International Airlines Group (IAG) chief executive Willie Walsh is hopeful British Airways (BA) will be able to expand its network in Australia beyond the current sole daily flight to Sydney.
However, Walsh said there were no plans for British Airways, which is owned by IAG, to mount ultra-long-haul nonstop services between the United Kingdom and Australia.
Walsh said British Airways’ daily London Heathrow-Singapore-Sydney offering using four-class Boeing 777-300ER equipment was working very well.
“I fully expect BA to continue to have a presence here in Sydney,” Walsh told a CAPA – Centre for Aviation conference in Sydney on Wednesday.
“I’d like to think we could expand back into Melbourne at some stage.”
#IAG CEO Willie Walsh says he fully expects #BritishAirways to continue its presence in Sydney and he would like to be able to expand to #Melbourne at some stage. But he says #BA is not looking at London-Australia nonstops #paxex #CAPASummit pic.twitter.com/mUzNDb5qwe
— World of Aviation (@the_wofa) June 5, 2018
There were some concerns British Airways may have ended its Sydney service following the end of the airline’s joint-venture partnership with Qantas on Australia-Europe routes in 2013, when the Australian carrier forged a new tie-up with Emirates.
Instead, British Airways restructured the service by swapping the Boeing 747-400 that previously served the route with the more cost-efficient 777-300ER.
And the airline became the sole European flag carrier to maintain a presence Australia with its own aircraft after Virgin Atlantic ended its London Heathrow-Hong Kong-Sydney service in 2014, with the flight instead terminating in Hong Kong.
Walsh said he feared at the time that the end of the alliance with Qantas would leave British Airways with little option but to withdraw from Australia.
“I thought that would probably be the end of BA serving Australia,” Walsh said.
“We decided that we would commit to the route and see if we could make it work and it has been pretty successful.”
In the days of the Qantas alliance, British Airways had flights to Brisbane, Melbourne and Perth with its own aircraft. The Brisbane service ended in 2000, while Melbourne and Perth – as well as Bangkok-Sydney – were dropped in 2006, leaving London Heathrow-Singapore-Sydney as its sole offering to Australia.
No interest in Australia-United Kingdom nonstop
Qantas commenced Perth-London Heathrow nonstop flights in March 2018, linking the continents to Europe and Australia with regularly scheduled passenger service for the first time. It is the world’s second-longest route by distance behind Qatar Airways’ Auckland-Doha flights.
The Australian carrier led by chief executive Alan Joyce is also currently working through its Project Sunrise challenge to Airbus and Boeing for an aircraft capable of flying from nonstop from Australia’s east coast to London and New York with a commercially viable payload.
Walsh said there were no plans for British Airways to follow in Qantas’s footsteps regarding ultra-long-haul flights.
“We’re not looking to do direct flights from Heathrow to Australia,” Walsh said. “I think Alan has successfully pioneered that.”
“Codesharing is an option but in terms of using our metal, we’re not considering it.
“Personally, the idea of sitting on an aircraft for 21 hours to get from Heathrow to Sydney, I don’t know, it just doesn’t appeal to me.”
Equity investments
Sitting alongside Walsh at the CAPA event was Qatar Airways chief executive Akbar Al Baker, whose airline currently holds a 20.1 per cent stake in IAG, the parent company of not only British Airways but also Aer Lingus, Iberia, Level, and Vueling. IAG also owns 4.6 per cent in Norwegian Air Shuttle.
Walsh said the equity investment by Qatar had no influence on its operations, with any cooperation based purely on their individual commercial objectives. (British Airways and Qatar Airways signed a joint business agreement in 2016.)
The IAG boss said there were lessons from the time when British Airways had a 25 per cent stake in Qantas from March 1993 to September 2004 for managing the partnership with Qatar Airways.
“I have got a picture of it in my office in London, but when it was announced that BA took a stake, big billboards outside of Sydney Airport – these are full-sized billboards – said ‘Piss off Poms’,” Walsh said.
“The reaction in Australia to BA taking a stake in Qantas at the time was very negative.
“And quite honestly, when I have looked at the history of that, what I saw was there was confusion, the equity created confusion in the relationship.
“Was BA interested because they were a shareholder, or was BA interested because there was commercial opportunity?
“When BA sold the stake the relationship actually improved. It is not because it was the right thing to do, it was because the history of that investment was clouded in suspicion.
“That’s completely different to Qatar having the stake in IAG.
“We are very clear. Qatar has an equity stake in in IAG but the work we do together is purely commercially driven.”
Al Baker noted Qatar Airways did not have a seat on the IAG board and did not intend to request for a seat on the board.
Further, Al Baker stressed his airline did not interfere in the operations of IAG and described the shareholding as a “strategic investment”.
The Middle East can only sustain two aviation hubs
The pair also discussed the outlook for the Middle East carriers in the period ahead, where each of Emirates Airline, Etihad Airways and Qatar Airways are each dealing with their own near-term challenges.
The most acute of those appear to be at Etihad, which is in the midst of a strategic review under chief executive Tony Douglas.
The Abu Dhabi-based carrier has already announced a number of network changes, with Edinburgh, Perth, San Francisco and Dallas/Fort Worth dropped and the prospect of more to come.
Further, Etihad’s strategy under former chief executive James Hogan of acquiring equity stakes in a bunch of airlines to feed its Abu Dhabi hub has unravelled spectacularly with the collapse of airberlin and the financial woes of Alitalia.
Walsh said the unfolding story at Etihad, which was the last of the Gulf carriers to arrive on the scene when it commenced operations in 2005 following Qatar Airways in 1997 and Emirates in 1985, was no surprise.
“Etihad did change the landscape a little bit because as everybody knows Etihad was playing catchup and they were doing things that people questioned,” Walsh said.
“I’m not going to have a go at Hogan, he’s retired from the business and I wish him the best, but everybody looking at the strategy that they were pursuing did question whether this was a sustainable strategy and we can see that from what has happened recently that it wasn’t.
“So it’s played out pretty much the way everybody thought.
“I can see a sustainable case for two major hubs in the Middle East. I struggle to see how three can operate in a sustainable manner.
“And with both Dubai and Doha established as the number one and number two hubs, it was always going to be difficult to create a third hub and I think that’s what happened.
“Etihad has struggled to do that and we’ve seen what’s resulted.”
Al Baker added: “You know, to buy airlines, and take equity in airlines to feed into your hub to increase your passenger numbers, doesn’t work.”
“Well the proof has already been in the carrier in our region.”
In Australia, Etihad Airways holds a 20 per cent stake in alliance partner Virgin Australia and has a seat on the Australian carrier’s board.
Its other airline investments include India’s Jet Airways, Air Seychelles and Air Serbia.
