Why are Qantas competing on price?

[LEWCASTC]

Watching what Qantas has been doing has had a lot of people thinking. My thoughts are the following;

Everything that has been said from Qantas has been based around cost. The theory is that their competitors run on a lower cost base and hence Qantas can't compete.

My question is, why compete on price? Don't Qantas have Jetstar to compete in this field? No matter how many costs are cut, how could an Australian Airline ever believe that their costs would match a competitor where wages are so far below that of Australia? Surely, it is a case of whatever you can cut, we can cut more and Qantas will always find itself behind in this field.

What would happen if Qantas changed their thinking to believe that they need to compete using their strengths, rather than their weaknesses? Could they compete on quality of product and charge more for the privilege? Would the flying public be willing to pay more to fly on Qantas, knowing that they were guaranteed to receive a superior product, excellent service and a better travel experience?

Picture this. Qantas running an advertising campaign to promote the following:
1. The use of the newest and best Aircraft available
2. The use of highly experienced and well trained Australian Engineers who provide the best maintenance standards possible for these aircraft.
3. The amazing service provided from their motivated, caring and passionate staff from airport arrival, to the experience on board, all the way to the departure from the airport.
4. The new and innovative services, food, entertainment systems etc provided that once again make Qantas a leader in airline travel and worth paying a premium for.
5. The fantastic destinations that can be reached on Qantas Aircraft using the Qantas product and service.

Would the travelling public for this iconic brand, known positively all over the world, be willing to pay a little extra to receive the kinds of advantages listed above knowing that no matter what happens on their journey, they will be well taken care of?

If the answer is yes, then this would allow Qantas to compete on the strengths that they once enjoyed and should allow the airline to set a path for long term success. Get the product organised and the staff motivated to achieve greatness for their customers and company. They may even find that people are more willing to negotiate fair and reasonable pay and conditions to allow the airline to prosperunder these conditions.

Qantas has the benefit of a great name and reputation and it also has the benefit of using Jetstar to compete on price. Qantas should now compete on quality of product and ensure that customers are willing to pay a little more to receive it.

They are my thoughts, what do you think?

[indamiddle]

won't happen.
all bonus calculations are based on cost reduction... sorry. that is how decisions are made at the rat.

[Toruk Macto]

Asian airline F/A's are dismissed on one bad comment card and stood down without pay if they go above a certain BMI. How is Qantas going to compete on service and image with this type of competition.

[OhForSure]

I think there are some credible points to your argument. Not bashing anyone specifically here... but modern managers seem to hold a deep seeded obsession with cutting costs. It leaves the obvious question: "What can you do to a business when there is nothing left to cut???"

Qantas has plenty to cut, but what will making those cuts do to the airline in the process?

I have spent the last 2 weeks flying all over the country with Qantas. I can honestly and proudly say that the service was absolutely brilliant in all cases. Even when flights were full, F/As were helpful and friendly. I am aware that it isn't always the case... but in my recent experience, despite all that is going on internally, the Qantas service was exceptional. Upon arrival in Perth, a passenger left an item of cabin baggage onboard, the CSM, despite having already finished for the day, returned to the aircraft for the passenger and when he reached the aircraft was told that the bag was forwarded to baggage services. He proceeded to reclaim the bag from baggage services and return it to the passenger so that the passenger could transfer flights (in absolute minimum time) without having to leave airside and re-clear security. This CSM could easily have said "Go see baggage services mate", especially seeing as he had just signed off, but he didn't. He went the extra mile, and I'm sure the passenger will never forget it.

This sort of service is what has traditionally set Qantas apart. These are the people who can help make this airline strong again.:ok:

[Terrey]

LEWCASTC,

Couldn't agree more. Been saying the same thing for a long time. Can't compete on price with an Asian carrier. They should be playing to their strengths not weaknesses. Problem is, it requires a real leader who understands how to run an airline. Not accounts who cut, cut ,cut and get bad advice from money hungry consultants.

