Jetstar Advertising Budget

[genex]

First of all let Genex defend his alma mater.......we learned good things there. Other, newer MBAs might have stuffed things up but at our last reunion we all agreed we had used our powers for good only.

But I digress......

No small part of the Jetstar brand is the defense of Qantas yields, a task which by definition the mainline brand cannot do for itself but done by Jetstar as a strength of the group.....and not something yet replicated so successfully, at least in the airline sector. There are of course many other parallels in other business spheres as you would know.

So yes, there is cross-subsidization Mstr Caution and you better hope it continues because without JQ holding up the yields of those who pay your salary you could be selling pencils on the street corner.

[lowerlobe]

So yes, there is cross-subsidization Mstr Caution.

.....Finally a slither of truth about subsidization.

you better hope it continues because without JQ holding up the yields of those who pay your salary you could be selling pencils on the street corner.

Easier said than proven........but the big bad wolf stories are entertaining if not a little monotonous

[mcgrath50]

I don't see what's wrong with cross-subsidisation when they are part of the same group?

Wouldn't Toyota and Lexus do the same, the hotel chains that have multiple levels of hotels and so on?

QANTAS Mainline is just one arm of the QANTAS Group, although I don't like how the QANTAS brand has been left to the dogs a bit, I don't see why cross-subsidisation is bad?

[Keg]

mcgrath, it's bad when the part of the business doing the subsidising (mainline) is told it's too expensive and that J* has been created to solve the problem.

[lowerlobe]

I don't see what's wrong with cross-subsidisation

Another word for creative accounting.....something Wall St and others have excelled at ...........to our detriment.

As Keg said it sort of rankles a bit when we are told that we wouldn't survive if it wasn't for J* but ......the true performance and therefore benefit of J* will never be known because of the creative accounting.....sorry cross subsidization.

It's all too easy to say that it is the only successful example of a legacy airline creating a LCC but how successful would it be if it had to stand on it's own?

I realise it's been asked before but it's a valid question....

Perhaps it would be very successful but it's a question we will probably never get an answer to without some spin and so we will never know.

[Mstr Caution]

Genex - Sounds like the justification an A330 Captain at Jetstar once told some Qantas mainliners. Without him accepting lower terms & conditions, the mainliners would not be enjoying their higher terms & conditions. Qantas mainline managed yields for decades prior to the arrival of the team Orange. QF mainline has endured boom & bust times in the past & is still here today.

Thanks for the careers advice, but I wouldnt choose to sell pencils on the street corner & undercut the local newsagent next door.. Unless of course I could justify it by saying I'm attracting business to his establishement as part of the process.

[ebt]

That may be true Mstr Caution, but could they have managed it against Virgin Blue and any other Tom, Dick or Harry LCC that came into Australia without JQ? Remember, QF tried a couple of tricks against DJ and Impulse but couldn't quite get it to work until they bought Impulse, rejigged it to a new brand and, voila, Jetstar is now the third carrier in the market and is actually able to make money on leisure routes. Without JQ, QF would probably be little more than a trunk route carrier in the domestic market.

Lowerlobe - when QF falls apart because of 'creative accounting', then I'll accept your comment at face value and gladly eat my hat, otherwise it's a steaming pile of something left by an animal out around Cloncurry way.

[Mstr Caution]

ebt - I agree with you. That Jetstar was nothing more than a strategic move by the QF group to limit the growth of VB & deter other operators entering the market.

[strobes_on]

I think the Jetstar strategy is continually evolving.

No doubt it countered VB very well, but are the bean counters now looking at making it the major domestic carrier with further expansion over more and more Qantas sectors.

A lot will depend on the future of VB. If VB hangs around, would JQ expand ?, or if it fails, would there be much less of a reason to reduce Qantas mainline operations because of the higher yield in a less competitive market?

Either way, a lean JQ operation could morph into the Qantas domestic mainline of the future.

[jungle juice]

when QF falls apart because of 'creative accounting', then I'll accept your comment at face value and gladly eat my hat, otherwise it's a steaming pile of something left by an animal out around Cloncurry way.

