Cost-cutting continues to underpin strong financial performances by Australasia's two main international carriers, Qantas and Air New Zealand, while the region's third biggest carrier, Ansett, prepares radical measures to fix its cost problems.
Investors remain worried by Qantas' exposure to Asia, in spite of management efforts to reduce that risk by expanding the route network outside Asia. In October Qantas was due to relaunch services to Paris via Singapore and, for the first time, operate to South America, with twice-weekly flights to Buenos Aires.
In the other direction, Sydney- Auckland-Buenos Aires is considered to have strong long-term potential as a business/ leisure/freight route and dovetails with the route networks of Qantas alliance partners American Airlines and British Airways. American's partner Aerolineas Argentinas flies the route and will now code-share with Qantas.In the meantime, Qantas has axed various Asian services.
Ansett is as unhealthy as Qantas is healthy. Its domestic operating costs approach 15 Australian cents per ASK while Qantas, which has trimmed about A$1.5 billion from group operating costs over two years, has passed on significant cost reductions to its domestic network. Over the same period, its strong brand image and frequent flier programme have wrested back almost 10 percentage points of market share from Ansett.
The consequent slide in Ansett's domestic yields and loads, combined with Ansett International's exposure to Asia, have the group barely breaking even with a margin of less than 1%. After a near two-year review, Ansett chief executive Rod Eddington has announced the first wave of changes. A number of Australian east coast regional ports will be handed to low-cost subsidiary Kendell, which will buy regional jets for the first time, saving Ansett about A$50 million a year.
Ansett will begin phasing out its fleet of British Aerospace 146s, eventually giving Kendell control of the group's below 100-seat markets. Internationally, Ansett will axe three flights a week to Shanghai in October. It has already axed Kuala Lumpur, Jakarta and Seoul, but will retain Osaka, Taipei, Hong Kong and Denpasar, Bali.
Air New Zealand, which owns half of Ansett, has achieved cost-cuts of NZ$84 million with annual savings projected at NZ$100 million a year. n
Clive Dorman
Source: Airline Business
