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Don't blame Alan Joyce alone for Qantas' woes...

By Geoffrey Thomas     Filed under: qantas

OPINION | In the face of a record $252 million loss across just six months and a drastic plan to axe 5,000 jobs, Qantas is on the defensive.

The Flying Kangaroo quickly donned its gloves to become a combative boxing kangaroo but it's Qantas CEO Alan Joyce who appears to have become every Australian's favourite punching bag.

Yet how much of the blame can be reasonably laid at the feet of the beleaguered exec?

This opinion piece contributed by Geoffrey Thomas – multi-award winning aviation writer, author and commentator, Aviation Editor for The West Australian newspaper, Airlines Editor for Australian Aviation magazine and Editor in Chief at AirlineRatings.com – suggests the reality is that everyone at Qantas is responsible.


Last Thursday the blame game erupted within seconds of Qantas posting its sickening result of a A$235 million loss on the Australian Securities Exchange.

Most had their crosshairs fixed on the airline’s embattled chief executive Alan Joyce but the reality is that everyone at Qantas, its unions and the Government is to blame.

A degree of blame also lies with the airline’s former chief executives Geoff Dixon and the late James Strong, who ignored global market trends, bought the wrong planes and did not take on some of the unrealistic unions decades ago.

Qantas started to lose loyal passengers when Mr Strong refused to put seat-back videos into economy class in the early 1990s to match Singapore Airlines.

It would be another 10 years before Qantas finally had its international fleet similarly equipped.

Mr Strong also turned his back on premium economy in 1997 despite the fact that Australians are the world’s second tallest travellers (behind the Dutch) and fly the second longest distances (after New Zealanders).

He told The West Australian at the time that he “couldn’t make the business case”. When the airline finally embraced premium economy in 2008, it admitted it was a “real winner”.

The blunders cost Qantas dearly, with passengers embracing companies such as Singapore Airlines, Cathay Pacific and Emirates that were first to market customer innovations.

"Buying the Boeing 777 would have saved Qantas over $1 billion"

Possibly Mr Strong’s and Mr Dixon’s biggest mistake was turning their backs on the 365-seat Boeing 777 300 — the world’s most economical and versatile plane.

It is estimated that if Qantas had bought the 777, it would have saved more than $1 billion in fuel in the past 10 years.

Added to the mix is that Qantas has accumulated a great deal of excess baggage in the past 93 years, with many of its staff contracts having salary, conditions and restrictions that date back to the 1960s.

The stark reality is, according to Oxford Economics, the average salary at Qantas is $92,000 compared with $47,000 at Emirates.

However, most staff at the coal face are paid well under that "average". And in the domestic space, Qantas’ costs are 17 per cent higher than Virgin Australia’s.

That is unsustainable by any measure.

Mr Joyce was bound to be unpopular delivering the medicine he did on Feb 27th but he has been held in a headlock by unions that seem to be refusing to embrace the reality of today’s aviation world. That world is the least profitable and the most rapidly changing.

"The gravy train of a government-owned and protected airline
of the 1980s is well and truly over"

Countless major airlines have gone bankrupt over the past 50 years, including pioneering icons such as Pan American and Trans World Airlines.

Every major US airline has entered Chapter 11 bankruptcy protection and restructured labour costs, with pilots for instance suffering pay cuts of 40 per cent over the past 10 years.

Qantas’ militant unions must accept the gravy train of a government-owned and protected airline of the 1980s is well and truly over.

At almost every turn they have disrupted the airline’s attempt to get its operations more competitive and to strip away inefficiencies.

The pilots’ union was telling its members that in its view “the Qantas announcement is a consequence of a long string of misguided management decisions over the past 10 years that include poor aircraft decisions, questionable foreign investment decisions, poor strategic decisions and disastrous brand management”.

"Many loyal Qantas customers tried Virgin Australia
and they liked what they saw"

The Transport Workers Union talked of strike action, putting doubt into the minds of travellers.

During 2011, the TWU and the Australian Licensed Aircraft Engineers Association conducted an aggressive campaign to disrupt the travel plans of millions of passengers in support of unrealistic wage and job security claims.

That campaign drove many loyal Qantas customers to try Virgin Australia and they liked what they saw. It is not a question of whether pilots, ground staff or engineers are worth what they are paid.

The question is will the passengers pay the price and the answer, more and more, is that they will not.

Only 17 per cent of Australians fly Qantas into and out of Australia — down from 45 per cent in 1988. Just as millions of Australians are working harder and smarter for less, so must Qantas staff.

It is time for Qantas staff, and their union leaders, to enter the departure lounge for the 21st century.


Do you agree? To what extent did Alan Joyce inherit the problems he now must tackle , and how much of a role do the unions really play in Qantas' current woes?

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About Geoffrey Thomas

Geoffrey Thomas is a multi-award winning aviation writer, author and commentator, Aviation Editor at The West Australian newspaper and also heads AirlineRatings.com

 

Have something to say? Post a comment now!

1 on 7/3/14 by tronixstuff

Funny thing is that QF was on the original 777 design panel. 

1 on 7/3/14 by watson374

Aw, jeez! Not 777s again...

1 on 7/3/14 by tronixstuff

Yup, pundits will never let that one go. 

1 on 7/3/14 by RK

And nor should they. Not ordering the 777 is without doubt one of the biggest blunders that Qantas has ever made. A saving of over $1 billion in fuel over ten years? That's a big deal.

1 on 7/3/14 by watson374

You can't blame AJ for not buying the 77W - the root problem was not buying the 77E. Honestly, I find the A380/A330 build order a more effective one for QFi's requirements.

2 on 7/3/14 by humanuscomotose

I would agree. I was one of the "loyal Qantas customers to try Virgin Australia" and have not regretted the decision. My personal experience with Virgin Australia has been superior to Qantas in enough areas that for work and leisure I now choose to fly exclusively with Virgin Australia and/or their partner airlines. To my mind Qantas has relied too much on its reputation and status to retain and expand their customer base instead of focusing on the customers themselves.

1 on 8/3/14 by Andy96

I fully agree with this - I was a loyal customer until I flew Singapore Business class and on the return flight got upgraded to First Class.  The difference in service was incredible and I have never flown Qantas International again.

