Qantas is cutting its flights between Sydney and Beijing for the third time. The airline flies an A330-200 between the two cities five days a week but said yesterday that this service would cease in March 2020. Qantas attributes the decision to decreased business demand and increased competition on the route.
Since early 2017, Qantas has operated QF107 up to Beijing during the day before returning as QF108 through the night, touching down in Sydney after lunch the following day. This was initially a daily service but, in a sign that all was not well, dropped back to five days a week in April 2018.
Eighteen months later, Qantas has decided to exit the route for the third time in 31 years. Qantas International boss Tino La Spina said in a statement;
“ Our flights to Beijing have been underperforming for some time due to weaker demand as well as a big increase in capacity from other airlines. We’re responding to what the market is telling us.”
Weak business demand and increased competition
Qantas noted the demand for business class travel on the route has been weakening. Furthermore, Chinese carriers have been laying on extra capacity on the route. Air China and China Eastern fly between Sydney and Beijing and they’ve ramped up capacity by 20% since the re-introduction of the Qantas flights in early 2017. Qantas anticipates further capacity increases in 2020.
China has proved problematic for many non-Chinese carriers over the years. Despite having a big population, an expanding middle class and a booming aviation market, airlines like Qantas have had difficulty picking up a piece of the action. In 2016, Qantas CEO Alan Joyce spoke of the tremendous potential in China.
Aviation analyst Neil Hansford told the Sydney Morning Herald that the Chinese carriers were dumping seats. Because the airlines are state-backed, they can ramp up capacity on routes without reference to the bottom line. In addition, they had the outbound Chinese tourist market sewn up. Qantas, accountable to its shareholders, needs to make money on its routes. Success in Beijing is alluding it.
Over the years, the potential has remained largely unrealized for Qantas.
Qantas has tried to make Beijing work three times
Qantas first launched services into Beijing in 1984. It was a very different era from today (Sydney – Melbourne – Singapore – Bombay – Frankfurt – Manchester anyone?). A timetable from the mid-1980s has Qantas running QF171/172 between Melbourne – Sydney – Beijing once a week using a Boeing 747. This service lasted until 1987.
The airline had a second crack at Beijing between 2006 and 2009. When this service started, Qantas went back in with three services a week using A330-300 aircraft. John Borghetti, then Qantas Executive General Manager cited the 2008 Beijing Olympics, the growing trade relationship between Australia and China, increasing demand for travel between the two countries and the large number of Chinese students studying in Australia as drivers behind the decision to fly to Beijing again.
The second attempt to crack Beijing came to an end in early 2009 amidst a deteriorating global economic situation when Qantas slashed a number of its services to China and abandoned India. At the time, Qantas CEO, Alan Joyce said;
“Airlines around the world are confronting significantly changed operating conditions and have to ensure capacity is best matched to demand.
“The Qantas group is performing well in this difficult environment, but we are not immune from the need to address underperforming routes.”
Renewed optimism in 2017
Eight years later, in 2017, Qantas went back into Beijing. Alan Joyce was firmly ensconced at Qantas, busy transforming the joint, and said at the time;
“The tourism industry in Australia is very excited about what the Chinese market will deliver over the next few years.
“Australia is now at the top of the wish list for Chinese travellers thinking about where they want to go next. There are 21 million people in Beijing alone …
“The business travel market is another key focus for this route, particularly off the back of the free trade agreement with China.”
As before, Qantas struggled to make the route viable. Conversations I’ve had with people I know who use QF107/108 tell me that business class cabins are often only around two thirds full. Beijing isn’t China’s top business city. That trophy goes to Shanghai, where the Qantas service reportedly does well.
There’s also anecdotal evidence that Chinese passengers remain steadfastly loyal to Chinese carriers. Fair enough, most people are loyal to and direct business to their local carriers. While the hard product on Chinese carriers is often criticized, it is also improving. Often with more flights than Qantas and better fares, the Chinese carriers can make a decent case for your business, particularly if you are on a daytime flight and don’t necessarily need to sleep.
Finally, while tourism from China into Australia is growing well, the market is tightly held by Chinese operators. Again, this isn’t all that unusual, but it isn’t much good for Qantas who can do little but sit by while all those tour groups book onto Air China.
There was, perhaps, an assumption a decade ago that flying into China would be a license to print money. There are a billion people there, the Chinese government was relaxing travel restrictions, and GDP was rising fast. It seemed like an ideal combination. But many airlines have had a tough time with China. Qantas is no exception.
But I wonder, when will Qantas have its fourth go at Beijing? Is it a case of when rather than if? Got some thoughts on this? Let us know and post a comment.