Qantas, part of the Jetstar Group
QANTAS has managed to destroy 43% of its brand value in just 2 short years.
In the 7 July issue of BRW it was stated that QANTAS has managed to destroy 43% of its brand value in just 2 short years.
90 years to build a brand, 2 years to destroy 43% of it.
I would love to take credit for the following reply to one of Ben Sandilands blogs. I don't know who wrote it, and I apologize if it has been posted on here before, but I hadn't seen it until today. It provides a very insightful synopsis of how we have found ourselves in this position of fighting for our very existence, and pulls no punches on who is to blame?
Some of you may be aware of the media attention recently coming upon Qantas- especially from it's CEO, Alan Joyce. Joyce came to the Qantas Group to run Jetstar, and had a small stint in Ansett, and a large stint in Ryanair previous to joining Qantas. Joyce has in past few months called Qantas pilots "Recalcitrant","Kamikaze", and "Rogue", as well as accusing them of "Living on cloud cuckoo land". The reason- Qantas pilots are asking to ensure Qantas Pilot jobs remain in Australia, as there is gathering evidence that Qantas wants to move more of its operations offshore. Qantas Engineers are also asking for the same guarantees. So far, Qantas has refused to negotiate at all on these asks from the pilots and engineers. Joyce was the golden haired boy of the previous CEO Geoff Dixon, the man who masterminded the attempted private Equity buyout of Qantas in 2007. Thankfully that did not get through. If it did, Qantas would have defaulted on the debt it was going to be loaded with, and would most certainly not exist anymore. Dixon stood to make $60m out of the deal, and Joyce in excess of $20m.
In the Dixon/Joyce years, decision have been made that have severely damaged the Qantas brand, including forcing passengers onto Jetstar without choice, closing in-house maintenance of engines which has resulted in a 180% increase in engine failures in the past 5 years, and not buying the right aircraft to modernise Qantas and allow route expansion. To add, Qantas has subsided the Jetstar operation from the start including paying for maintenance, payment of landing fees, fuel and terminal charges, and seat subsidies.
As a result, Qantas share prices are below their 1995 issue price of $2.00. Joyce was in Singapore recently for the International Air Transport Association (IATA) conference and blasted the pilots and engineers as being to blame for the tanking share price. He also stated that there would be no more investment in Qantas until it "started to return it's cost of capital". As one commentator put it, this is akin to "not spending any money on your car to make it run until it starts". To put some of this into context and to show how badly Qantas management have stuffed up, here is some quotes from Qantas management and what has subsequently happened:
"Jetstar will not operate more than 15 aircraft" G.Dixon 2004.
It now operates more than 70 aircraft.
"Jetstar will never operate internationally" G Dixon 2004.
It has taken many Qantas routes from its parent company to Hawaii, Japan, Bali and other ports.
"Emirates is not a threat as it is not a growth model" G Dixon 2001.
Emirates now operate more than 60 services per week to Australia and flies to 26 destinations in Europe.
"The B777 is an old technology aircraft" G Dixon 2006.
The B777 could fly 90% of the routes currently flown by the B747 with a 30% reduction in fuel burn and is flown by every major airline in the world.
"There is no money in freight" G Dixon 2004.
Qantas now operates a full freighter B767 aircraft flown by contract pilots as well as full time contracts with Atlas Air Cargo. All the while Qantas pilots get assigned Long Service Leave because of a surplus in pilot numbers due to the outsourcing of flying previously done by Qantas pilots to Jetstar, Atlas cargo, Jetconnect across the Tasman, and Jetstar Asia.
You will find below a succinct, precise, summary of where and why…
Qantas finds itself- losing money and losing market share. This was written as a response to a blog by Ben Sandilands on crikey.com.
Qantas pilots and engineers ask for your support and patience this year while we try to end the rot, keep Australian jobs in Australia and attempt to save a national icon from corporate greed.
Of all the elements a board and a CEO must manage and protect, surely building and protecting the brand of a company must be their number one priority. Clifford came out swinging on the weekend saying the focus of the board and CEO must be, and is, on the share price and return of capital. But it is the brand that drives the share price, not the other way around. Everything else flows from that.
