Qantas,JetStar and Honolulu

[DEFCON4]

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.

[breakfastburrito]

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.

...when I drive down the street & see everyone from CEO's down driving a Kia or Hyundai I will know that LCC is the only viable aviation business model.
1st July 2009, 05:20 (http://www.pprune.org/dg-p-reporting-points/335986-merged-tiger-tales-post5032633.html?highlight=hyundai+lcc#post5032633)
Thank you Mr Joyce for recognising what some of have been saying for years.

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.
I heard this a year ago from the B767 crew. Rumour at the time was that QF booking went up after J* started on HNL.
Am I detecting the first hints in a secular shift in thinking inside the executive suite?

[Pedota]

Breakfastburrito

We have exchanged views on similar subjects in the past . . .

While it does not pertain to the Honolulu service, I had my first Jet* flight on Sunday evening. I was using QF points and went to Perth on QF and came home Jet* (because it was convenient) and I thought I would share my experience.

And in offering this missive I am very much aware that a ‘sample of two’ does not make a representative position.

In summary, the only difference between the two ‘airlines’ was that QF provided a ‘meal’, a snack, pillows and blankets (although not enough of both) and IFE (although it was broken on the 76 – which caused a 45 minute delay). Alcoholic drinks were for sale on both flights.

The QF 76 was old and tired – and the cabin crew dude in my sector was one of those in your face blokes, always wanting to be the centre of attention. All the flying was wonderful and announcements informative and to the point. And I still like the ‘Captain’ standing at the cockpit door saying cheerio to everyone – and apologising for being late, which he did.

The Jet* A321 was new and impressive . . . I heard my fellow passengers comment about this. A fellow traveller left her phone in the terminal toilets and they found it – she was most grateful. We left early and the flying was wonderful, ‘tech crew’ announcements succinct, clear and informative. The cabin crew were Gen X or Y . . . all cool, low key and nothing too much trouble, including bending some rules.

Jet* arrivals at Melbourne mean walking down the stairs and a long hike to the baggage claim . . . but sometimes the distance is just as long with QF.

All in all, on these flights the QF ‘full service’ high cost carrier offered a meal, snack, pillows and a blanket and the Jet* ‘empty service’ low cost carrier did not.

Just my 10 cents worth . . .

Cheers

Pedota

[breakfastburrito]

Pedota, thank you for making my point so concisely:
The QF 76 was old and tired
...
The Jet* A321 was new and impressive

What's wrong with this picture? Premium, old & tired, LCC, shiny & new.

[packrat]

Glad to hear it.
One of the few destinations left on the QF network that is still fun.
The customers on the other hand...well?They are different.
The jetstar, QF duo are not performing the same tango on the Japan route.The JetStar model just aint working .
JetStar do persist however

[Its the Pleats]

"all cool, low key and nothing too much trouble, including bending some rules."

Which rules did the JQ crew bend? Just curious thats all.

[73to91]

"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."

HNL....Making Money?

Gee, there must be some confused board members but perhaps they don't like to ask questions?

So by saying that the 2 airlines appealed to two different segments, could you argue that: there's a place for Qantas on many a route to pick up the other segment, the pax willing to pay a bit more? and perhaps because of experience do not want to fly a LCC?
For example, to Bali and win pax back from Garuda? Phuket and win some pax back from Thai who get the overnight stay in BKK thrown in, to Vietnam perhaps? Then there's Europe where there's been talk that JetStar may fly to one day couldn't you have say JetStar service ATH (the leisure market to the Islands) and Qantas compliment that service by servicing Rome?

[Brutus]

Jetstar B787's to be based in SIN to service the European market.

You heard it here.

[Pedota]

Its the Pleats asked . . .

Which rules did the JQ crew bend? Just curious that’s all.

Very insignificant matters other than they delighted a couple of customers . . . one person near me had brought their own delightful looking salad on board and the CC commented that it looked great and offered her a better fork, salt and pepper and some complementary cheese and crackers – with a big smile.

And someone else asked for a glass of water to take a tablet on descent (with the ‘bar trolley’ already closed off) – the CC quietly placed a bottle (that would normally cost) on the seat next to her.

There are great people and exemplar crews in all airlines . . . but it was nice to see that the CC of this Jet* flight seemed to have a positive attitude and customer focused ethos.