My opinion is Qantas think they are in the business of Air Transportation and passengers are like crates of goods.  Singapore Airlines tries and I believe succeeds in creating a complete passenger experience that makes you want to experience it again

3 on 7/3/14 by JBH

A well written and balance assessment of 'how it's come to be' for QF.

4 on 7/3/14 by tonywills

Yes the 777 arguement has been a 'regret' of Qantas for over 10 years, so instead of pondering it any further, buy or lease them!! This could have been put to action well before the current situation became evident. As for the cut to wages and union activity, governament legislation backs that so point the fingers in the right direction. Imagine if QF was able to slash wages and quell Union activity - Companies all over Australia would follow suit - this could be a good or bad thing but would certainly represent a huge period of transition. The comparison with the US carriers is way off base - QF don't have Continental, Northwest or US air to merge with to save each other's bacon. We are really still a duopoly in Australia with premium carriers. If it wasn't for the smart move to get Jetstar profitable, QF would have been in hot water long ago

5 on 7/3/14 by trevor

Joyce definitely inherited some fundamental problems, most of which are mentioned in this article. He's also right about the unions which are the bane of Qantas. However, I feel as though the pressure on Joyce would not be so intense if he did not steadfastly maintain that Qantas management is completely blameness...

6 on 7/3/14 by spacecadet

"[Management] ignored global market trends, bought the wrong planes and did not take on some of the unrealistic unions decades ago" ... as well as "questionable foreign investment decisions, poor strategic decisions and disastrous brand management"

Say no more! Joyce really is not to blame (singlehandely). I say sack the whole Qantas management board; they are clearly incompetent.

Great article.

1 on 7/3/14 by trevor

Absolutely agree. But why not recognise this? 

7 on 7/3/14 by AusFlyer

It is refreshing to read an article that actually truly summarises the issues that have led to the problems Qantas is having. It is not just about Alan Joyce and his management and it is the usually the people who know very little about it that jump on the bandwagon and squarely blame him for everything. The problems have been around long before Alan Joyce and he is left to deal with it. I don't necessarily mean that he is sound a sterling job of dealing with them but the fact is, he has to deal with the lack of strategic management from his predecessors. 

The proble, now facing Alan Joyce is having to put in place what should have been done over the course of the last twenty years and where it could have had smaller impacts at any given time, Qantas staff now face big impacts all at once. I just hope the fortunes of Qantas can be turned around. Is Alan Joyce the person to do this? I don't know... He has made his fair share of mistakes too (such as the over expansion of Jetstar).. So whatever happens and whoever does it... Good luck!

8 on 7/3/14 by RUmsey

Joyce has a history of failure: Ansett, Jetstar Asia, Qantas. Borghetti has made a fool out of him. Snubbing Gregg and Borghetti in favour of Joyce was a big mistake.

1 on 7/3/14 by Nicklg

RUmsey at least get some facts straight - Joyce had no Exec role at AN, he just worked there and left well before it collapsed. Jetstar asia won't fail, it's expansion will be slower. and Qantas' issues are not his making! did you not read the article???? I seriously doubt either JB or Gregg would have done any better!

9 on 7/3/14 by TheRealBabushka

Fantastic article! Thank you Mr Thomas.

The question I'm keen to explore is this: Did management in the 90s make poor decisions because they were molly coddled by the government and therefore didn't see the need to try harder, or

Were they just inept and behind the curve?

1 on 7/3/14 by Geoffrey

Thanks TheRealBabushka; They were behind the curve in my view. Myself and several others made presentations to Qantas in the 1990s about the 777, premium economy etc but they were not interested. In the safety space Qantas is number 1 but when it comes to product, they are always behind the market. I think there was a mentality, with foundation, that its safety record would see it through. But the dynamics of the industry have changed so fast with most other airlines just as -or almost as - safe as Qantas. When I asked Dixon about the 777 he said there were concerns about twin-engines over the Pacific. But I pointed out to him that Qantas was a pioneer of operating the 767 over distances over water (ETOPS). Also we must not forget that the unions have been a major problem for decades and I guess management may have put that in the too hard basket.

Best GT 

1 on 7/3/14 by TheRealBabushka

Interesting you should say that. I do wonder if being behind the curve is isolated to Qantas or systemic across all industries in this country.

Are we as a people too complacent and happy to rest on our laurels lapping up the bounty of our land?

Do we have enough fire in the belly? Do we have adequate diversity and mix of backgrounds in our board rooms and within senior management to foster dynamic thinking and new ideas to face the challenges of an ever increasing globalised economic and social environment?

Is the continued fixation of saving Australian jobs inadvertently causing us to chuck the baby out with the bathwater?

1 on 10/3/14 by Arcanum

TheRealBabushka,

It is absolutely a systemic issue but one far from isolated to Australia.  You could equally substitute Canada/US/Europe in your comments.  The entire Western world has gotten fat and complacent since winning the Cold War.

Unfortunately, we've also spent the last two decades pushing globalization, with the result that we are now forced to compete with emerging markets where people are willing to do more work for less pay.  This obviously hit manufacturing early on, and aviation is now feeling the same effects.  Assuming similar costs for fuel/aircraft/landing fees, an airline that employs cabin crew from Malaysia/China/Philippines/etc. will be cheaper to run than one employing Australians/Canadians/Brits/etc.

As you allude to in your third point, if we can't compete with emerging markets in cost-efficiency we must outperform in innovation/quality/etc.  The Germans have proven to be quite adept at this, one of the reasons for the continued strength of their economy.

10 on 7/3/14 by foodwineflyguy

A very intelligent and well written piece.

I'd consider myself a long term loyal Qantas customer. Over the years I've seen many airlines overtake Qantas with their offerings in the premium cabins. Spending $60k per trip to take my partner and son to Europe several times a year in First Class I began to see less value flying QF and more flying EK.

Yeah Qantas stuffed up with the 777 but it goes deeper. The sense of entitlement displayed by some workers is offensive. When you pay for a premium service you expect to receive it.

My next several trips to Europe will see me check out multiple airlines. This is not about getting the cheapest First Class airfare, it's about getting better value. If I'm now doing this I'm sure I'm not alone. 