HUH, ebt, I don't know what your problem is, but I'll bet it's hard to pronounce

but could they have managed it against Virgin Blue and any other Tom, Dick or Harry LCC that came into Australia without JQ?

As Lobey said this repetitious argument is fast becoming a joke.Like it's been said,the big bad wolf scenario is just that,a fairy tale

Without JQ, QF would probably be little more than a trunk route carrier in the domestic market.

So no international flights then,another fairy tale to scare small children but with no substance or proof

Qantas mainline managed yields for decades prior to the arrival of the team Orange. QF mainline has endured boom & bust times in the past & is still here today

Mstr Caution,You've got that right.

[ebt]

JJ - my last checkup yielded no problems, but thanks for your concern. Always nice to know that someone's looking out for me.

I did not mention the international services as it's probably a given that they would still exist in any circumstance anyway. My comments were about the domestic side of the operation which is probably the most strategically important market for QF. International is a different market with more competition (to which QF has been gradually losing its market share), so that's for another discussion.

Scary fairytale or not, a lot of people in QF Group Strategy got nightmares about the situation in the early 2000s once they saw DJ getting some traction. There were a couple of tricks, such as messing with catering and all Y QF flights, but it wasn't till JQ that they could really take on DJ with a pincer. Strategically, they got a bit of a victory with DJ adjusting its own strategy.

Just for clarity, I am in no way anti Qantas or hold no grudges to anyone here. It just seems that there needs to be some other perspectives put in there.

[genex]

The thing about the dreaded "cross-subsidization" is the need to get beyond emotion and understand the difference focus between "economies of scale" vs "economies of scope".

The latter, put simply says that if an organization is already producing a suite of products in a particular field then it should be cheaper for them to start up a kindred operation that it would be for a third party to start up a "green fields" operation. There are many examples of this. You could even look at the Army.....they can run the SAS much more efficiently and cost effectively than if it were a separate stand alone structure. Does the regular Army subsidize the SAS? Or vice versa? Or is it simply a strength of the Army as a whole that it can do both things better than the sum of two stand alone outfits?

I really do hesitate to suggest that uninformed speculation and comment detracts from rational debate but I fear this is one of those cases where lack of understanding, fuelled by emotion, has led to unwarranted fear and loathing of JQ.

Anyone who really believes that by itself, on its superior brand name and capabilities alone, QF could have held off other LCCs.....is simply wrong. Compass Mark 1 had the old AN within days of bankruptcy. Southwest and Jet Blue continue to have the US majors reeling.

However poorly it was explained, and however much there may be some drooling ideologues who just love to "divide and conquer", and however annoying it is to see shiny jets and promotion rates you'd love to have had......the fact is that it is a business strength that QF could set up JQ and run it so that QF (domestic) and JQ between them are far stronger than had they been stand alone. And in any case, had someone else started up JQ they would have had no compunction in running directly against the CityFlier services, something JQ largely does not do, for the good of the whole Group.

[Keg]

Genex, the strawmen are getting tiresome.

Anyone who really believes that by itself, on its superior brand name and capabilities alone, QF could have held off other LCCs.....is simply wrong.

No one is denying the requirement for J*. The issue is the lack of transparency regarding the real costs and the support provided by mainline as well as the non-stop rhetoric that comes out proclaiming J* to be the saviour whilst mainline directly subsidises- equipment, cheap sign offs at SIT, etc- the J* operation.

Of course, let's not go into the broken promises to the mainline pilot group by Geoff et al, the slight on mainline 'culture', etc despite Geoff's stated requirements (in writing) post the freight debacle to deal 'ethically' in all business dealings.

[lowerlobe]

genex....

Your analogy regarding the SAS and the regular Army to QF and J* is about as accurate as the comparison between a restaurant and a circus......

The perfect synopsis of this thread is exactly how keg put it...

The issue is the lack of transparency

Then of course is the matter of the public having their choice taken away by Darth in places such as Coolangatta...

[Tidbinbilla]

Yet another thread deteriorates to a completely off-topic Qantas vs Jetstar handbags at 10 paces.