Managed to find the AFR article:
PLANE ANGRY (PT 1)
Narelle Hooper
Australian Financial Review - 11DEC04
Qantas management says there's not a problem and shareholders can point to high stock prices, but costs are being cut and trouble is fermenting among the increasingly disgruntled passengers.
'Daa da-da-da-da-da . . . No matter how far, Or how wide I roam, I still call Australia . . ."
At this point, buckled securely into your Qantas seat, returning from a long trip, any self-respecting Aussie comes over just a bit misty and a lump rises in the throat.
That song, those beautiful kids, have lodged Qantas in our psyche. Increasingly though, when it comes to Australia's national flag carrier, something else is starting to stick in customers' throats and it's not pleasant. And for Qantas that spells trouble.
Qantas shareholders are flying high right now. Qantas chief Geoff Dixon has run Australia's national airline hard, delivering record profits through one of the most turbulent periods in aviation history. It's an amazing performance given that airlines are going bankrupt all around and the price of jet fuel has soared.
The question, though, is how long it will take for customers to get sick of Qantas delivering the extra shareholder value, at least partly by squeezing their customers too hard.
Cabin staff say they're already sick of it.
"This has gone past a joke," one long-serving senior crew member tells the Weekend AFR. "We're the ones who continually have to apologise: 'I'm sorry your meal's not ordered, sorry your seat won't recline, I'm sorry the audio system's not working.'
"The crew are sick of apologising for all of this. We call ourselves Apology Airlines. "
The accusation that Qantas is whittling away its service comes on top of a range of other complaints. Which national flag carrier has introduced the most savage cutback of frequent flyer benefits ever? Which one has rail-roaded passengers in northern Tasmania and at Queensland holiday hot spots off full-service Qantas flights into potluck seats on no-frills subsidiary Jetstar? And who was it who slapped on three fuel surcharges in six months?
The Weekend AFR's sounding of customers, the industry and the online frequent-flyer forums uncovers a list of mounting grievances. Is that an extra row of seats squished in the back? Great, they've finally replaced those disastrous cardboard-box ration packs with hot meals but are my eyes failing or do they seem much smaller portions? How dare they keep pushing those frequent-flyer reward trips out of reach?
Qantas chief financial officer Peter Gregg and Qantas executive general manager John Borghetti defend the airline's record.
"We've haven't done everything perfectly," says Gregg. "It's important to recognise there are some traditional Qantas customers who are unhappy. We're continuing to look at that and to refine things. We don't intend to sit on our hands and say we're right and they're wrong."
But both insist the problems are at the margins. Borghetti points to independent customer and brand surveys: best airline in Australasia, fourth best in the world according to offshore online group Skytrac.
So, while business-class cabin crew describe having to huddle in the galley divvying up meals so customers can get their food preferences, making up for the fact that not enough meals have been loaded, Qantas remains one of the best-managed airlines in the world. In the year to June it delivered a $648 million profit on marginally lower revenues of $11.4 billion. It has carried more passengers than ever 30 million safely and efficiently. It is more profitable than most of its peer flag-carrier airlines with the exception of Singapore Airlines and Cathay Pacific.
At least one senior pilot has become annoyed enough to get a friend to write letters to the newspapers because pilots can't violate company confidentiality.
The long-time senior cabin attendant has tolerated management's cost dilemma but is saddened by the decline.
"Standards are really dropping but they don't seem to care," this attendant says. "We can't keep promoting ourselves as this five-star airline when we're operating like a budget airline.
"They hadn't loaded the dry ginger ale a while back. We had this guy in business class. His audio didn't work. They didn't load his choice of meal. He said, 'Forget it, just get me a bourbon and dry'. I combed the whole plane then had to come back to this frequent flyer and say: 'I'm sorry, we can't give you your bourbon and dry.'
"Take away the passengers, our concern now is safety. And we're presented by the company as these whingers who won't give up their conditions. "
Apology Airlines is a phrase neither Gregg nor Borghetti claim to have heard before. (Qantas chief Geoff Dixon is at a conference in Europe and can't comment.)