But then, maybe others have had different experiences??

[Mstr Caution]

Mstr Caution - Oct 2009

The opposite is also true, say for example yields & premium demand was to start improving. Let's say HNL for an example. Then the QF / J* flights could/would be altered to reflect the changes in demand.



Will be interesting to see what happens domestically with ports like Hamilton Island, Gold & Sunshine Coast.

[MrWooby]

Sunshine Coast has a lot of well to do people who just hate flying Jetstar. Many would rather drive to Brisbane for QF than fly with Jetstar. Its going to be interesting when Virgin start offering more upmarket products across their network. Virgin will be what QF was a few years ago, passengers had choice of business or economy on virtually all flights. How does QF respond to that. Do they put Qantas back on those routes, or do they go upmarket with Jetstar. Thats the problem with the 2 brand concept, as other airlines have found. Although QF is much smarter than all the other airlines.

[dragon man]

There's two things that come to mind about this thread. Firstly, as mentioned above if there are two kinds of people willing to buy tickets (some at a higher price) then why isnt QF domestic with nice 737s, J class and full service Y class competing against Jetstar to the Sunshine and Gold Coast? Could it be that they would make Jetstar unprofitable, i think so. Secondly, on Honolulu if there is enough people travelling there to make a 767 and A330 profitable wouldnt it be more economical/profitable to send a high capacity 747 with increased frequecy? Lower crew costs , more freight space, and i would suspect happier paxs. As Jetstar now has an agreement with Air Canada for their paxs to go on Air Canads flights to Toronto and Vancouver why hasnt QF done the same?

[Eastwest Loco]

Dragonsan

The Gold Coast market is very similar to the MCY market in that there are a good number of well heeled people with good amounts of disposable dollars to spend on air travel.

The problem is that there aren't enough of them as a percentage of each passenger load to be profitable to the degree QF mainline wants.

The vast majority of the seats to this day on the route are holiday low yield traffic and unfortunately that means the high yield stuff just isn't there.

This has a knock-on effect to the demographic of the passengers arriving at either destination. Check how many originally high end businesses in Noosa have closed their doors or changed their marketing approach after the incoming passenger profile moved from the Northern Beaches of Sydney to Penrith. Jetstar cometh - the bus traffic followeth.

Qantas mainline seeks high yield. These runs do not provide it domestically and have no business base to back it.

HNL is another case to be considered and for some reason is totally different. They still have a mainline presence.

I have a good number of clients who will avoid JQ like the plague and defer to the QF3/4 services on the elderly 763s. I do however find $7999.00 return J class on a QF 763 with no flat bed a little rich. HA are 6200.00 before tax/fees. Same aeroplane type.

With OOL and MCY at least the punters can go up to 90 minutes either way to BNE and pickup mainline.

On HNL I am finding they are deferring to the QF golden oldie rather than JQ.

Just my 2 bobs worth.

Best all

EWL:ok:

[lowerlobe]

Posted by Pedotathe cabin crew dude in my sector was one of those in your face blokes, always wanting to be the centre of attention.
Dude....?

In your face.....wanting to be the centre of attention....?

Can you expand on that Pedota?
When you look at the routes, the market divides and none of the corporate market travels with Jetstar
You don't need to have experience sitting on a board to know that that would happen.....
Joyce said he didn't see price completely dominating the market:
It may not dominate the market but it undeniably dominates the board room decisions we see....
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
Yes,you can invest but are you?

It's easy to say you are investing in the mainline or premium product but the question should be 'how much is that investment in comparison to the money spent on the Jetstar product?'

The allocation of the 787's is a case in point....is one segment of the group getting priority over the other?

The appearance and seating of the 767's,IFE on the 400's and advertising are also worthy of mention ....

Perhaps if the same priority,energy and finance allocated to Jetstar was given to mainline the picture of the group would be different...

The question about 'how would Jetstar do if it was a stand alone airline' has been asked countless times.However,we will never know the exact position and real contribution Jetstar makes to the group profit simply because it will never be told...

[ditzyboy]

HA are 6200.00 before tax/fees. Same aeroplane type.

