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Bye Bye Qantas Hello Jetstar

Old 24th Aug 2014, 11:16
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I dunno, but you would have to be the dumbest C U Next Tuesday on the face of the planet as a westerner to think you could compete with an Asian on a low cost basis in any industry.
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Old 24th Aug 2014, 21:33
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Folks, let me introduce you to the biggest killer of businesses on the planet; profitless growth.

Qantas, aka Jetstar has a very bad case of this disease.

Conventional wisdom is that the seat flies whether the aircraft is empty or full and if you can sell that empty seat for one dollar, even one cent , you are making more money.

However there is a countervailing argument in my opinion; the value proposition. This basically states that if your product is ****, then it doesn't matter how little you charge for it, people will buy something else which they perceive to be better value for money even if it is more expensive.

For example, Coles supermarket sells potatoes pretty cheap, but when you get the bag home and open it, you find they are all Second or Third grade and require a lot of peeling to remove the cracks and blemishes - not a good value proposition at all compared to buying first grade unblemished potatoes from your local specialist. Similarly with bread, meat and a lot of other products.

My contention after flying Qantas domestic and Jetstar is that Jetstar is a poor value proposition. Furthermore, catering for Bogans permanently consigns you to thin margins - profitless growth.

The smart money these days in marketing is not into discovering how many customers you can attract by charging less, it is the reverse: discovering how much premium a customer is willing to pay for what you can offer. This is why Melbourne's coffee shops have these simply insanely large menus; they are trying to discover exactly how much a customer will pay for a coffee that is precisely to their taste.

Airlines like ANZ have understood this, they offer meal options, drink options, bag options, seat options. They on sell accommodation, tourism, car hire, etc. automatically. Qantas domestic and international is able to do the same if it keeps its staff, anyone remember the 1970's "fading blue denim" section on the Kangaroo route? What does Jetstar do? One size fits all! Prices are down and staying down!

Then of course there is the opportunity cost argument; time is not free. What else could management and staff be doing that would earn more money for the business than engaging in profitless growth? When I ran an OEM manufacturing business I had a lot of customers who turned out to be cheapskates and general pains in the backside, my good customers I hung onto like grim death. The cheapskates I deliberately got rid of by overpricing and then recommending them take their business to my competitors - that left me with spare capacity to go looking for more good customers, and over time build up a stable of clients who were prepared to pay a good price for a superior product.. What is Jetstar doing? Filling it's aircraft with cheapskates.

Jetstar thinks that price and market share will protect it and to some extent they are right, but meanwhile they will leak any and every customer that can afford to pay a little more to other airlines, leaving Jetstar with the Bogans because they are trying to discover how little a customer will pay, not how much he will pay - profitless growth. Furthermore, when the economy turns down further, the bogans won't fly at all.

Last edited by Sunfish; 24th Aug 2014 at 21:58.
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Old 24th Aug 2014, 22:02
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Standard Unit, what about seats on JQ to HNL?

Ken Borough, yes you are correct however, there was only 1 fare type displayed, the others were greyed out.
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Old 24th Aug 2014, 22:48
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I think it's not only funny, but just plain ignorant to assume Jetstar fly only bogans around, as Sunfish suggests.

Far from it. Get your ignorant, grossly over assuming head out of the sand. Do you think business is keen to splash out and pay more for a ticket for a perceived better product? I think you will find, most businesses count every cent, especially post GFC.
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Old 24th Aug 2014, 23:04
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Yeah right. If that's the case, why do Jetstar management always travel at the pointy end of QF aircraft?

If it's only a "perceived" better product, you would think that a Jetstar manager would be able to see through that perception. So why don't they use their own product if it's just as good?

Also if "most businesses count every cent, especially post GFC", and in a year when yields in the leisure market are under pressure wouldn't it be better for Jetstar's bottom line if Jetstar managers (and other duty staff for that matter) passengered on their own aircraft, rather than pay QF for a J class seat?

That is, assuming they pay QF anything at all.

