Qantas complacency at its finest, and how Joyce may be its only hope

Joyce Nov 2010_2.JPGFor some, a recent Hitler parody video explains all that is wrong with Qantas. But for those wanting a more insightful and accurate account, look no further than 13 words chief executive Alan Joyce delivered last week about Qantas International: “It has achieved its required returns only three times in the past 15 years.”

And if you think the figures are cooked, Joyce adds that “the good years have not been good enough to offset the bad.”

The statement begs the question how Qantas managed that record and did not think it prudent prior to February to announce it would return its international division to profitability.

It also partially exonerates Joyce as Mascot’s persona non grata since the problems he face are not ones he exclusively created but rather inherited from predecessors including Geoff Dixon and James Strong, the latter of whom resides on the Qantas board. Perhaps that explains why Joyce chose to reveal such an unflattering record.

Joyce was barely two and half years into his tenure when he announced a turn-around for the international division, details of which will be made public at the carrier’s 24 August annual results briefing. While it can be asked why Joyce waited 2.5 years, it should also be asked why Strong and Dixon, let alone the board, never bothered.

Perhaps the answer is complacency. Qantas had a domestic monopoly, and more recently a frequent flyer programme, that could prop up a loss-making international network. Cue the statement, “The Qantas Group has made an annual profit every year since 1995, a claim only two other major full service carriers can match.”

The international network was critical as it gave the staple domestic passengers and corporations international flight options, thus creating a seamless single-carrier preference. As Qantas said in its application to the ACCC for a joint business agreement with American Airlines, “the viability of Qantas’ entire portfolio of businesses depends on a viable international business.”

But the status quo is no more. The trans-Pacific duopoly has ended and Asian and Middle Eastern carriers with lower cost bases have entered. What is not said is the future of Qantas domestic. While it may continue to be profitable, the yields and revenue volume should shrink as a result of Virgin Australia’s entry into the corporate market.

Qantas, however, spent years–at least 15–being complacent. That is how a middle seat almost became standard in business class, enhanced benefits are only now being implemented with American Airlines, and, for an anecdotal reference, how flight attendants failed to pick up a dirty spoon.

Jetstar A320
Photograph: Yannick Delamarre.

But Qantas has not had non-stop complacency. There is, after all, Joyce. He helped establish Jetstar when Qantas was about to incur serious damage domestically thanks to Virgin. If Jetstar is diminishing Qantas, it is a reflection of market demand: cheap flights. Does every person who berates Jetstar always fly Qantas on fully-flexible business class tickets?

It is thus appropriate Joyce’s speech was entitled “the Qantas for our times”.

Arguably, Joyce saved Qantas last decade with the creation of Jetstar. Without it, there may not have been a Qantas today. Yes, Joyce did say his pilots were of the “kamikaze” nature and lived on “beyond cloud-cuckaoo land”. But that is a war of words in the carrier’s seemingly never ending labour dispute, and one Qantas apparently reckons requires harsher words given the history compared to Sir Richard Branson’s tame empathetic approach for the first time Virgin Atlantic pilots may strike. (If you are wondering, no, I am not a member of the Chairmans Lounge.)

There is room, in Australia or Asia, for an airline that bares the name Qantas, not Jetstar, with fares passengers are willing to pay. The tradeoff will be the reality of not being able to offer the previous service, be it caviar in economy class or 100% local jobs. There is the modern full-service airline Joyce speaks of.

Can he save Qantas again?


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