesses in general for that matter.
Anyway, how will we be shocked? A340s,777s and 744s to AN/NZ with the probable purchase or lease through SALE of A319/320/321? AN to expand it's International network to the USA, NRT, and SIN? NZ/AN to operate under a new banner? Or even the purchase/lease of some A380s by NZ to counter QF on Pacific services? Not one of these can be achieved without substantial financial support from SQ.
What is the time-frame for the Toomey grand-plan? Surely you can share that with us if everyone at NZ knows about it. And if they do it will leak very quickly and maybe some AN people might realise this master stroke.
What a joke,Mikey. Me thinks you know nothing at all!!!
B744 From New Zealand, joined Dec 1999, 491 posts, RR: 0
Reply 17, posted (14 years 4 months 4 weeks 12 hours ago) and read 2252 times:
Dalecary - right on the mark.
Mikey, although I admire your enthusiasm, you have indicated in your post that your are privy to some fairly commercially sensitive information (via your sister...) that you aren't prepared to share with us. If that is the case, please don't bother mentioning it at all. It doesn't help in any way at all.
As Dalecary has pointed out, AirNZ would not divulge such sensitive information to the rank and file if keeping it under wraps for now is critical to improving their commercial position. The chance of leaks is just too great. After all, your sister passed on this all-so-important information to you!
Rmm From Australia, joined Feb 2001, 525 posts, RR: 1
Reply 18, posted (14 years 4 months 4 weeks 12 hours ago) and read 2246 times:
Was removing the peanuts from all AN's flights part of the grand plan.
This article appeared in todays Australian
Kiwis nobble our nuts
By Steve Creedy, Aviation writer
THE great trans-Tasman airline peanut heist has been unmasked: Air New Zealand
is responsible for nicking Ansett's nuts.
The coveted packets disappeared from Ansett Australia flights after a "realignment"
of in-flight products under its Kiwi owners in January. But Ansett denies it was a
case of Kiwi bean-counters going nuts.
Disappointed passengers requesting the snacks have been given an array of
One flight attendant was overheard telling a NSW cricket team member on a
Sydney-Perth flight the nuts had been cracked because they could cause allergic
A second passenger, however, was told the peanuts had been sacrificed to cut
An Ansett spokeswoman insisted yesterday costs were not an issue and said the
nuts were simply not part of "the new mix" after the corporate shuffle in January.
Airlines and snack manufacturers were unable to say how much the peanuts cost,
but most reckoned a few cents a packet.
The Ansett spokeswoman said the new in-flight service was introduced after
research with customers and flight crew. It provided more substantial servings, a
broader range of menu choices and meals in line with journey length.
But she admitted the airline had no exchange for the lost nuts.
"No, there aren't any straight substitutes for peanuts if that's what you're looking
for," she said.
The alternative for disgruntled peanut lovers is to switch to Qantas, which still
offers the snack.
"They can travel and crunch to their heart's content," a Qantas spokeswoman said.
Singapore 777 From Australia, joined May 1999, 1026 posts, RR: 3
Reply 19, posted (14 years 4 months 4 weeks 10 hours ago) and read 2238 times:
So what is actually happening to Ansett? I thought they were a pretty fine airline with a good inflight product?
So in conclusion, is AirNZ being just too greedy for themselves to handle or is Qantas simply coming up with a better inflight product than them? I haven't flown on QF but want to try them one of these days.
Rmm From Australia, joined Feb 2001, 525 posts, RR: 1
Reply 20, posted (14 years 4 months 4 weeks 9 hours ago) and read 2230 times:
AN still have a good inflight product but years of mismanagement have taken
a huge hunk out of staff morale which is slowly eating away at this product.
ANZ being tight doesn't help either. Another example is to replace all linen
head rest towels with paper ones. These look shocking after 2 or 3 legs. I hope
ANZ don't get their way with this one.
Singapore 777 From Australia, joined May 1999, 1026 posts, RR: 3
Reply 21, posted (14 years 4 months 4 weeks 8 hours ago) and read 2221 times:
But why is AirNZ degrading the level of the service? I mean like doing away with the peanuts, that's absolutely nuts!!! I mean how much can a packet of peanuts cost? Why is AirNZ having such a tight control of everything? And why isn't SQ doing something to reverse this?
Rmm From Australia, joined Feb 2001, 525 posts, RR: 1
Reply 22, posted (14 years 4 months 4 weeks 8 hours ago) and read 2213 times:
I don't think ANZ have any choice but to cut back on services. They have no
money to support AN. I heard from a manager (AN) yesterday that our market
share has now dropped from 40% to 38%. He said they can't substain anything lower than 33%. It is my belief that this is when SQ will pounce and buy 50% of AN. SQ have a shrewd business sense and will get AN at an extremely good price.
Something else of interest too. At the moment there are 20 ANZ engineers
working in the Ansett hanger to cover staff shortages. Most agree that SQ will
move in a big way soon.
Mx5_boy From , joined Dec 1969, posts, RR:
Reply 23, posted (14 years 4 months 4 weeks 7 hours ago) and read 2206 times:
Whilst the media can claim whatever they want, the fact of the matter is that AN still has 40% of the market.
What you will find is that the general domestic passenger movement in Australia has increased dramatically. There is room in this country for different carriers to operate, but given the size of our country, and the limited market, one current carrier must go.
What is my prediction? Virgin. I doubt that Virgin has the intimate and precise knowledge of the Australian market that Mr McGowans enterprise does. Branson may pump money into the business but you only have to look at Virgin Express to see the trouble that is about to brew. Impulse on the other hand has been marketing quite effectively, and has also stolen many a business customer from the big two.
We all know that AN's inflight service is legendary, particularly on their international routes that make SQ look like a third world carrier. NZ's buying of AN was not a good idea, AN needs the capital of SQ to make it truly competitive. I don't particularly like SQ service, call it a personal preferance but I have found at times it to be a little intolerant.
That's personal preferance though, AN will survive, QF will bring their services on par shortly. The problem with the Australian domestic pax is that the business people are loyal to their respective carriers (FF programs) however the new entrants have made a quick trip to Brissy or Melbourne from Sydney a cheaper and more vialble alternative to video conferencing.
In thought, expect to see one of the worlds best airlines QF to flourish this decade, and you can expect the same of AN as well, as soon as SQ get control. SQ management know that AN will be their only "room" for positive growth in air travel markets for the next decade.
(These opinions were formed after I asked my leading stock broker in Singapore to "speak" to some SQ high level execs.)