11 on 7/3/14 by Mark

Mr Thomas

It is easy to blame the unions for most things.  But this is a part cop out.  I have embraced Virgin Blue / Australia and the reasons are as follows:

1.  I first discovered Virgin when Qantas tried to force me on Jetstar on certain flights, expecially on multi sector flights (Jetstar to Qantas).  Loyalty meant nothing then.

2.  The fact that Qantas tried to impose Jetstat business class seats on my flights to Perth.

3.  The continuation of not having an international business class product that provides direct assess to the aisles.  I love having a window seat but absolutely hate having to step over the person next to me.  I knwo that is going to change in the coming years domestically and into Asia

4. Lounges that offer the food people dont want ie Neil Perry v the great fresh sandwich options in the Virgin lounges.  But I do like the Qantas First Class Lounges and Domestic Buiness Class Lounges (All Borgetti concepts).  The new Singapore Lounge is overrated, while the concept of the cooking areas is visually great the ventialtion is not great so that is the dominant aroma in the lounge.

5.  Dropping the Asian stopover flights to London.  the sector times on the BKK flight in particular allowed me to have two decent sleeps on the flights to / from London.

6.  The great grounding.  Cost us $180 million as a shareholder and as a customer stuck in LA a great pain in the arse.  Yet if the objective was going after the unions in reality nothing changed.  Look where QF are at now.

7.  If i had been on the QF A380 flight out of Singapore I would of paid any amount of money after they landed back in Singapoe.  I would never say they are overpaid for that skill level when safty is at risk

Anyway there are lots of more examples relating to the lack of development of the QF product under the current CEO (and previous CEO's) v the easy union target as to why people have discovered and stay with Virgin Australia and many other international airlines

12 on 7/3/14 by PLATY

Yes, Joyce inherited some legacy issues.

BUT he has had 5 years to put his own stamp on matters.

Geoffery Thomas cites premium economy as an example of lagging the competitive field and cites CX as more innovative, yet CX introduced premium economy in 2012.

He makes the demonstrably incorrect claim that the cited 17% wage differential between QF and VA makes QF domestic unsustainable, but conveniently ignores many years of high QF domestic profits and makes no comment on the unsustainability of the phoney 65% market share capacity wars, the parasitism of market share by JQ.

He cites salaries for UAE-based Emirates being lower than QF, but omits to point out that there is no personal income tax in the UAE.

He enters the usual union bashing (almost customary now we have a right wing federal government) but omits to point out it is the function of the union to look after the interests of its members just as it the function of corporarte management to maximise profit (force wages down), that the unions do not determine wages and conditions, these are actually arbitrated through Fair Work Australia under the IR frame work decided by the federal government.

And, if QF are seriously expecting staff to engage in constructive debate, perhaps the board/management need the anti-staff public rhetoric that has dominated the airline through the Dixon and Joyce years.

Of course, Geoffrey offers no balance on that in his anti union rant.

Joyce's numerous failings have been well aired in other posts with very good summaries appearing in recent Australian Financial Review and SMH. 

1 on 7/3/14 by Jason

Without a doubt the most thought out and (I would say) best comment on this thread.

1 on 7/3/14 by Geoffrey

Hi PLATY: My opin piece is holistic by design. There are a host of problems at Qantas and I have mnetioned but the mains ones. With regards to the unions. fair work. It matters little what Fair Work decides, in the global context passengers have choices to travel with far cheaper and better (product) airlines. Sure work conditions in other countries are different but this is the same as what happened to Australia's textile / clothing and shoe industries (and now car) and the list goes on. I am just the messenger. If the unions, management and staff at QF can't see what is happening overseas and in Australia at VA then they are doomed. It is as simple as that I am afraid. Qantas will be another Japan Airlines or Alitalia!! 

1 on 7/3/14 by PLATY

Thanks, Geoffrey, I respect your article and that it represents an opinion.

And we are essentially in agreement-  there are some legacy issues.

But if we accept your response above (that IR and trading condition are different in various countries.regions) it is really irresponsible of you to spend so much of your article hammering the right wing blame the unions line. people earn different salarie sin different countries. That isn;t the unions fault.

Seriously, shame on you for promoting such shallow stupidity.

Changing IR framework is the function of federal government.

Sure things need to change (we are agreed on that also). But in your rant you don't BALANCE the obivous: Joyce is a poor leader in that he has FAILED to engage his staff.

He is also a poor leader of an airline in that he and his management resolutely refuse to engage with customers.

Yes, of course staff and management have to work together. But is ain't gonna happen with Joyce. He has no capital/goodwill with his staff.

 

 

 

In my opinion that is not unbiased and reasonable journalism.

1 on 8/3/14 by Geoffrey

Good Points BUT why don't the unions and staff work to erase decades of perks and conditions that have no place in the 21st century. A pilot contract that is 250 pages long for instnace should be no more than 50....but that is just one example. And fir the record I am in a union and in fact am chairman of our Union House Committee and represent 250 staff. The bottom line is while everyone blames one another Qantas is doomed. If Joyce is not the right guy who is? Who would take on the engineers, pilots and TWU and decades of "my right to exisit"? 

1 on 8/3/14 by PLATY

Yes, we are agreed all need to work together. But surely that requires constructive dialogue from executive/management as well as staff. And crucially its executive/management that have to champion the change and set the tone.