[DirectAnywhere]

Because at the end of the day consumers buy based only on price. They'll bitch about the lack of service, amenities, connections, seats etc. after the flight but when it comes to spending their hard earned when they actually book the ticket all they look at is price.

[Terrey]

"Because at the end of the day consumers buy based only on price"

So is that why people by Apple, BMW,Merc, etc.

Apple is the biggest company now, not by offering cheap products, but by offering quality. You get what you pay for.

[simsalabim]

They had the quality , premium ,respected up market product . It was called Qantas. In Asia where prestige products attract a premium (Louis Vuitton, Rolex , Mercedes etc) Qantas was the brand. Asians would happily pay a premium to have the QF tag seen on there luggage. Unfortunately the trough feeders got in and based their bonuses on cost cutting which is a bit like eating your arm off. Now that the brand is trashed they need a new one to attract this premium business,RedQ ? A start up with no history or track record. I doubt it will work and we are all losers . Except Dixon and his mates.

[craigieburn]

Oh for Sure, you said:
I think there are some credible points to your argument. Not bashing anyone specifically here... but modern managers seem to hold a deep seeded obsession with cutting costs. It leaves the obvious question: "What can you do to a business when there is nothing left to cut???"

The problem is that no talent managers only have one way of increasing margins, and that is to cut costs. Cutting costs is the easiest way for a no talent numpty to move their way up the corporate ladder.
The far more difficult road to hoe for any manager is to increase margins by................ WAIT FOR IT.....................................................

GROWING THE BUSINESS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

To grow the business requires several things, not least being courage. It also requires talent, ideas, foresight and planning.
I think that we can all see what the issues are at QANTAS and why cost cutting is seen as the only way forward.:ugh::ugh::ugh::ugh::ugh::ugh::ugh:

[Fly_by_wire]

Because at the end of the day consumers buy based only on price.You're wrong, very wrong.

People are capable and willing to pay more when they do truly get a superior product. Flying around on clapped out 734's, 767's (hell even the jumbos are passed it) is not very appealing. Most people I talk to myself included have stuck with QANTAS because of the FF program, Qantas club, business class etc. Now we have Virgin offereing FF status match, business class and decent lounges.

Qantas's soloultion to the problem is to reduce CapEx and delay new aircraft :ugh:

[Fly_by_wire]

The argument being that they don't have the revenue to pay for the new aircraft, so the obvious answer is to.... try and get it using your old ones?! LOL

[ALAEA Fed Sec]

Because at the end of the day consumers buy based only on price.



That's rubbish. Qf load factors are above 80%. They are pretty much the most expensive on each route. Other airlines sit at or below that figure on the same sectors.

[SpannerTwister]

The argument being that they don't have the revenue to pay for the new aircraft, so the obvious answer is to.... try and get it using your old ones?! LOL

Or spending some of the three billion dollars they have in the bank ?

ST

[Toruk Macto]

ST , they have plans for that money but it does not involve new aircraft for Qantas.

[DirectAnywhere]

I should have clarified. Your average Aussie airline consumer looks at price, first and foremost. if they can get the same price on QF and Jetstar, they will choose QF. If they can save 10 bucks, the vast majority will.

The trend by consumers towards lower prices in air transport is clear - even at the expense of service for the majority - and has been for years.

QF load factors are high as they are they have reduced services to a point where they are only able to service a segment of the market which is still willing to pay a premium to fly with them. The vast majority of Australians clearly have no loyalty to the brand and are chasing:

a) price when travelling to tourist destinations, or

b) networks which are far superior to QF, even when compared to the network of say 10 years ago, for premium passengers.

[Jerr]

Due to work I have been travelling for 6 weeks now. Have to say Qf service is excellent. Have flown American Airlines, Iberia, Royal Jordanian, Cathay, British in the last 6 weeks. QF excellent.

However is QF doomed by having relied on flying the Kangaroo route only?

Happy to fly to LHR, especially on the A380. But anywhere else in Europe fly EK. One stop...