Last edited by Livs Hairdresser; 25th Aug 2014 at 00:00.
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Old 24th Aug 2014, 23:10
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Just because Qantas has a business class doesn't indicate all the passengers are 'business class'. Likewise all-economy Jetstar doesn't make everyone a bogan. The suits and bogans are spread between both!
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Old 25th Aug 2014, 00:18
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It's not just the Jq management that utilise Qf biz class. The Thai based Jq flt attendants are constantly paxed around the network in Qf biz class.
I highly doubt Jq pay for any of those costs for staff or duty travel.
Cost shifting at it's best and hurting the qf bottom-line, especially internationally.
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Old 25th Aug 2014, 01:58
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I just did Austrailia-Japan-Australia with my family. Northbound sector was with Jetstar and we came home on QF 22 with Qantas. Overall, each product was satisfactory with the following observations:

Jetstar.
A330 aircraft. New and smelled nice. Crew were mostly foreigners based in Singapore. The Purser/Cabin leader was an Aussie girl about 25 years old and did at no stage look or sound comfortable with what she was doing. We had pre-paid for meals and got a standard airline economy class slop in a plastic tray followed by a 'vegetable curry roll' later in flight. After meals were provided, the cabin crew all managed to make themselves totally invisible except for a couple of forays into the cabin to sell duty-free items. Having said that, all interaction with CC found them to be cheery and friendly. PA from the FO sounded like he he could probably read and write as well as talk.

Of note that when we had checked in for the flight to Japan, J* staff told us that the airline had been trying to contact us to tell us that we had been re-booked to depart in another 2 days. We said that we had not heard from them and that this would be a huge inconvenience. A supervisor arrived and determined that no emails had been sent and that there was a note to say that when Jetstar had called, they didn't leave a message and would try call us again later, which they didn't do. The supervisor made some calls to a higher up and pointed out that the airline had failed to inform us of the change. After some firm argument from her, she managed to convince whoever she was talking to that we should travel which we did. We thank her for her efforts and professionalism.

Qantas. (Southbound).
Old B744 aircraft. Interior was clean but the interior was so dated, that the signage was written in hieroglyphics. Cabin crew could only be described in these terms: professional, friendly, slick, confidence inspiring. Captain made the usual PAs and sounded like an articulate industry veteran. It was a great relief that he could provide flight details and avoid the dull and hackneyed "sit back, relax and enjoy the flight" (which makes me cringe every time that I hear it).

Economy class food was not the Rockpool level, but was ok. I didn't eat the white suff with yellow fruity looking thing on the top that was apparently 'dessert' but the Roast Pork main was fine as was the Sav Blanc served by the friendly and helpful CC named John. In-flight entertainment was not as user friendly as on Virgin B777 and had less movies but was ok. Drinks were served at regular intervals and we were happy.

The price for each sector was pretty much the same, Southbound with QF a little cheaper. In their own way, the product by each carrier was fine.
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Old 25th Aug 2014, 02:56
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since taking over the Board and AJ's only priority is a return to shareholders at the expense of all else
Well, if that is the case, they are failing badly. No dividends for years and share price in the toilet. Neither of these constitute a return to shareholders.
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Old 25th Aug 2014, 03:14
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Qantas. (Southbound).
Old B744 aircraft. Interior was clean but the interior was so dated, that the signage was written in hieroglyphics. Cabin crew could only be described in these terms: professional, friendly, slick, confidence inspiring. Captain made the usual PAs and sounded like an articulate industry veteran. It was a great relief that he could provide flight details and avoid the dull and hackneyed "sit back, relax and enjoy the flight" (which makes me cringe every time that I hear it).

Economy class food was not the Rockpool level, but was ok. I didn't eat the white suff with yellow fruity looking thing on the top that was apparently 'dessert' but the Roast Pork main was fine as was the Sav Blanc served by the friendly and helpful CC named John. In-flight entertainment was not as user friendly as on Virgin B777 and had less movies but was ok. Drinks were served at regular intervals and we were happy.