Whilst I am reluctant to defend the international 763 product, you'll find that HA's J seat is very close to QF's domestic J with only 4" greater pitch. That's 8" less than the QF 763 (international) seat and it's also 2" narrower. QF definitely offers a superior J hard product on the HNL route.

The inflight service offering seems quite similar.

[Pedota]

lowerlobe asks . . .

Can you expand on that Pedota?

Sure . . . but I have sent you a note by private mesage 'defining' dude and articulating this particular CC's behaviour and demeanour. I didn't post it here as it seemed too much of a drift from DEFCON4's orginal thread.

Cheers

Pedota

[Capt Kremin]

The A330 will be taking over both HNL and MNL in the next couple of months.

[skybed]

Per-Nrt. All 767's stay domestic:ok:

[packrat]

I hope its true.....but...I will believe it when i see it.
Qantas is at present short of hulls....so where will these A330s come from?
The A330 freed up from NRT is going to NYC

[The The]

JQ were taking 2 A330's from the QF fleet as 2 new A330's arrived for QF.

I believe now that only 1 A330 is going to JQ and thus QF retain an extra.

Don't know if 1 extra is enough to cover NRT, MNL, HNL though.

[Fatguyinalittlecoat]

JQ were taking 2 A330's from the QF fleet as 2 new A330's arrived for QF.

I believe now that only 1 A330 is going to JQ and thus QF retain an extra.

Don't know if 1 extra is enough to cover NRT, MNL, HNL though.
Today 05:35

Correct. EBP will now be coming to QF instead of JQ.

[RedTBar]

After making do with old aircraft for so long how about letting the parent airline getting both and more while they're at it.

Another idea would be to open up or restart the old HNL/SFO runs.God forbid you might even consider an onward connection to Dallas or Chicago.

That means expanding QF and that will probably never happen again.:sad:

[Capt Kremin]

Considering that not long ago the stated aim for J* was to get a fleet of 12 A330's as soon as possible; I find this development intriguing.

Is that still the plan? Maybe the premium class upturn is happening faster than expected? Good news anyway for QF pilots on min hours and assigned leave.:ok:

[73to91]

What about 1 stop to DFW but not via LAX, SFO or HNL
Great Circle lookup shows that SYD-LAX is 7488 mi but NAN-DFW is 6625.

The American's love Fiji, they love all of those overpriced 5 Star resorts near Nadi. Gee, you could set up a 'golden triangle' for the cashed up Americans with say AKL & BNE with a partner like Air Pacific, then back on QF from NZ to OZ or make their own way to SYD if arriving in BNE, who knows, it might work???

Then back on the 1 stop SYD-DFW service, avoiding LAX but still partnering with AA from DFW to other points in the US of A.

But that won't happen - as per last line by RedTBar above.

[Going Boeing]

CK, I believe that the extra A332's for JQ will be the Increased Gross Weight version that should start arriving later this year. These aircraft are planned to be operated by JQ Asia to Athens & Rome - the standard A332's don't quite have the payload/range figures for that operation.

Don't know if 1 extra is enough to cover NRT, MNL, HNL though.

Qantas is at present short of hulls....so where will these A330s come from?
The A330 freed up from NRT is going to NYC

The B744 will start operating SYD-NRT 6 times per week (+ A330 one per week) in July thus freeing up A333 capacity for SYD-HNL, SYD-MNL & PER-NRT ops. The AKL-LAX-JFK ops will be flown by A332's which previously operated to Mumbai but as that is now flown by A333's as an extension of the QF51/52 service through SIN, the A332 capacity is available.

There has to be a huge market for DFW - so many AA connectors through LAX only hope we could do DFW direct - do we have anything that could make it there non stop from Sydney? Perhaps a bit too far?

When the B744ER's were purchased, they considered using them direct SYD-DFW but that would require fitting a second "AUX" fuel tank thus causing 11 tonne restriction of the payload - this was assessed as uneconomical. Depending on the final payload/range figures of the B787-9, that type may be used to start the route.

[73to91]

Just checked the QF web using the 1st of each month for the SYD-HNL sector.
May to Aug sees JQ 4 p/w & QF 3.

In Sept JQ goes to 5 p/w and QF stays at 3.
JQ will compete with QF each Wednesday

Then the JQ Wednesday service ends on the 27th October - BUT no increase in QF service to HNL? There is no change in aircraft type for the QF services though.