SUNBIZ

How ‘Aggressive’ Qantas Now A Threat To Fiji Airways

The Australian giant holds 46 per cent of shares in Fiji Airways and has long operated a successful code-sharing partnership with seats on Fiji Airways flights.
16 Sep 2019 14:51
How ‘Aggressive’ Qantas  Now A Threat To Fiji Airways
Qantas

Continuing behind-the-scenes questions about the motives of Qantas in the Fijian aviation market flared into the open over the weekend.

Both Acting Prime Minister and the Minister responsible for Aviation Aiyaz Sayed-Khaiyum and Fiji Airways managing director/chief executive officer Andre Viljoen have spoken out.

Aggressive escalation

They have questioned what is being called “aggressive escalation” by Qantas.

The robust level of the language used reflects the concern over damage Qantas could do to Fiji Airways.

Words like cannibalising and going from commercial partner to competitor.

The Australian giant holds 46 per cent of shares in Fiji Airways and has long operated a successful code-sharing partnership with seats on Fiji Airways flights.

Yet the Australians have now three times surprised Fiji Airways. First by launching Qantas low-cost subsidiary Jetstar on to Australia-Fiji routes.

Then by launching four-times-a week full-service Sydney-Nadi -Sydney flights by Qantas itself. Now by planning to increase the Qantas services to daily.

Fiji Airways pressure

Fiji Airways is feeling the pressure. The upshot of what Qantas is doing could ultimately damage our economy.

Mr Sayed-Khaiyum while a chief guest at the South Pacific Stock Exchange Annual Awards 2019 in Suva on Friday night had highlighted this.

Mr Sayed-Khaiyum said there are some issues with Qantas cannibalising the market even though they have a 46 per cent stake in Fiji Airways. But hopefully, it can be resolved in the next couple of weeks, he said.

Mr Viljoen, then yesterday issued a decidedly strong statement in which he said: “It is certainly alarming when your major (46 per cent) shareholder and long-standing commercial partner all of a sudden becomes your major competitor.

“We share a long history with Qantas, who has been a shareholder in Fiji Airways since 1958 and actively participated in our board until 2012.

“Qantas is also our key Oneworld connect sponsor airline.

“Over many decades, as Fiji’s national carrier, Fiji Airways has faithfully supported tourism and trade with services between Australia and Fiji.

“For 17 years, Fiji Airways has operated and developed these services as codeshare flights in partnership with Qantas, at substantial cost and risk.

“Historically, this partnership has been a win-win for both parties, so you can imagine our surprise when Qantas announced, in January this year, that it would be commencing its own services to Fiji in competition with Fiji Airways.

“Qantas’ move is odd for a number of reasons. Firstly, they have entered the market at a time when Australian visitor arrivals to Fiji are flat. Secondly, the addition of the Qantas services has created overcapacity and diluted yields.

“Thirdly, through our codeshare relationship, Qantas has earned healthy codeshare commissions for little cost and risk.

“Conversely, by operating its own services, at its cost and risk, we estimate that Qantas will struggle to turn a profit on the route.

Qantas’ sudden flip from ally to adversary

“This brings into question the entire commercial rationale.

“Surprisingly, Qantas has recently indicated it will be increased from four flights per week to a daily service between Sydney and Nadi later this year.

“Qantas’ sudden flip from ally to adversary has been very damaging for Fiji Airways.

“It is competing aggressively, actively directing passengers onto Qantas and Jetstar services.

“It is very difficult for a small Pacific island national carrier to compete with the substantial market power and financial capability of Qantas which, frankly, dwarfs the resources and capability of Fiji Airways.

“Fiji Airways has met with Qantas on a number of occasions to voice our concerns. However, it seems that they have fallen on deaf ears. Qantas has cited increased connectivity for its own passengers as a key reason for flying to Fiji, but our analysis has shown that, with the exception of some marginally improved connection times, the Qantas services do not create any meaningful new connections.

“This whole situation raises questions about Qantas’ real motive.

“What I can tell you is this sudden, aggressive escalation in the competition is severely damaging Fiji’s national carrier and our ability to compete.

“It should also be noted that Fiji Airways is a vital contributor to the Fijian economy, as well as the regional economies of the neighbouring South-West Pacific States whose economies, like Fiji, are highly dependent upon tourism and trade.

“The economic impacts on Fiji Airways this year are already apparent, and forecast figures present a worrying trend.

“The public should be aware that this race to the bottom not only stands to damage the economic stability of one of their favourite holiday destinations, to the great detriment of the Fijian people.”

International airline activity report

The Australian government’s international airline activity report shows Fiji Airways has a dominant share of flights between Fiji and Australia.

The airline carried 43,393 passengers between Australia and Fiji in June, compared with 23,779 on Virgin Australia, 5017 on Jetstar and 4686 on Qantas.

Since 2012, Qantas had removed its four directors from the Fiji Airways board because it disagreed with moves by the major shareholder, the Fijian Government.

Qantas claimed that the Government was interfering in the management of the airline.

But there had long been a view in Fiji that Qantas had seized too much control in Fiji’s national carrier. It did not always act in Fiji’s best interests.

This included Qantas having veto powers at board level and people from Qantas in key senior management roles.

Bainimarama government

The Bainimarama government, with Mr Sayed-Khaiyum playing a key role, changed the balance of power.

Fiji Airways has grown – and grown.

The question is: what game is Qantas playing?

Now the Qantas moves are out in the open. So are the Fijian concerns.

The coming weeks will be interesting.

Feedback:  maraia.vula@fijisun.com.fj

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