Geoffrey, if the leadership of QF want the respect of their staff they need to turn their back on :

  • $12 million year salary packages (way above global airline standard)
  • potential pay out of $130 million for the CEO in the event of the private equity bid success (the equivalent of 1500 staff salaries!)
  • treating their staff is a rude and disrespectful manner (the staff I speak to tell me the manners of Joyce and Dixon leave a lot to be desired)
  • slagging off their staff publicly
  • adopting an antagonistic approach to IR
  • ignoring that as principally a service industry they are dependent on staff performance and human capital
The unions pay claims were at times of massive profits, and from what I recall mostly were not unreasonable, the management delaying negotations for many many months.   The domestic operation is still profitable (albeit with a large reduction compared with previous year results).   The right guy? That could have been Borghetti. He has the respect and trust of the staff at VA! I have never met one VA staff member who had a bad word to say about him. the Board made a spectacular blunder in appointing Joyce and putting their eggs firmly into the Jetstar basket (rather than, say, stick with the main brand, "merge with BA", whatever)   Now in terms of your assumed position that the QF staff are strutting around with a sense of entitlement, I'm not convinced that is the case.   By way of example, on my flight last yesterday, the CSM, "D", is facing a move to BNE with the wipe out of the CNS based staff with  a few weeks' notice: he is leaving his family behind in CNS. The point being that not only is he one the airline's best assets in terms of performance (I have flown several times with him as CSM), but has a "take it on the chin" atitude to doing what he needs to do to keep his job, feed his family, etc. All credit to him and I'll be writing a staff commendation as a P1 customer.   What is reasonable is that a group negotiation in a context of an antagonistic and more powerful party (the employer) and forced arbitration would have current entitlements as a starting point for negotiation. Duh!   Your article assumes a "who would take them on" attitude, that at QF it must necessarily be a battleground for IR.   Yet you recognise the opposite needs to happen - constructive dialogue in the interests of the company and staff.   So there are broadly two ways to go:   1. Continued old Tory classic IR battleground 2. Constructive and respectful dialogue   I suggest that it is the responsibility of the Board/executive to set the agenda.   For (2) this needs a radical shift - Joyce has to go, Clifford as well. Both are tainted. Both have exhausted any "political capital" in staff relations.   Also, it will require significant organisational change - traditionally hard to manage, but possible.   By way of example, Vodafone (then 28 worldwide companies) adopted a values based approach around 10 years ago. Key attributes included establishing strong professional "connection" between executive/senior management; promoting "customer connection" between executive/management and real customers (all had to spend time at the coal face in shops and call centres inetracting with real customers); and product innovation to demarcate from other supplies offering very similar product (thus launch of no lock in contracts).   The staff took to this with gusto once they could see that exectuive were serious and committed to positive - it's the middle management that have to be purged! The middle management layer is the traditional organisational weak spot.   Conclusion is that for serious constructive dialogue Joyce and Clifford must go - probably middle management urged and a leadership team installed coming from an angle of inspriational positive change rather than the antagonitsic fear-uncertainty-doubt right wing IR stupidity.   QF needs a positive and progressive agenda on which to rebuild its IR - it is being led down the path of reactive "panic" stop the leaks in the rusty bucket mentality. Again, devoid of leadership.   However, you look at it, Joyce has gotta go! Time to stop blame game, time to stop writing about who's fault it is and time to map out creative ideas for a successful outcome!

1 on 8/3/14 by Geoffrey

Hi PLATY: This all begs the question where did this toxic relationship start and who started it? It underscores the enormous challenge that is front of you all. I don't think there is a solution quite frankly. I really don't. I am not blind to management's failures and I have been very vocal for a long time on that score. My defense of Joyce is more about what others have left him with - a mess. There is no queston that Qantas's domestic monoploy on business and full service economy has masked deep problems. BTW the equity success payment was $100 million between all exec team not that its makes it any less obscene. I argued very strongly against that buyout BTW. Regardless, good luck. Best GT 

1 on 8/3/14 by PLATY

Thanks, Geoffrey, hopefully we'll get to enjoy more of your writing and ideas: you've managed to stimulate lots of interesting responses.

2 on 8/3/14 by nixjet

It's not about the level of income tax, PLATY, it's about the cost to the airline.

Staff costs at QAN are too high and it's over staffed.  Anyone who can't see this is in denial - you can have the happiest, most magnificent staff in the world but if there's too many and they're overpaid then ultimately it's unsustainable.

The board and shareholders of QAN will deal with executive management in due course until then QAN management has a mandate to deal with legacy staff issues ASAP.  We saw this on the wharves years ago with Patrick and P&O - hostile times but IR reform was long overdue - I remember some of the staff benefits at the time get this one: wharvies being paid an 'embaressment allowance' for unloading toilets.

The staff associations at QAN need to get on board and drive reform instead of being part of the problem because at the end of the day if QAN goes under and new players enter the market there'll be nothing left of legacy conditions but a memory.

13 on 7/3/14 by Charles Burfitt

In all the articles that have proliferated in the past few days about Qantas the key point concerning customer service has not been highlighted. Qantas now finds itself in its present loss making situation because its management and staff have lost the art of looking after the details in customer service. It would seem no customer is special with Qantas any more. It needs customers to survive – pure and simple.

I am a small business owner who has to travel overseas 4 to 5 times a year and often interstate – perhaps once a month. So why, having been a frequent flyer member with Qantas for 20 years I now fly with Virgin Australia, a company that I despised in past years for its frivolous cabin presentation, constant fibs about on time arrival and flight cancellations and plain uncomfortable seats  about which they had the hide to boast. So just a couple of points concerning my experience as a business traveller in recent years.

1. Inconsistent service in Qantas business class on long haul flights seems to be its hallmark ranging from the sublime to the most atrocious service possible. So if I can get a cheaper flatbed, in my mind I am pretty sure the service will not be worse than Qantas – then why not opt for this?  It seems no one is responsible for the customer’s comfort on Qantas. Virgin Australia is the antithesis of Qantas in this. Individual responsibility affects performance.

2.  Virgin Australia  can confirm an upgrade using points if one is available at the time of booking. With Qantas, I pay the requisite fare and apply for an upgrade with points and hope it comes through.  Arriving in LA and having to drive down to San Diego the same day – hope is not an option –so flying Qantas is not an option. I cannot risk falling asleep behind the wheel.

The Domestic Situation is similar – whether it is the lounge, security clearance, seat allocation, baggage collection, arriving at the airport and being able to transfer to an earlier flight – Virgin Australia outshines Qantas.

Forget the rhetoric – it is all about looking after the customer – being customer focused. The above may seem to revolve around trivial issues but when someone is cooped up in a silver tube for many hours in the case of overseas travel – in the scenario of travelling from home to customer or supplier , the experience must be pleasant. If you do not deliver on this, then we go to someone who will.

Borghetti seems to get it, Joyce does not.