The price for each sector was pretty much the same, Southbound with QF a little cheaper. In their own way, the product by each carrier was fine.
Quoted from Anthill

Nice to read. Qantas are a class act in the cabin, I simply don't get all the comments about surly staff and poor service. They are far superior to the Air NZ product (which is still generally adequate) but also compare very favorably to their Jetconnect cousins, another area where they often receive unfavorable (and unfair) comparison. The food in the economy cabin is excellent (although Air NZ has the wood on them in J). I really hope they find a way out of the current crisis, it would be a sad day without them.
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Old 25th Aug 2014, 05:42
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Jetstar to replace Qantas? Here's why that's absurd

When Qantas invented Jetstar a decade ago, it aimed to be everything Qantas wasn’t: a no-frills way to move people with dirt cheap fares and, it was hoped, handsome profits.

So basic was the model pursued by Qantas boss Geoff Dixon and the executive he eventually appointed to run Jetstar, Alan Joyce, that it did not even pursue any style of customer service apart from having the minimum number of flight attendants permissible for the purpose of staffing the exits and the food trolleys.

That was in stark contrast to the world’s biggest low-cost carrier Southwest Airlines, which is now America’s biggest domestic airline of any type on the back of its quirky, cheery in-flight service.

In fact, when Sir Richard Branson was setting up Virgin Blue in Australia in 2000, he thought so much of the Southwest style that he ripped it off Down Under and the remnants of it are still apparent in Virgin Australia’s customer service.

Jetstar’s no-service model has performed exactly as intended, until recently, delivering steady annual profits. The recent slide into losses has been suffered by all four domestic airline brands as a result of too many seats chasing too few bottoms – “overcapacity”, using the trade lingo – and a soft Australian economy, which has reduced discretionary consumer spending.

But, for almost its entire life, there has been a subterranean “fear” fanned by Qantas unions and others, that the “real” agenda is to replace Qantas with Jetstar.

And almost every year, in the lead-up to the airlines’ annual meetings, crackpot stories like Jetstar becoming Australia’s main international airline get a run.

Suggestions that Jetstar “is set to become Australia’s main international carrier” are absurd.

So is the idea that further cuts at Qantas’s international arm will more than halve Qantas’s overall size, which is necessary to realise the above doomsday forecast.

It IS quite true that, since 2008, Qantas international has been slashed, led by the axing of three of the airline’s five daily services to Europe – the Bangkok to London and Hong Kong to London flights in 2012, and Singapore to Frankfurt last year, leaving just two services – one from Melbourne, the other from Sydney, via Dubai.

And Qantas International, which is hemorrhaging cash when only six years ago it was earning record profits, will be targeted for further savings in the next three years.

That will include measures as simple as changes in schedule. “Fleet and network adjustments are earmarked to save up to $600 million over three years for the Qantas Group from the overall $2 billion cost reduction target that is at the centre of the airline’s turnaround plans,” the airline said on Friday.

That was part of an announcement of an increase in Qantas international services to North and South America, which includes the rescheduling of Sydney-Los Angeles flights with a morning and evening service to better suit business travellers, and the introduction of three extra evening non-stop services per week from Melbourne to Los Angeles.

This coincides with United Airlines’ decision to resume Melbourne-Los Angeles non-stops with its new Boeing 787 Dreamliners from October, and Virgin Australia’s decision to axe Melbourne-Los Angeles and beef up Brisbane-Los Angeles to daily.

Qantas 747 non-stop services from Sydney to Santiago, Chile, will increase from three to four per week and the daily Sydney-Dallas service will switch to A380s non-stop in both direction six days a week from next month.

The idea that Jetstar would become Australia’s main overseas airline is fanciful. Yes, Qantas’s once-dominant position has been reduced from more than 40 per cent two decades ago to less than 20 per cent.

