Blab Blab Blab
Alan Joyce
Chief Executive Officer
Address to National Aviation Press Club
Sydney
6 June 2007
Ken Morton and members from the Aviation Press Club,
From World Vision Australia, Ian Cook and Paul Steele
Members of the media;
Ladies and gentleman.
Thank you for the opportunity to address you today.
This is my 3rd address to the Club and it coincides with Jetstar’s recently celebrated 3rd birthday on 25 May.
Sticking with the theme last Friday we also passed the 3 year milestone of flying at Melbourne Avalon Airport, where we now operate 70 return weekly services. This represents around one third of our Victorian domestic operations.
It is hard to believe that so much has happened in the last three years. We have seen:
The profitable introduction of a new value based airline model for the Qantas Group;
Genuine low fares leadership in every domestic and international markets we now serve;
Successful integration of a fleet of 24 A320s;
Establishment of an intra Asia low cost carrier;
Short haul international flying to both New Zealand and Asia; and
Since November the on-time launch of one of the world’s first value based long haul international operations.
Now serving 6 overseas markets from Australia, our long haul operations will soon further expand to Nagoya* and Osaka* from Cairns and to Kuala Lumpur* from Sydney. (*Subject to final regulatory approval).
Our Long haul fleet will grow to 6 A330-200 aircraft by September
Jetstar has carried over 17 million customers of which over 1 million have travelled one way with a Jetstar.com fare for less than AUD $50 dollars and over 8 million for less than AUD $100 dollars.
Consumer engagement
Our organisation prides itself in delivering excellent customer service at great value for money across our fast growing international and domestic network.
The effect and impact of Jetstar has been endorsed by many third parties and by our own detailed research.
Unlike the poor methodology behind the recent work by Choice magazine, I can report Jetstar is in fact receiving the best customer feedback we have had in our history and continue to have one of the lowest levels of complaints for any airline in the world.
The Choice survey on Jetstar was based on a sample size of just 171 people for travel experiences that could have been up to three years old.
Jetstar carries up to 24,000 passengers each day.
As such this sample represents less than 1 per cent of a single day of Jetstar flyers.
Jetstar offers the lowest airfares in Australia and has one of the best on time performance (March’s 89% on time arrival was the best in Australia) and consistently one of the lowest levels of flight cancellations.
Further positive customer metrics include us achieving one of the lowest levels of lost bags of any carrier and we carry our customers on the youngest jet fleet in Australia – and one of the youngest worldwide.
All airlines can improve on how they handle customer issues and engagement and Jetstar is no exception.
At the end of the day the best indicator of customer satisfaction is demand for your product.
With passenger growth up 35 per cent year to date and approaching 8 million annually – we do believe we are a company with serious consumer backing.
Jetstar and growth
Jetstar has already grown over three fold since it started flying three years ago.
Within the next three years Jetstar will become ten times its initial size measured by Available Seat Kilometres.
In 2011 we plan to have 70 per cent of our operations dedicated to international markets.
Jetstar’s aggressive future growth plan will be supported by new aircraft acquisitions including 9 additional Airbus 320s for the Australian domestic market, the first to be received prior to the end of 2007.
We have not made a final decision on where the additional 9 aircraft will be operating but in the coming months we will be making an announcement about the first three aircraft to be operated during Northern Winter 2007 schedule period.
Domestically we foresee more growth for markets that have responded well and grown with Jetstar.
This will include the Gold Coast, our largest domestic destination, already receiving a base schedule of 107 weekly return services.
Further growth from our existing major domestic hubs of Sydney, Melbourne and Brisbane to some of Australia’s major leisure destinations is set to occur – provided we strike the right commercial framework with airport owners.
More domestic growth is possible at Melbourne Avalon, where a new terminal upgrade is being rightfully considered.
And the development of Jetstar as a rapidly growing pan Asian carrier is now foremost in our strategic planning.
In response to the performance of one of our strongest international markets – Bali – Jetstar is to boost our existing international services from Australia to Denpasar by 50 per cent.
As part of the two brand future growth strategy within Qantas, Jetstar International operations will always seek to grow in markets with either demonstrated or future growth potential.
This includes Bali - which is clearly bouncing back in the tourism stakes from the tragic events of recent years.
Our two-class 303 seat A330 services to Bali currently operate twice weekly from Sydney and separately twice weekly from Melbourne.
From 28 October Jetstar International services on the Sydney-Bali route will grow to 4 times weekly* – and overall offer a 6 times weekly service to Bali from the Australian east coast. (*Subject to final regulatory approval.)