One can only wonder how the Board chooses itself. In a service industry not to have transport and service orientated members seems peculiar. The board should not be a sinecure for well connected friends who cannot remember the last time they travelled economy and who have little clue about the minutiae of a service industry providing for increasingly demanding consumers.  The federal Government of any persuasion has yet to offer my company a financial handout.  Why should they help Qantas, and leave entrenched a board who seem to think we should all fly Qantasbecause it exists, independent of the quality of the offering?

1 on 7/3/14 by reeves35

In much of this you are right.  Even in Virgin Blue days, the culture of the airline was one of staff empowerment.  This is what the customer wants and needs.  The want a decision made there and then.

A number of years ago I was on a DJ flight and some drink was accidentally spilled on a passenger.  Straight away the FA advised that the company wouldpay for the dry cleaning cost and then provided the affected customer with a free beverage.

Several years later I was on a Jetstar flight and despite paying for an extra legroom seat I was put in a standard seat.  The Cabin Manager advised me that she was aware of the problem but there was nothing she could do and I should write a letter to get a refund.  Apart from the Cabin Manager being polite but impotent I did write the letter and got no reply.

As well as making for a better customer experience, staff empowerment improves staff morale because they feel valued, supported and trusted.  This is simple stuff.  How a business can still not get it in 2014 is a mystery.

14 on 7/3/14 by Charles Burfitt

In all the articles that have proliferated in the past few days about Qantas the key point concerning customer service has not been highlighted. Qantas now finds itself in its present loss making situation because its management and staff have lost the art of looking after the details in customer service. It would seem no customer is special with Qantas any more. It needs customers to survive – pure and simple.

I am a small business owner who has to travel overseas 4 to 5 times a year and often interstate – perhaps once a month. So why, having been a frequent flyer member with Qantas for 20 years I now fly with Virgin Australia, a company that I despised in past years for its frivolous cabin presentation, constant fibs about on time arrival and flight cancellations and plain uncomfortable seats  about which they had the hide to boast. So just a couple of points concerning my experience as a business traveller in recent years.

1. Inconsistent service in Qantas business class on long haul flights seems to be its hallmark ranging from the sublime to the most atrocious service possible. So if I can get a cheaper flatbed, in my mind I am pretty sure the service will not be worse than Qantas – then why not opt for this?  It seems no one is responsible for the customer’s comfort on Qantas. Virgin Australia is the antithesis of Qantas in this. Individual responsibility affects performance.

2.  Virgin Australia  can confirm an upgrade using points if one is available at the time of booking. With Qantas, I pay the requisite fare and apply for an upgrade with points and hope it comes through.  Arriving in LA and having to drive down to San Diego the same day – hope is not an option –so flying Qantas is not an option. I cannot risk falling asleep behind the wheel.

The Domestic Situation is similar – whether it is the lounge, security clearance, seat allocation, baggage collection, arriving at the airport and being able to transfer to an earlier flight – Virgin Australia outshines Qantas.

Forget the rhetoric – it is all about looking after the customer – being customer focused. The above may seem to revolve around trivial issues but when someone is cooped up in a silver tube for many hours in the case of overseas travel – in the scenario of travelling from home to customer or supplier , the experience must be pleasant. If you do not deliver on this, then we go to someone who will.

Borghetti seems to get it, Joyce does not.

One can only wonder how the Board chooses itself. In a service industry not to have transport and service orientated members seems peculiar. The board should not be a sinecure for well connected friends who cannot remember the last time they travelled economy and who have little clue about the minutiae of a service industry providing for increasingly demanding consumers.  The federal Government of any persuasion has yet to offer my company a financial handout.  Why should they help Qantas, and leave entrenched a board who seem to think we should all fly Qantasbecause it exists, independent of the quality of the offering?

1 on 7/3/14 by Nicklg

Charles you point here: 

2.  Virgin Australia  can confirm an upgrade using points if one is available at the time of booking. With Qantas, I pay the requisite fare and apply for an upgrade with points and hope it comes through.

I'm a Platinum on both and I've never been able to upgrade whilst booking, it must be done over the phone. So if you book online you have to then call up.. that for ALL upgrade types. At least on Qantas I can request an upgrade online and it's confirmed immediately for domestic and waitlisted for INT. Mind you the average Joe cannot upgrade on VA Long haul, it's only for gold/Platinum.

Also how can you say QF seat selection is worse than VA? Up til a couple of months ago, if you didn't select a seat you had to call up? Qantas nailed this perfectly. I can select a seat and the seating choice is determined by status.

I agree the baggage handlers at QF should be fired and new ones hired, they are hopeless, but i've only ever had one time i couldn't swap flights on QF, nearly every week i am asked if i want an earlier one.

The VA lounges have nicer touches but I don't drink beer so Qantas wins there, and the Domestic business lounges are better than VA's lounges. they sit inbetween the Qantas Club and the J lounge.

15 on 7/3/14 by Broderick

Excuse my naivety but wouldnt it be simpler to sell of an A380 or two to recoup the costs? Im assuming it more complex than that.

1 on 7/3/14 by RK

It's a LOT more complex than that. That could result in less flights on profitable routes such as Australia - LAX.

2 on 7/3/14 by Geoffrey

Problem is Broderick...who would buy them? Very difficult to sell/lease. Many airlines are pushing back deliveries and a number of cancelled orders. The best thing for Qantas is if Emirates would take them all and swap for 20 777s!! Problem is Qantas A380s have Rolls engines and Emirates Engine Alliance. Plus you would have to strip them out and reconfigure. Very costly. 

16 on 7/3/14 by nixjet

Very balanced article - good to see this type of reportage without the histeria and misleading 'facts' trotted out by MSM.

Truth beknown, VAH is in the same, if not worse, financial position - it's losing money faster, has less cash and less in assets but.... it has very, very generous shareholders.

17 on 7/3/14 by Dubya

The biggest problem with Qantas is the fleet. Qantas has been shocking at forecasting demand and supply conditions within the international travel market. Airlines generally (with the exception of EK, CZ) have not been able to profitably operate the A380. The aircraft is too large and too inflexible to allow for cyclical demand and fails to provide adequate frequency on routes (e.g. SYD-HKG). Qantas should have made the 777 the international workhorse. Instead they are fumbling with the high cost of using 747s. This is where Alan Joyce is to blame- he keeps complaining about a high cost base but then keeps starving Qantas International of the necessary capital to correct it's fleet. Then he cuts routes because they are no longer profitable and starves the business of capital because its not meeting profitability expectations. Part of a vicious cycle.

