March 12 (Bloomberg) -- Qantas Airways Ltd., Australia’s largest carrier, is discounting flights to Asia to lure more passengers as an alliance with Emirates adds 40 percent more seats on routes to Singapore.
The carrier has “still got a lot of capacity to fill” on aircraft flying to and from Asia, Simon Hickey, chief executive officer of the carrier’s international unit, said in an interview yesterday. Qantas rescheduled its Asian flights to appeal to business-class travelers as the Emirates tie-in allows the carrier to reduce unprofitable flights to Europe.
The fare discounts are effective next month as Sydney-based Qantas begins expanding seating to Asian cities. One-way fares to Singapore, Hong Kong and Bangkok were cut to A$350 ($360) each way last week, Sophia Connelly, a company spokeswoman, said by e-mail.
“We’ve got a lot of capacity increase going through ports like Singapore and Hong Kong,” Hickey said by phone yesterday. Discount fares are being used to fill those seats, he said. “We’ve got to sell into that capacity. You’ve got to think about things a little differently.”
Airlines closely watch capacity on their routes to make sure seating supply doesn’t exceed customer demand. When it does, carriers have to cut their fares to entice passengers on-board, narrowing profit margins.
That doesn’t appear to be a risk at this stage, Russell Shaw, an analyst at Macquarie Group Ltd. in Sydney, said by phone. Qantas’s ability to provide connecting flights beyond the main Asian hubs will be decisive, he said.
“They’re trying to stimulate the market,” he said. “A lot will depend on the connections they’re able to establish.”
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