Early bookings from business travelers have been strong for Qantas' direct flights to London, but it is a highly competitive market so the real test will be after the initial hype wears off. The jury is still out on whether the airline can make this route profitable.
Qantas Airways Ltd. started direct flights between Australia and London this weekend, passing a major milestone by reducing to 17 hours a trip that once took 12 1/2 days.
Flight QF9, which originated in Melbourne, landed at London Heathrow at 5:02 a.m. Sunday following a 14,498-kilometer (9,000-mile) trip from Perth, according to the U.K. airport operator’s website. The route marks the first nonstop passenger service between the continents, putting Europe’s financial center one night’s sleep from the capital of Australia’s mineral wealth and the operations of resources companies including BHP Billiton Ltd. and Rio Tinto Group.
For Qantas, the Perth connection is a high-profile test for a planned ultra long-haul network that the airline hopes will span the world by 2022. To succeed, the route must defy the boom-and-bust commodities cycle that has preyed on Western Australia. And Qantas needs business travelers to pay up for the shorter, one-hop flight to London rather than make a stop in Asia or the Middle East.
“You have the resources sector on both sides, you have banks, you have lawyers that all want to fly fast and reliably and comfortably,”’ said Rico Merkert, professor of transport and supply-chain management at the University of Sydney’s business school. “And I think they’re prepared to pay the premium.”
Mining companies in Western Australia dig up more than a third of the world’s iron-ore and bring in some of the largest hauls of gems and rare earths. The sector also supports financial-services firms such as Hartleys Ltd., whose Perth-based director of corporate finance Steve Kite was booked on Sunday’s flight — the second in the new service to London — for just a four-day trip.
“It’s effectively an overnight flight for me and that feels like I’m saving a lot of time,” said Kite.
Qantas Chief Executive Officer Alan Joyce is betting he can make money from the daily service by stripping excess weight from a Boeing Co. Dreamliner and stacking it with top-tier passengers.
“I don’t think anyone at the Qantas side will relax until this touches down in London,” Joyce said in Perth before the flight. “This is a major step for aviation, the first time Europe and Australia have had a direct link.”
Not everyone is convinced of the route’s commercial future.
Aircraft leaving Perth for London will need feeder passengers from around Australia, said Volodymyr Bilotkach, author of the book “The Economics of Airlines.” But flying from Sydney to London via Perth saves little time over a transfer in Asia or the Gulf, he said.
Andrew McGinnes, a spokesman for Qantas in Sydney, said bookings on the new route “have been strong” and corporate clients in eastern Australia have indicated they’ll stop in Perth for meetings on their way to London. “It’s a very competitive market but this is a unique flight,” McGinnes said.
An analysis of flight times and prices highlights the challenges Qantas faces.
Flying business class from Perth to London with Qantas in mid-June would cost A$6,614 ($5,121). Opting for Singapore Airlines via Singapore would take an extra 2 1/2 hours but cost just A$4,843, according to fares on Webjet.
Qantas has challenged Boeing and Airbus to build a jet by 2022 that can fly fully loaded from Sydney to London without a break. Success on the Perth-London service would lay the foundations for even longer routes to Europe.
“It’s really just the beginning,” said Merkert at the University of Sydney.
©2018 Bloomberg L.P.
This article was written by Angus Whitley and Rebecca Keenan from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to email@example.com.
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Photo credit: Qantas CEO Alan Joyce participated in the launch event on March 24. The airline is hoping its direct flights to London will help build an ultra-long-haul network. Sergio Dionisio / Bloomberg