The high cost base is no doubt a huge problem for Qantas. But a gripe with Alan Joyce and Geoff  Dixon is that they have had tunnel vision on cost without focusing much on revenue. This is pre-Alan Joyce, but Qantas had the opportunity as the third recipient of the A380 to come out with a superior cabin to earlier recipients SQ and EK. Instead Marc Newson didn't want to create an enclosed suite because it was too claustrophobic and no one realised that aisle accessibility from each business seat and a decent sized screen is a big plus. The customised economy seats are more cramped, harder and probably more expensive than SQ/CX/MH's mass produced benches. Marc Newson should go along with Joyce.

The unions for the most part have been belligerent and are doing themselves a great disservice. Not only are they risking jobs through unrealistic wage conditions but in a country where great conditions have already been won, they risk disenfranchising a generation.

For all of Alan Joyce’s missteps, one thing remains certain: Alan Joyce and Leigh Clifford are far too tight a unit. This is how Alan Joyce has been able to stay in his white tower. So long as Leigh Clifford is the Chairman, Alan Joyce will be his CEO. This leaves the shareholders or private equity to turf Clifford and his mob.

1 on 7/3/14 by Nicklg

I've sat in both the QF and SQ Y seats on the A380 and I found virtually no difference with them..

2 on 8/3/14 by PLATY

Just curious, do you harbour the same resentment to other professional bodies that represent the interests of their members who might not have the word "union" in their title?

Do you have a problem with the AMA lobbying government on the number of medical training places to limit supply and thereby push up the salaries of doctors etc.?

What about the various medical "colleges" that force members through very stringent exams thereby also effectively controlling supply of labour into the marketplace?

And what about the law societies who encourage members to charge the "going rate" in legal fees so all members can fatten themselves with huge salaries?

QF wages have been set by independent arbitration!

 

1 on 8/3/14 by PLATY

PS. Love the rest of your post!

2 on 8/3/14 by Dubya

Over the years I have had the privilege of knowing many Qantas employees. I have even flown First class on a family member’s QF staff benefits. What they all have in common from the coal face to middle and upper management is that they all have outstanding conditions. There are also quite simply too many middle management roles. Those who say that this was not a problem back in the early-mid 2000’s, advocate for a kind of reactive management that leads from behind. For the most part, that’s exactly the kind of management Qantas has had.

From what I have read of your argument, there is this notion that Qantas will never be able to match the kind of wage structures of EK and SQ. I agree, but that is no reason to be complacent. To add another statistic, in the latest half yearly results QF labour costs as a percentage of revenue were 26%. VA’s was 23.2%. On over $7b of revenue, if QF could match VA it would save around $200m per half. Economic logic tells us that with a much larger scale, Qantas should be able to achieve a better result on this metric than VA. Qantas is losing the cost battle on home turf too.

A high cost structure doesn’t just make it harder for Qantas to compete on price. It makes it harder for Qantas to compete on quality too. High costs starve the business of much need free cash flow. That means less internal finance for product innovations and the acquisition of new aircraft.

Qantas’ unions for the most part have been belligerent. They have asked for more when the market is less willing to pay the prices necessary to support such a structure. The truth is that we belong to a global economy and the union’s antiquated view of looking out for its members through better conditions is inconsistent with a post nationalist Qantas. There is none more erroneous than the recalcitrant TWU in this regard. A lot of their members are non-core and most at risk of outsourcing (watch out for Toll Dnata). If they want to preserve jobs they need a Qantas built to last and a Qantas built to last needs a lower cost structure. The Flight Attendants Association is an example of a cooperative union that recognises Qantas’ situation. Not all unions are bad, but those that are myopic to the new reality are doing their members a disservice.

I don’t wish to comment on other professional associations only to say that a case by case basis is necessary and further that I would rather my health professional passed a stringent medical exam than an easy one.  

18 on 7/3/14 by Broderick

With Air New Zealand making A$275m profit recently, is it fair to say  Qantas have far inferior management compared to ANZ?

1 on 8/3/14 by nixjet

Easy for AIZ to make a profit when they were bailed out by the NZ Governmentt after walking away from Australia's biggest corporate collapse for a paltry $200m payment to the administrators of Ansett.

Better management, maybe, but lots was gained by starting from a clean slate.

19 on 7/3/14 by DB

A great perspective and well written piece. I think the unions are only concerned about the current situation because the heavily unionised Qantas workforce won't be paying union fees when many of them are made redundant.  Do the math; 5,000 people losing their job.  I would guess at least 3,000 of those staff would be union members paying anything upward of $500 a year in membership fees.   That's a lot of money the unions will be missing out on in years to come. 

1 on 8/3/14 by PLATY

It is the function of the union to represent the interests of its members. The wages at QF have been set by independent arbitration wherein the union presents the interests of staff and the airline the interests of the employer.

The altenative is each individual employee has to negotiate a package with their functional management in an "unequal" dynamic (generally employee holds more power than employee so can potentially act in an unconscionable manner).

Of course, in a political climate of fear-uncertainty-doubt it's not surprising some will imagine reds-under-the-beds and leftie conspiracies.

20 on 7/3/14 by paa

Geoffrey, it gave me comfort to read an article with thoughtful analysis rather than emotion. Too much of the discusion around QF is emotive for my liking, especially when my tax dollars could be on the line.

When I think of what puts bums on seats for a carrier, I think of customers making their decision on specific factors - route network, hard product, soft product, affinity and price. The carrier has to acheive the right balance of these to be attractive, both to the passenger with choice of carrier, and the corporate procurement department when negotiating their travel contract. QF cannot with it's current cost constraints get this balance right.

I have left safety off my list of factors, as I dont think in the market QF are competing this is really a factor. If a carrier flying into or within Australia had any real risk of crash, they would lose their rights immediately. I think customers understand this more than certain interest groups would have us believe.

