Have been pondering the paradox that is J*.
Qantas have announced significant price rises to offset increasing fuel costs as have most other airlines. The price of Jet fuel is a major component in operating cost as prices soar far outweighing labour costs which has been the mantra of the Low cost (low wage) model.
Why is it that "J* are considering their position with respect to raising prices to offest fuel rises" (i am paraphrasing Simon Goebels I mean err Westaway)?
In my considered opinion there are a few possible reasons, none of them very positive for the J* model, given Dixon noting the "softening of J* demand"....
- J* is so price elastic that any rise will significantly reduce revenue
- The yield increase from a price rise will be outstripped by the demand elasticity
- J* don't use any fuel
- Qantas is paying for all fuel
- Qantas as a model is with its significant business travel less price elastic
Either way as we see the continual unwinding of the world's economy, the pressure being placed on J* will only mount. It is happening in Europe, marginal yields and falling demand from the target demographic put an end to the Dixon mantra that somehow J* has a way to make money that the rest of the group has not.
Perhaps when the departure of Dixon finally arrives, there will be sufficient pressure placed on revenue to focus on building yield and preserving margin, rather than destroying what clearly is the underlying strength of the Qantas brand, the sadly ignored mainline product.