Qantas,JetStar and Honolulu
Two-brand strategy a winner for Qantas
27 Apr 2010
At a presentation last week to the Australia Israel Chamber of Commerce Qantas CEO Alan Joyce covered a spectrum of topics, but his vision on the dual-brand strategy was of particular interest:
Joyce said he didn't see price completely dominating the market:
"I think it's not going to commoditise completely. I think there's two segments of the market. There's a price segment, which we'll do very well (with) with Jetstar, which is absolutely a fantastic business and it's grown massively. And there is a premium market and we'll never walk away from it and we don't have to compromise on it.
" We can continue to invest in both, and we're continuing to invest in the Qantas premium product, because we believe absolutely there is a market that's willing to pay a premium for a Qantas brand, as do our people that pay a premium for a Mercedes or a BMW. There is - in every industry there is the potential for a high value brand to charge a premium. And I absolutely believe that's the case, and in 10 years' time I could see both brands equally growing and doing very well under different segments of the market.
" But over the last seven years we have seen the two brands really develop in very different segments and (with) very different appeal to customers and, believe it or not, there are 26 routes today that both Qantas and Jetstar operate on.
" When you look at the routes, the market divides and none of the corporate market travels with Jetstar. So you look at Melbourne, Sydney, Jetstar has very little of the corporate market. Even Sydney to Perth less than one per cent of the corporate market travels on Jetstar...
"What we found is that we're more effective when we have the two brands. So we started flying Jetstar and Qantas on Sydney-Honolulu. We thought, leisure market, Qantas wouldn't be able to make a living on Honolulu and it would eventually be a complete Jetstar route. What ended up happening is that the competition got squeezed, Jetstar and Qantas appealed to two different segments of the market. Both are making money on Honolulu and both would be very keen to grow Honolulu going forwards.
"So on a pure leisure market like that there's a role for both brands. So we think that can work on the Asian markets as well and both carriers can complement each other and appeal to two very different segments and squeeze the competition in terms of their position."
And when quizzed about the fate of F class, given recent announcements about removing it from a section of the fleet, Joyce said that he saw a limited market for the product. He revealed that loads in F have been between 30 and 35 per cent - and that too often the cabin is occupied by frequent flyer upgrades of staff travelling FOC.
Joyce also pointed out that the business class product is pretty much what first was five years ago, so perhaps that's diluted the allure of the expensive F class product.