I would be interested to hear more on your thoughts on the true effects of the QF sale act, the challenges the QF multi-hub network represents, and the cannibilisation between QF and JQ.

21 on 7/3/14 by trevor

Love him or hate him, no one can say Alan Joyce does not generate debate. Quite incredible. There is not an executive director I can think of, at least in Australia, that brings about so much fervent discussion.

Haven't ever seen this many comments on an AusBT piece. Great article though; definitely thought provoking. Bravo

22 on 7/3/14 by Fonga

Everyone is focussing on their personal experiences about levels of service. Yes, Qantas is inconsistent. There are inexplicable differences between the first rate product on an A380 and the tired grunge of an A330/767. The airline ought to address this and fast.  However, as Joyce's briefing showed, patronage is actually up on both domestic and international. Capacity though has outstripped passenger growth so loads are down, but only slightly. More, but emptier, planes cuts into profit.  It isn't that passengers are deserting Qantas, but that the airline has failed to capture the growth in the overall market. This suggests the airline could make some significant inroads into regaining market share with a better product offering. That would mean bringing forward the upgrades of the A330s and the retirement of the 767 and older 747s. Joyce has taken both these decisions.

Assuming product can be brought up to scratch and service levels restored with a more motivated and less indifferent workforce, the other side of the coin is deploying the right aircraft, at the right frequencies on the right routes. Again losing the fuel hungry 767s and 747s and replacing them with new/er 787s and A330s will attack that key cost driver. Retiming the Asian flights should also prove popular, and the focus on sending premium A380 product into partner hubs (DX, DFW, LAX, HK) helps overcome the end-of-line handicap. Again Joyce's strategy seems sound.

Jetstart makes money domestically when it isn't used to flood a route in a capacity war. Jetstar Japan and HK are likely to be good investments once established, but start-up costs will drag the group down till then. Jetstar will likely dominate the Asian LCC market with a great brand and that should be a source of pride for Australian business.

 

So product quality and fleet deployment are being addressed, if slowly. The airline is a little stranded because it lacks the capital to update the fleet as planned, and those upgraded 747s are going to have to last a little longer. We should probably forget the 777 and look to the the 787 as the next plane to drive growth at the airline.

That leaves staff costs as the one remaining variable the airline can control. A goal to reduce average staffing costs to Jetstar/Virgin/Air NZ levels seems a reasonable and realistic one and shouldn't compromise safety or service. That will mean less staff or lower wages and conditions or a shift to part-time work.

Back in profit with a superb product offering the airline should then be able to invest in the next generation of plane to put it back where it belongs. I think Joyce is making the right calls. He stuffed the politics with the PM though.

1 on 8/3/14 by PLATY

QF already has a degree of flexibility in staffing:

  • by using a proportion of casual labour
  • outsourcing some operations to Cobham
  • how it mixes JQ and QF on given routes

23 on 7/3/14 by curly

As a former WA travel agent one thing I have noticed is the stupidity of the flying poor and how this relates to people leaving Qantas. Before anyone starts kicking off, what I mean for example is the growing number of people who will book flights to Denpasar with Virgin/Jetstar/Air Asia for $400 return then pay a fortune for taxi's to get to the airport as the bus/shuttle transfer doesnt run at stupid o'clock, then they will pay extra for baggage, food and entertainment. If they had of looked they would have seen Garuda, a 4 star full service carrier offering the trip at better times, meals, entertainment and 30 kegs of luggage to bring as many knock off handbags back as they like for the same price, but they just simply don't look.For years now and not just in travel but all aspects of our lives there has been this constant and never ending push of cheap cheap cheap, price price price! And people are falling for it.I would hint that the reason Jetstar/Virgin are making good money is because they're filling their planes and collecting the same revenue per passenger after all the add-ons however they ultimately offer less inflight service and their passengers are still happy because they "got their flight cheap" even though they have spent the same amount of money as they would have flying Qantas.A flight from Brisbane to Sydney on a good day is $89 with Qantas at a nice 3:30pm departure on a wide body aircraft with all the trimmings or $69 with Jetstar, then you can start adding more for everything else.  Qantas must have noticed this with their recent advertisment about how the price includes everything (bags, meals and movies) however I don't believe it was all that well received by their target market. If they could get this through peoples heads that spending an extra 15% now will save you 25% when you fly they should be seeing full planes and happy passengers, however I feel that some people are so conditioned about this "cheap price" situation banged into them it might be hard to change.

1 on 8/3/14 by TheRealBabushka

I completely agree curly. When BA dropped their low cost airline, they focused their marketing to show that with all the added (in some cases non-optional)  items, they offered a better value proposition. That seems to be missing from QF's strategy, because I suspect at the back of their minds they still have Jetstar. 

While I appreciate that the Jetstar approach might be a (good) subversive way to cut wages and circumvent the unions, any Tom, Dick and Harry can see that approach cannot be sustainable for Qantas. It is a short term (and lazy) approach by not having to deal with the Qantas issue head on.

1 on 8/3/14 by PLATY

+1

24 on 8/3/14 by the trimmer

Possibly the reasons less aussies are flying in & out of australia on Qantas is because their are more airlines flying in  & out of Australia.So is that the current managements fault, or the authorities who opened up our skies?.

1 on 10/3/14 by PLATY

The sjies get opened up so the country can benefit from:

1. Increased tourism

2. Increased business

The interests of the nation outweigh one coporation!

For example, QFi has truned its back on Cairns - thankfully Cathay hasn't. That's we locals fly CX and not QF when heading overseas...

Although many would like to retrograde to an isolationist existence, that just ain't reality!

25 on 8/3/14 by Peter

The article makes some good points but i dont think you can just blame aircraft choices for Qantas' issues.  They did screw up big time by not getting the 777, but Alan Joyce's attitude towards customers is a bigger problem.  To me there are really 4 issues that are contributing to Qantas' problems:

-Their attitude to customers is poor.  I have been a platinum FF for more than 10 years and still feel im treated like a second class citizen.  When i travel with Emirates or Singapore and get an immediate upgrade i feel like my loyalty is taken for granted.