Our organisation is also serious about supporting the expansion of Jetstar into a pan Asian brand through a number of potential franchise opportunities with existing operators within strategic pockets in the Asian region.
Pacific Airlines in Vietnam, where the Qantas Group is now finalising a 30 per cent stake in the carrier, presents but the latest opportunity since the Group’s investment in 2004 in Jetstar Asia for this to develop.
Jetstar will now receive15 Boeing 787s up from the prior announced 12 by Qantas, with the first B787-8 entering the country in August next year.
As the first in the Qantas Group to receive the Dreamliner it will be our international growth vehicle.
Jetstar fare leadership
As stated by our Group CEO Geoff Dixon last December:
“Jetstar is the only value-based model established by a full service airline to have reported profits for two straight years since start-up.”
The word profitable is key here.
But holding both low fares leadership - and cost leadership in our markets - remains critical to maintaining this position.
Our recently announced Double the Difference Voucher Guarantee – where the lowest fare for flights within Australia will be on Jetstar.com, or the customer gets a flight voucher for double the difference – reflects this determination.
Pleasingly to date we are issuing few vouchers but having lots of enquiry.
Jetstar has - and after the entry of Tiger Airways into the Australian market – will maintain the lowest cost operations.
Today we believe our cost position on a like to like basis is up to 15 per cent better than Virgin Blue.
Our international operations have also continued Jetstar’s trend of attracting new markets with our research showing 1 in 10 passengers being first time overseas flyers.
Our Competitors
Jetstar is preparing for one of our most challenging, but also exciting periods, in respect to expansionary plans but also the competitive environment.
The next two years may well redefine Australian aviation as we have come to know it.
Competitive change is headed of course by Virgin Blue and their own future growth strategies which have been well publicised.
Air Asia and its Chief Executive Tony Fernandes have a plan, proposing to launch their long haul venture Air Asia X in Australia later this year.
He recently said:
“For the first time in 5 years I’ve got a clear path. I can go out there and steamroll now. I’ve got 100 planes coming. I have virtually all the route rights I want. I’ve got the support of Government’s. I’ve got the lowest costs”.
And according to Tiger Airways head, Tony Davis, the Australian carriers’ cannot effectively compete with the South East Asian market entrants anyway on a cost basis – and by extension – on low fares.
“Jetstar is an airline from a country with high wages, a high standard of living and a predominantly Australian consumer base,” Tony told an Australian aviation conference last year.
“It could never match the low labour costs available to Asian-based carriers”, he added.
Last month Mr Davis said Tiger “are in the profit making business” when announcing Melbourne as their down under operational base.
Whilst Jetstar takes any new competitor very seriously – one can’t not help but think when Tiger’s first year of pre-tax profit will come.
Their operations have and continue to lose money – over Singapore $60 million in two years – and at a greater rate than Jetstar Asia to our estimation in their last financial year ending in March.
The intended launch of the two Tony’s airlines in Australia, the growth plans for Virgin, Emirates, Etihad and even Viva Macau just reinforce that our home market has ultra competitive skies – but also very liberal ones.
Industrial Relations
It is but one of the reasons that Jetstar has a range of workplace arrangements that will include globally competitive:
Collective union and collective non-union agreements,
Common law contracts and
Australian Workplace Agreements;
that best support our people, our growth and our sustainability.
Jetstar is seeking to pursue a more direct relationship across our workforce, to work collaboratively as management and staff, to drive our sustainable future growth path against this competition.
Offering AWAs for future Pilot and Engineer recruits is but one step.
Jetstar will require a minimum 250 more Pilots and Engineers in the next two years, on conditions including terms and pay that will broadly mirror current Enterprise Agreements (EBA) covering existing personnel.
Jetstar has continued to demonstrate the highest standards in all of its operations for the past three years.
To hold an Air Operators Certificate for both wide and narrow body operations, including 180 minute ETOPS or extended range operations for our A330s, can support this claim.
Our lead team of Pilots for the B787 program will include highly experienced pilots from within Jetstar and new recruits.
The Australian International Pilots Association (AIPA) sees it differently.
So what is AIPA’s problem that is seeks to peddle a negative image of Jetstar and denigrate our professionalism and standards?
Their recent comments again need public redress.
In a letter to Geoff Dixon dated 16 May 2007, Ian Woods, President of AIPA, said:
“There is a growing concern in regard to Jetstar’s capacity to erode Qantas’ world’s best reputation”
The following day AIPA gave an interview to the ABC claiming differences in pilot command training. And I quote:
“Command training for Qantas mainline services is five months. Command training for Jetstar is five weeks”!
AIPA’s General Manager Peter Somerville made similar comments to a Senate Enquiry earlier this year.