Putting the complaints down to a minority of older disgruntled staff, they absolutely deny any corners are being cut or safety issues affected. Borghetti says Qantas benchmarking has seen its customer service levels the highest in many years. He won't disclose those figures but says the airline has more than recovered ground lost after the collapse of Ansett.
One issue which will be a slow but hot burner is the most recent winding back of the Qantas frequent-flyer scheme, the third in just a few years. The frequentflyer.com.au website has been full of angry chatter about the impact of the changes to the once-generous scheme.
Cliff Reichlin, director of the website, says the changes are a mix of "the good, the bad and the ugly". Short-distance domestic flights, such as Melbourne-Sydney, Brisbane-Sydney and Melbourne-Adelaide, will require fewer award points. Members will be able to buy top-up points and transfer points between family members.
The bad is that frequent flyers will have to clock up more kilometres in the air to pick up their reward points between all other cities and internationally. By Reichlin's calculation, when it comes into force in May 2005, in some cases frequent flyers will find their points devalued by about 40 per cent. The ugly, he says, is that customers will no longer be able to confirm international upgrades until check-in and no longer be able to upgrade from any ticket.
From the website, the comment that just about sums it all up is this: "As a frequent flyer, I'm very disappointed but as a Qantas shareholder, I'm very happy."
The introduction of Jetstar on domestic routes to arrest the inroads of Virgin Blue into Qantas yields has also pleased many travellers. They're happy to travel cheaply, provided they have the time and the patience to put up with the restrictions on check-in times, weight limits and absence of seat allocation. (The airline has a tiered boarding-pass system gold frequent flyers and families first, then everyone else.)
First it was the northern Tasmanians unhappy that they lost their access to full-service Qantas and were being crammed into Jetstar's narrow seats. Then it was residents on the Gold Coast and more recently Hamilton Island. Last month, the well-heeled members of the Queensland holiday resort Hamilton Island told The Australian Financial Review how they hated being jammed onto Jetstar flights and that the airline was offloading a stream of budget travellers with little money and somewhat less class.
A war of words ensued. Dixon wrote to the AFR about the secluded elite having to watch ordinary holidaymakers enjoying themselves. He went on to suggest the millionaires start their own airline so they could be "spared the indignity of quality cutprice travel and so that Jetstar's many happy customers can be spared the indignity of their company. Everybody will then be happy, including Qantas."
It's some irony that Geoff Dixon, who clocked up a $6 million salary package this year, won the support of the tabloids. His comments, though, really put noses out of joint with some of Qantas's highest net worth customers (and shareholders).
Here's a sample of the letters: "We will not return to the island until they reintroduce proper flights. We will not travel Junkstar." "We are not wealthy but we have no intention of putting up with the offerings of this Mickey Mouse airline."
One gold frequent flyer tells the Weekend AFR she had booked a holiday to Noosa in May. By June they were informed their tickets would be transferred to Jetstar. No discount. No alternative. The frequent flyer said that wasn't good enough. Ultimately Qantas offered a $20 rebate on the tickets. It took three months to come through. She was told the airline was only responding if people made complaints.
Even as Dixon was exchanging words in the media, Qantas was on the phone to soothe those pesky elites. Borghetti spoke to Hamilton Island owner Bob Oatley and general manager Wayne Kirkpatrick. About a week ago, there was a discreet meeting between Dixon and Jetstar chief Alan Joyce with Oatley and other Hamilton Island residents.
AFR (PT 2)
The official line from Qantas now is that the airline is "reviewing" Jetstar processes as it had always intended. Did Geoff Dixon go too far this time?
"He\'s a boss. I\'m not going to criticise him," says Gregg. "We\'ve all had bad flights or bad train trips and car trips. We carry 30 million passengers a year. You can have good experiences and bad experiences. We\'re sorry that happens."
The simple fact remains that its cost base is too high to compete sustainably with the successful budget airlines, the so-called value-based carriers such as Virgin Blue in Australia. Ryanair and JetBlue are increasingly successful offshore examples. Qantas stepped up its Sustainable Future campaign to chop out $500 million a year in costs ($1.5 billion over three years).
"That\'s coming from a multitude of areas. We\'re not reducing our product," Gregg says.
In spite of this Qantas is still not making its targeted return above its cost of capital (thought to be between 12 and 14 per cent). That\'s a hurdle it says it only met once, when Australia was crawling with visitors for the 2000 Olympic Games.