-Joyce's 65% market share rule is a joke.  Why is the airline industry different from any other?  If a route is unprofitable you cut it.  So long as you are providing adequate coverage of routes and timing.

-Flying into Asia is really only an option if you live in Sydney.  For us who live in Melbourne, we either have to use a domestic connection or travel with another airline.  I regularly travel to Singapore, Thailand, Philippines and China and get tired of having to hang around Sydney airport when i can fly with Cathay or Thai and fly direct to Melbourne. If I am combining more than one country forget it as I refuse to fly Jetstar so will most likely use Cathay, Singapore or Thai.

-Any manager who wakes up one morning and decides they need to cut 5,000 jobs isnt doing their job effectively.  Staffing and route cuts should have been made 3 years ago if he was really in tune with where the market was going.

I really hope they work it out.  I think generally they have a good product for Australian domestic, but i really dont think that Joyce is the man to get them out of their current mess.

26 on 10/3/14 by Aafje

I do find the service and reliability of SIA a great plus and will not fly Qantas any more. But it is the Unions that are to be blamed in undermining doing Business in Australia. We are the most expensive in many a category and we should not blame Industries from going off-shore, but point a finger at the Unions and our very strict and overboard Health and Safety Laws!

1 on 10/3/14 by PLATY

WTF!!!

The Unions DO NOT set wages in this country!

The IR framework is set by the FEDERAL GOVERNMENT!!! And thence (under the framework) by independent arbitration.

Seriously, what don't you understand? The previous right wing Howard government wanted to introduce Work Choices (away from collective bragiang to individual contracts) but this was rejected by the community (we live in some sort of democracy).

Both Gillard and Rudd supported the BALANCE offered by Fair Work Australia.

IF (right wing government again) Abbott tried to move the balance too far in favour of corporations/employees he knows the electorate will kick him up his sorry butt. Hence the foot in the water not sure what the F I'm doing approach of Abbott and his hopeless "no policy" coterie.

ANY corporation has to work under their local conditions. That isn't the unions fault. It is just the nature of the international marketplace.

IF a business is genuininely not sustainable (not actually the case for Qf domestic which makes big profit despite the author's unsubstaintable claims in his article) in Australia, then so be it!

QF domestic has a future (if Joyce gives up 65% market share) BUT QFi probably doesn't. NOR does JQi (DESPITE not paying Australian wages).

IF this country had any long term vision it would be looking to innovative technology and long term vision.

The government has neither. The government doesn't even have a science minister. It has stripped away resouces from CSIRO. These areas are where future wealth for a "mature" economy will come from - new energy, biotech, genomics.

We can never compete with industries reliant on cheap labour!

Seriously, what do you myopic union bashing idiots think the answer is? Plunge the country into developing nation status?!

I really can't believe how intelligent people (including Geoffrey with so many years of experience) can be so sucked into the anti-union mantra.

IF Joyce has such a problem all he has to do is make redundant whole parts of his business and transfer to JQ and outsource. That was the whole point of JQ. Circumvent existing awards! teh wolepoint of JQAsia! The whole point of Qf Asia premium  - al currently FAILURES. And not any unions fault!

I really can't believe how so many get sucked in and don't use any critical faculty.

 

 

 

 

 

1 on 13/3/14 by JakeDrake

Sure the unions don’t set the wages and conditions but:

 a)      it is undeniable that compared to international competitor airlines, a lot of the current award conditions are hugely more expensive at Qantas and reflect a past where these cost differentials mattered less

b)      the unions can agree to change the existing conditions but their vehement opposition to doing so has either largely failed to recognise point a) or they are just being bloody-minded; they can defend their entitlements to the death on principle, but ultimately more jobs would probably be lost than might exist if they worked with Qantas. That’s the criticism of the unions.

And BTW, I am a supporter of and have benefited from unions. But the world is changing for globally exposed Australian companies.

27 on 10/3/14 by Jono

Great article and some great points. My 50 cents: change work conditions, simplify and service.

- Change work conditions: When an openly pro-union author tells stories of a 250 page contract that should be 50, I shudder. Here in Aus, we are all legally entitled to 28 days annual leave a year. In Hong Kong it's 7! Just as an example. According to the editor of Airliners.net, (may have been another trade publication,) one of the conditions in a Qantas pilots contract is the serving of vegitables they must get on stop overs.

- Simplify: I understand LSO's (large scales organisations,) require a certain degree of bereaucracy. However, I'd suggest being careful of 'paralysis, by analysis'.

- Service: In this day and economy nobody is going to buy from you just cause your an Aussie. As a hand on heart, patriot of the lucky country I wish they would. I am getting sick of the attitude of Qantas stuff and having to specify to them that they are not entitled to my business.

If Qantas were a person, they would be a grumpy 90 year old, winging as to why life isn't like it was in the 20's. Virgin Australia would be the trendy, smart 20-something and Cathay would be a neatly dressed, well mannered Hong Konger.

For the sake of all, I hope they do sort it out, but agree with the well written article, that not all blame should be aimed at Joyce.

1 on 10/3/14 by Jon

A superb analysis Jono! 

I'd love to fly with Qantas but it is offering is 2nd place in most all areas of it's operations.

Let's see a change of the senior executive and allow some real flyers to take on the reigns. After all, no one could do a worse job than the incombents. 

28 on 10/3/14 by Michael

This article is so on the money! the real question now... is how does Qantas get from where "it's at" to where "it needs to be"!

29 on 10/3/14 by wardest

The 777 mistake is a given

But the author fails to mention any of the moneys spent in asia on Jet *

Jet star japan has 24 aircraft but flight load demands for around 9 or 10

Jet * HKG... How much ? and the 4 aircraft purchased already plus orders ?

Jet * Vietnam? Profits ?

Jet * Aust ?  Huge question marks over who pays for what? Fuel , lounges, maint support out side the norm. Airframes/Aircraft ?

My point is are the above listed a drain on the parent. The orders for the 787 are by QF..

The list of open questions are endless with little transparency

You mention wages. Many engineers licenced and unlicensed have left QF to Virgin and Jet* for pay rises.

 

 

 

30 on 28/4/14 by tris1313

Alan Joyce is an idiot, and he's currently just driving QANTAS further and further into the ground.

 

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