Qantas returned with a formal response to the Enquiry which for the record said:
“A valid comparison would relate to Qantas B737 and Jetstar A320 requirements as they are similar narrow body aircraft. Both command courses for these aircraft require a minimum of 8 weeks.
“All other aspects of the training, such as safety pilots, areas of operations and other requirements are comparable. “
Obviously AIPA do not let the facts get in the way when it comes to its criticism of Jetstar.
How can AIPA possibly claim to have the interests of Jetstar pilots as one of their priorities for the future, when it would seem their public position is to at best curtail Jetstar’s growth and ultimately its commercial and operational viability?
Jetstar’s undertakings to significantly increase our domestic and international capacity will unlock untold opportunities for our existing and future Pilots.
So let’s not confuse the rhetoric from this pilots union as anything but a position that seeks to deny the way that the world and Australian aviation industry is developing.
AIPA it seems sees Jetstar as a threat to their position and are doing everything in their power to undermine this airline.
However they have gotten it badly wrong.
They just cannot see that one of the reasons that Qantas is currently in the position it is - is the fact that Jetstar exists and is successful.
The biggest threat to their members’ jobs and their career progression is not Jetstar but the competition that we mutually face.
The greatest hope of the Qantas Group management is that AIPA stop trying to undermine Jetstar and help defend the market position of the Qantas Group.
Enshrining Low Fare leadership
As Australia’s low fares airline Jetstar has made it clear it won’t be beaten.
Beyond our pricing initiatives our recent approach to ancillary revenues provides yet another platform for Jetstar to keep our fares low.
During the 2008 financial year we aim to derive in percentage terms around 10 per cent of our total revenues at the airline from ancillary activities.
Jetstar will not pursue the almost zealot like approach of some European LCC’s where the aspiration of offering low to zero fares will be supported by aggressive ancillary revenue intakes.
Rather at Jetstar we believe in genuine consumer choice – of offering products and services that both appeal and relate to the travel experience.
Jetstar.com now receives around 2.5 million unique visitors per month and our online traffic has grown over 750 per cent in three years.
Our alliance with AIG Australia since March to offer Jetstar customers affordable travel insurance online is an excellent case in point.
Recently Jetstar achieved the highest ever single day in online sales for travel insurance sold by AIG for any airline globally.
The recent introduction of Dynamic Currency Conversion providing clear benefits for overseas customers to transact in their own currency with Jetstar is a further practical development.
Meanwhile our Jetstar Holidays business is meeting our expectations and supporting the “one stop travel shop” platform at Jetstar.com
Later this year Jetstar will introduce kiosks at Airports to complement our existing check-in infrastructure.
It will also be supported by the introduction of online home check-in.
We believe both will be customer friendly and sensible initiatives to best digest the predicted growth in our passenger volumes through the additional A320s at already busy airports.
Jetstar and World Vision
I am a firm believer that Australian corporations have a real role to play in helping fund and support responses to our nation’s and the world’s social challenges.
After three years of entrenching our operations, brand and our sustainability the time is right for Jetstar and our 1600 strong workforce to make our contribution towards fighting poverty.
Jetstar is seeking to raise $3 million over three years for World Vision Australia as part of an innovative philanthropic partnership – we call it StarKids!
Recently announced, the partnership will support World Vision community based projects in key Jetstar international destinations such as Vietnam, Indonesia and Thailand, as well as domestic projects in Australia.
As World Vision Australia’s CEO Tim Costello has articulately stated:
“Corporate social responsibility has revolutionised the way companies operate and invest in Australia. But in a globalised environment we can no longer stubbornly maintain a domestic focus.”
The most immediate part of Jetstar’s future - and our future focus - is in Asia.
And this is where StarKids will seek to make an investment to positively impact the lives of families living in poverty and give children a brighter future.
Next month Jetstar will undertake a corporate initiative at Jetstar.com where the airline will donate monies based on the number of Jetstar bookings made over a 24 hour period.
We will also soon offer the ability for our customers to make online donations direct to World Vision when visiting Jetstar.com.
And subject to final regulatory approval by State authorities we anticipate in August that all Jetstar domestic and international services will offer passengers during their flight the opportunity to make an inflight donation to StarKids.
Conclusion
In conclusion, in my previous address to this forum in 2005 I said:
“The success of Jetstar will not only be measured by its stand alone profitability but more importantly it will be measured by overall profitability of the Qantas domestic operation.
“We will continue to ensure that we are not cannibalistic but are complementary to the Qantas offering.”
I think to date we’re sticking pretty well to the brief.
Thank you
ENDS