If you followed that logic Jetstar never would have been started and Virgin wouldn't be spending a fortune re-launching and building the brand. If Virgin can do that, why cant Qantas?
Let's look at the facts. This is marketing and business studies 101. Qantas from the inception of the very first brand surveys decades ago consistently and without exception, year in year out, always lead the pack as the NUMBER ONE BRAND in Australia. This was not just in terms of brand recognition but also in relation to the more significant drivers of financial success in the market place; trust and emotional attachment for the brand. The Qantas brand was pure 100%, 24 carat, rolled gold. This was Qantas's number one asset. It still should be bigger than all the aircraft and other tangibles combined. Every airline has plant and equipment, but only Qantas had that number one position, the ultimate in brand power.
After sitting at number one for decades Qantas is no longer even in the top ten. But worse than that here's a report from Readers Digest annual Most Trusted Brands survey way back in 2008. "the iconic flying kangaroo, Qantas, dropped 47 spots in consumer confidence."
You read right. In 2008 Qantas dropped 47 spots. That massive drop in the brand if quantified in dollar terms is so much more than the net worth Jetstar has added to the Qantas group. So what happened? How did the best, most loved, number one brand in
Australia for decade’s crash and burn. So quickly. So badly. There are two main reasons for this. And they have names, the first being Dixon, the other Joyce. The destruction of the brand has zippo to do with the current biffo with the unions.
1/ When Dixon took over as CEO the Qantas brand was still riding high and proud at number one. It was untouchable. He was seen by many as marketing and PR genius. Yet the destruction of the Qantas brand can be traced back through these exact same brand surveys to having> commenced during his tenure. It is no coincidence that this rapid decline coincides EXACTLY with the rise of Jetstar under the Qantas umbrella.
BA when they held seats on the board warned Dixon an in house low cost carrier would cannibalize the parent brand. Dixon thought he knew better.
We all know the story. As soon as Jetstar was launched Qantas ****ed off many local communities with the haste it pulled out of so many key domestic and international markets and forced people who were used to, and wanted full service, onto Jetstar with an appalling lack of service.
Everyone knows Jetstar is Qantas. Each and every time people feel ripped off or mishandled by Jetstar, which is often, the knife is dug deeper and twisted further into what is left of the Qantas brand.
Just ask any of the tens of thousands of passengers forced to fly Jetstar (because Qantas has pulled out) to destinations like the Gold Coast, Sunshine Coast, Tasmania, Hamilton Island, Bali or Japan.
They don't blame Jetstar, they blame Qantas.
2/ From the day Jetstar was conceived fleet renewal and investment in the mainline product ceased almost completely. While Jetstar got an entirely new fleet of fuel efficient A320/A330 aircraft "full fare" passengers on "full service" Qantas were stuck with clapped out, gas guzzling, dirty and unreliable aircraft. The new Dallas debacle is a perfect example.
As you point out Ben, when Qantas could have, should have been renewing its mainline fleet, such as buying B777's as did all of its main competitors, there was no money or motivation as all the focus and cash were thrown at Jetstar.
Clifford and Joyce had already earmarked the first B787s for Jetstar, meaning Qantas mainline will not be seeing any new aircraft for many years. Just who has been subsidizing who? This only serves to compound the destruction of the brand. Joyce is now the biggest most vocal detractor of Qantas brand, constantly screaming hysterically that long haul is in serious trouble.
What would the books look like if Qantas had, as it should have as the premium brand, a fleet of all new and super efficient aircraft while the budget arm Jetstar was stuck with the old aircraft from the current mainline fleet.
A/ Jetstar would no longer be making money
B/ Qantas mainline would be making money
C/ Qantas would have a product people expect of a full service carrier and it would be growing its market share.
No one at Qantas management either remembers, or understands, these important lessons from history.
The only player who appears to do so is John Borghetti. You can see he 'gets it' by his determination to invest substantially in a full service product, to grow markets such as this morning's tie up with Singapore Airlines, the business and the Virgin brand. He knows where Qantas is vulnerable and it is insightful too that he is branding Virgin Australia as the Australian airline and he is vocal about returning jobs to Australia service his aircraft here.