JERR

[unseen]

Fed Sec

If we are at 80% load factor and charging the most, our profits must be massive!

Unless of course our costs wipe out that profit....

[EWP]

LEWCASTC,

Superb post. It's not rocket science at as you have clearly pointed out.

Good old fashioned, timeless service and a company that cares for it's people - Qantas needs to spend a couple of billion to make more of it. Alas the familiar whiff of Ansett is around the halls of Qantas, quite remarkable yet not surprising.

Fancy a CEO's job? Your first mission should you chose to accept it is sack the entire board (big saving's there), order a dozen or more 777's and start that impressive marketing campaign you mentioned. Since when did we see a stirring Qantas commercial?...nothing since the paper aeroplanes and the A380 experience. It's all Jetstar and a big wash of orange on screen and in print and I bet QF pays for it all...

VA look sharp and up for it because the man who is running it should have been given the job at QF. Alan Joyce is the new Sol Trejillo - come in, leave a litany of destruction and walk away with millions in the bank. The spin has become nauseating.

This is a soul destroying chapter in Qantas' proud 92 year history and Government, Opposition and the general public need to rally to save out iconic brand.

[Fly_by_wire]

If they can't afford the CapEx I don't get why they don't retire some 747 & 767's and lease half a dozen 777. But obviously it's not that simple.

[The Green Goblin]

As much as I hate to say it, they should convert the 400s to freighters, lease a fleet of 777s and with the increased net revenue, order 777NGs when they are announced :)

But there's no money in freight :hmm:

[Dunnocks]

GG,
Not only is there no money in freight, but the tripler is old technology...
I can't believe you only learned part of the lesson....:yuk:

[PA39]

Not only is there no money in freight, but the tripler is old technology...
I can't believe you only learned part of the lesson....
Fedex and DHL doing very nicely thank you!

[Dunnocks]

i·ro·ny (http://img.tfd.com/hm/GIF/imacr.gifhttp://img.tfd.com/hm/GIF/prime.gifrhttp://img.tfd.com/hm/GIF/schwa.gif-nhttp://img.tfd.com/hm/GIF/emacr.gif, http://img.tfd.com/hm/GIF/imacr.gifhttp://img.tfd.com/hm/GIF/prime.gifhttp://img.tfd.com/hm/GIF/schwa.gifr-)n. pl. i·ro·nies 1. a. The use of words to express something different from and often opposite to their literal meaning.
b. An expression or utterance marked by a deliberate contrast between apparent and intended meaning.
c. A literary style employing such contrasts for humorous or rhetorical effect.

[Toruk Macto]

Only 2 A/C types aircraft leasing companys would work with during the GFC, they were the 777 and 320.

[Archer2002]

So totally agree with this about growing the business. Never could work out how you're supposed to make more money by contracting the business. Become aggressive, take OTHER carriers business, and probably also a good idea not to give away a huge whack of your business to Jetstar.

[Nose wheel first]

Alan Joyce will never spring for the Trippler.

During the last round of the senate inquiry he was at great pains to defend the decision NOT to purchase them. I'll have a dig around and see if I can find the link but off the top of my head it was in part 4 or 5 and 8 mins in.

He went on about not wanting to increase frequency but up the capacity, therefore the 747 and A380 were the best choice. He even said that Air NZ with their 777's were losing money therefore it vindicated QF's decision to not get them. (or words to that effect) If he's so sold on the 747 why doesn't he at least purchase the -8 series? at least it will give fuel and other cost saving advantages over the present 747 fleet.

This present QF management team would send the who sorry mess completely down the toilet rather than admit that there is a place in the fleet for the 777.

[shon7]

Because at the end of the day consumers buy based only on price. They'll bitch about the lack of service, amenities, connections, seats etc. after the flight but when it comes to spending their hard earned when they actually book the ticket all they look at is price.

So true. Apart from SQ and EK very few airlines have any sort of brand equity.
And the reason is service. Let QF match the service and the business traveller will buy on them. Until then, its a price competition.