In defending the investment in customer service, Gregg points to the $385 million spent on fitting out sleeper beds and on-demand entertainment systems, the plans for $18 billion to be spent on new aircraft and $50 million on better in-flight lounges for passengers.
As for the other issue upsetting customers, the fuel surcharges since May are meant to combat rising oil prices. Qantas is not alone. Even with oil prices heading down, Gregg says the airline is spending between $150 million and $160 million more than last year on fuel, despite the benefits of the stronger Australian dollar.
Caught in a relentless squeeze generated by the increasingly competitive international airline environment, on the one hand, and its inability to come to grips with its high labour costs and highly unionised workforce on the other, Qantas is in a no-man\'s-land between the traditional full-service airlines and the increasing number of low-cost carriers. Qantas\'s share price, while up nearly 9 per cent this year, is still well below its peak of 2002 before Virgin Blue entered the domestic market.
By responding with its own budget carrier, Qantas has eaten away at its own yields locally. It will also start up Jetstar Asia out of Singapore next year to service the booming China markets. It stoops to cloak-and-dagger contract training of potential strike-breakers. It has become one of the biggest supporters of industrial relations reforms.
The end result is that Qantas, the brand we all love to love, is becoming a shrinking icon. Brand consultancy Brand Finance puts an approximate brand valuation on Qantas of $900 million. The consultancy\'s managing director, Tim Heberden, says cost cuts that reduce customer service, combined with splitting the airline into full service and budget carriers, can hurt from a branding perspective.
"Careful management is required in terms of the link between the two, otherwise it will rub off onto the parent brand," Heberden says.
Sam Osborn, chief executive of Interbrand Australia, disagrees, saying that Qantas is right to pitch different services to different types of customers. "A multi-brand (brand portfolio) strategy is good for consumers, not bad," he says, adding that it\'s too early to tell in Qantas\'s case. "You really need to understand the different customer segments before you can make that claim and then ask, who is actually going to vote with their feet?"
Beyond the ever-present imperative for profits, it\'s a question Qantas, Virgin Blue and, no doubt, ultimately the shareholders would love to have answered sooner rather than later.
FRIGHT STIMULATOR
Jetstar
The complaint:
Millionaires on Hamilton Island claim they¿re being treated like cattle class since Qantas imposed Jetstar on them.
The defence:
\'It must be dreadful for the secluded elite of Hamilton Island (including, apparently, its management and owners) to observe ordinary holidaymakers enjoying themselves and boosting the local economy. I can only suggest that the millionaires of Hamilton Island start their own airline so they can be spared the indignity of quality cut-price travel.\'
- Qantas CEO Geoff Dixon
\'We are not wealthy - we have no intention of putting up with the offerings of this Mickey Mouse airline.\'
- Jetstar customer, South Australia.
Fuel levy
The complaint:
Qantas applies three surcharges to $12 a sector for domestic passengers and $US29 a sector overseas as oil prices rises from $US44 to $US56 in six months but is under pressure to remove them just as quickly.
The defence:
\'To take the surcharges off altogether, it would have to fall to $US32 a barrel. \'
- Qantas chief financial officer Peter Gregg
Frequent flyers scheme
The complaint:
From May 2005, it will be easier to earn reward points on short routes but harder for most flights. Upgrades will no longer be available on discount fares and will not be able to be confirmed in advance on international flights.
The defence:
\'There were some incredible deals around, almost to a ridiculous point. In a lot of cases it didn\'t bear any resemblance to reality. No one likes prices going up - but we had to correct it. \'
- Qantas head of marketing Mark McKinnon
Food and service
The complaint:
Consumer reports have suggested Qantas is seen as a \'second-tier\' airline, like Lufthansa and Air France, but below Singapore Airlines, Emirates and Cathay Pacific.
\'There are so many corners being cut it is not funny. We call ourselves Apology Airlines. We can\'t keep promoting ourselves as a five-star airline when we are operating like a budget airline.\'
- Long-time Qantas worker
The defence:
\'All our research indicates that we\'re not people who put our heads in the sand and we\'re doing terrifically on service.
- Geoff Dixon
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