London via China tests Qantas

QANTAS will face a new front in its battle to turn around its loss-making international operations this week when Asia's largest airline opens up a new way of flying between Australia and London.

In a direct threat to Qantas and British Airways on the so-called ''kangaroo route'', China Southern Airlines is launching services tomorrow between Australia and London via its hub in Guangzhou in southern China.

Airline executives fear the so-called ''Canton route'' will become a bigger threat to Qantas and other airlines once Australians can gain transit visas, making it a more palatable route for passengers. At present, Australians flying via Guangzhou have to pay $98 for a one-entry tourist visa if they want to stop over.

But China Southern is lobbying the provincial government to follow the lead of Shanghai authorities in issuing two-day transit visas. Beijing is also about to allow transit visas.

An eventual relaxing of visa restrictions for Australians is expected to lead to a much larger number of people considering routes via China as an option for flying to Europe.

China Southern has been aggressively expanding its international network, and plans to double flights between China and Australia within the next three years to 55 return services a week. Next month it will increase flights to Sydney from 11 a week to 14, and to Melbourne from seven to 14.

Airline executives say China Southern is increasing capacity not just because it wants to carry more people from China to Australia but to allow it to challenge Qantas's position on the ''kangaroo route'' to Europe.

Matt Crowe, a transport analyst at CBA Equities, said the Chinese airlines posed a ''big threat'' to Qantas, adding to the competitive pressures from Middle Eastern carriers such as Emirates.

''They are just lining up to push into Qantas's markets,'' he said. ''The only upside is that this is something that Qantas has had to deal with for quite some time … but it is certainly not getting any easier.''


Mr Crowe said the need for a tourist visa for Guangzhou was a ''big deal'' for passengers, and would help protect Qantas from China Southern's expansion.

But he said the removal of the need for a tourist visa would make China Southern a ''formidable opponent'' in the longer term.

Qantas has sought to reduce its exposure to intense competition on the kangaroo route from Middle Eastern airlines by recently reducing flights from five a day to three.

Virgin Australia's chief executive, John Borghetti, said late last month that the advent of Chinese airlines flying to Australia had ''gone unnoticed'', and their presence would only grow as they had a large chunk of the total aircraft orders placed with the manufacturers Airbus and Boeing.

In a sign of its intentions, China Southern recently bought a six-storey building in Sydney's CBD to be its Australian headquarters, and will open a national call centre there within the next month.