But its 16.6 per cent market share among carriers flying into and out of Australia is still by far the largest and dwarfs Jetstar’s 7.7 per cent – which, incidentally, is the same as Virgin Australia’s international market share with its flights from Sydney and Brisbane to Los Angeles and Sydney to Abu Dhabi.

After Qantas, the next-largest international carrier to Australia is Emirates with just 9.5 per cent, followed by Singapore Airlines with 8.8 per cent.

Just as ludicrous is the idea that Jetstar would get all Qantas’s passengers if Qantas international shut down. If that doomsday scenario ever occurred, the beneficiaries would be Qantas’s competitors like Emirates and Singapore Airlines, not Jetstar.

In 2009, Qantas spent $10 million on a “centre of excellence” in Sydney to train and retrain flight attendants in the art of customer service and now claims its “net promoter score” among customers – the measurement now widely used in the marketing industry – is higher than it has ever been.

The next chapter in the Qantas saga will be the eagerly anticipated Qantas annual meeting on Thursday, closely followed by Virgin Australia’s AGM on Friday.

The results of both will be of more than passing interest to customers of both airlines.
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Old 25th Aug 2014, 08:20
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Bad Adventures....AGM 24th of October...This Thursday is the announcement of the results.
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Old 25th Aug 2014, 09:32
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Jetstar’s no-service model has performed exactly as intended, until recently, delivering steady annual profits.
Which were basically paid for out of Qantas coffers.... Not a particularly sound argument as there has never been anything concrete provided to support it. Frankly, I see that claim as wild exaggeration at best and a blatant lie of criminal proportions at worst.

The job of anyone in business is to work how much they can sell something for, not work out how to give it away for less. None of these guys have ever run their own business or they wouldn't have thrown billions away like confetti. They are incompetent, shameless and lie as a matter of course.
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Old 25th Aug 2014, 09:49
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Anthill

I think your post sums up precisely what is wrong with the Qantas Group.

You said the return fare on QF22 was actually less than the JQ flight to Japan.

Group marketing is a total shambles. Where the two airlines share common routes they are being promoted as interchangeable and expect the punter to accept that, while on the other hand selling JQ as a bottom feeder product. Sometimes the turd polish rubs off.

This is also happening domestically.

Getting back to international for a moment, I am constantly getting emails from some of the travel websites promoting fares on QF to HKG for return fares of AUD 690 or thereabouts. They are doing themselves no favours by downgrading the value of their own product while crying that they cannot get a premium.

All the economic arguments about cost do not wash with me for the very simple reason that QF management has destroyed the network. QF has less flights out of Australia each week than many of the foreign competitors, including my own company. They are trying to spread fixed overheads over a depleted network and then trying to blame it on unit costs.

As many have said on this thread, it's a tough gig out there in aviation land and to survive you can never shrink your way to profitability. Margins are razor thin so you have to have minimum critical mass and provide the travelling public with a network they can use, and on a/c that can make a dollar for you. Pilots' salaries are a miniscule portion of the overall equation.

You most definitely cannot survive by charging equivalent or less than your LCC bastard brother (who is leeching off all your so-called legacy costs).
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Old 25th Aug 2014, 09:50
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Bad Adventures....AGM 24th of October...This Thursday is the announcement of the results.

Don't tell me, tell Clive Dorman, he wrote the article.
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Old 25th Aug 2014, 10:30
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Originally Posted by aardvark144
AJ's only priority is a return to shareholders at the expense of all else.
Yet Qantas has paid $0 dividends since 2009? And its share price has dropped from $6 to barely over $1 over the same time frame.

Investors Dividend History | Qantas

Can't use that as an excuse for what he's done. Shareholders must be LIVID!
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Old 25th Aug 2014, 11:18
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What is a Bogan?
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Old 25th Aug 2014, 11:25
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Same as a Westie or a Bevan
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Old 25th Aug 2014, 12:25
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Sorry as a thick Pom never heard of those two either!!
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Old 25th Aug 2014, 12:47
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Bogan - Wikipedia, the free encyclopedia
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