AJ letter to Crikey Blog - QANTAS.

[harvyk]

No Virgin Australia are making mileage of the hard work THEY have done over the past 10 years, in particular keeping costs down, rather than benefiting from any Qantas mistake. So hats off to them.

Yes and no, it's only been in the few years that DJ has actively gone after the corp market... For a long time they where a true LCC with no intention of being anything different... Ansett going down help them establish themselves, but they had to outwit QF to get a foot in the door of the corp market, and customers can be notoriously stubborn when it comes to leaving the incumbent.

The problem with Qantas now is simply their cost base, which is what Joyce is trying to fix. But work a work force in denial and unwilling to work to become relevant Joyce is pushing the proverbial up hill.

Disagree, whilst yes they do have a legacy cost base, it's not something unique to QF... The big problem with AJ is he didn't really do anything for the brand, and hasn't really done a lot to keep the bread and butter flyers (QFF's) happy... QF is now seen as reactive rather than revolutionary, QFFer's know that "enhancements" = loss of services, he hasn't taken the media by the horns and taking them to task for bias reporting (they have the money to do so) and he has being relying on the fact that "customers can be notoriously stubborn when it comes to leaving the incumbent" to keep the company going...

What QF needs is someone who understands the value \ luxury market, who understands that there are people who look for other things other than price (if price was the only concern of QF's flyers there would be no need for Y+ \ J \ F) who will take on the media, and will build loyalty amoungst those who are loyal because they fly a lot (eg PS \ SG \ WP \ WP1) and those who have paid good money to be loyal (QP)... and of course someone who will encourage the NB's \ no loyaltie's to use QF services (today's NB is tomorrows WP1)

 

[ajw373]

Yes and no, it's only been in the few years that DJ has actively gone after the corp market... For a long time they where a true LCC with no intention of being anything different... Ansett going down help them establish themselves, but they had to outwit QF to get a foot in the door of the corp market, and customers can be notoriously stubborn when it comes to leaving the incumbent.

Disagree 100%. The success of Virgin is wholly down to their ability to change and adapt to the market. The changes that have recently been announced can be traced back through history as a series of evolutionary changes rather than a revolution and none can actually be blamed on any single mistake made by Qantas.

So sure when Brett Godfrey first created Virgin Blue he couldn't have dreamt the company would be in the position it is today, you can bet your bottom dollar that every change made since the collapse of Ansett in particular has been a slow and deliberate change to the market and the result is what we see now. So yes they started out as a LCC, but have quickly changed away from that model into what they called a new world carrier then into what we see now.

About the only mistake Qantas has made domestically is hiring Joyce of John Borghetti, not because of any failing on Joyce's behalf, but because of the wealth of company knowledge John Borghetti has taken to Virgin.

When it comes to comparisons between Virgin Aus and Qantas DOMESTIC the main advantage Virgin has is one of cost, simple as that.

Disagree, whilst yes they do have a legacy cost base, it's not something unique to QF... The big problem with AJ is he didn't really do anything for the brand, and hasn't really done a lot to keep the bread and butter flyers (QFF's) happy... QF is now seen as reactive rather than revolutionary, QFFer's know that "enhancements" = loss of services, he hasn't taken the media by the horns and taking them to task for bias reporting (they have the money to do so) and he has being relying on the fact that "customers can be notoriously stubborn when it comes to leaving the incumbent" to keep the company going...

What QF needs is someone who understands the value \ luxury market, who understands that there are people who look for other things other than price (if price was the only concern of QF's flyers there would be no need for Y+ \ J \ F) who will take on the media, and will build loyalty amoungst those who are loyal because they fly a lot (eg PS \ SG \ WP \ WP1) and those who have paid good money to be loyal (QP)... and of course someone who will encourage the NB's \ no loyaltie's to use QF services (today's NB is tomorrows WP1)

Will start from the bottom. Yes there are people who look and value the luxury market, however in Australia there are not enough of them willing to pay the dollars to provide that. Especially when internationally in particular there are carriers such as Emirates, Singapore, Ethiad who can provide that service at a significantly lower cost, and provide that service to more places that Qantas can ever do. So how do you think the brand should have been promoted or enhanced more?

As for disgruntling their FF'ers, reading this board it is apparent there are many upset, but you can bet your bottom dollar there are many more just as happy or not phased at all. This Qantas platinum FF being one of them.

As for other carriers being in the same boat as Qantas can you please name a few? I for the life of me cannot think of too many who are fighting a second domestic carrier that is now offering more or less full service but on a near LCC cost base. Or one who was given an 80% market share to maintain, or one who competes head to head with Asian carriers or carriers from oil rich tax havens, both who offer a luxury product at a significantly lower cost.

As I said people in this country will not support a brand, even one as iconic as Qantas if the competition is providing the same for less. So really the only option to Qantas is to reduce their costs or collapse.

 

[medhead]

No Virgin Australia are making mileage of the hard work THEY have done over the past 10 years, in particular keeping costs down, rather than benefiting from any Qantas mistake. So hats off to them.

Qantas was riding high in the early 2000's simply because of the Ansett crash and their ability to quickly expand and soak up the extra capacity, something that the then Virgin Blue couldn't.

The problem with Qantas now is simply their cost base, which is what Joyce is trying to fix. But work a work force in denial and unwilling to work to become relevant Joyce is pushing the proverbial up hill.

No, it is not the work of virgin that I'm talking about. It is qantas that have been alienating their platinum members. It is because of the changes to QF and QFF under Joyce that made me consider more flying with DJ in the first place. It is the changes that DJ are making now that have got me sticking with them, preferentially checking DJ when bookings flights - that is making mileage from qantas' mistakes. They can do all the hard work they want, but it is useless if qantas doesn't turn its customers off first.

Edit: I'm talking about what is happening now not the last 10 years, joyce's term. Cost base can be largely irrelevant if you keep those loyal flyers on side. We can see that by the continuing profits that qantas has been making. However, he has now enhanced out his loyal customers and I don't expect profits to continue.

 

[ajw373]

No, it is not the work of virgin that I'm talking about. It is qantas that have been alienating their platinum members. It is because of the changes to QF and QFF under Joyce that made me consider more flying with DJ in the first place. It is the changes that DJ are making now that have got me sticking with them, preferentially checking DJ when bookings flights - that is making mileage from qantas' mistakes. They can do all the hard work they want, but it is useless if qantas doesn't turn its customers off first.

Edit: I'm talking about what is happening now not the last 10 years, joyce's term. Cost base can be largely irrelevant if you keep those loyal flyers on side. We can see that by the continuing profits that qantas has been making. However, he has now enhanced out his loyal customers and I don't expect profits to continue.

So are you saying that Virgin's product changes of late are just a reaction to Qantas pissing off Platinum FF'ers? Hmmm yeah right. Please give Virgin Australia some credit. As I said all their product changes over the past 10 years have been minor tweaks and what we see now is the culmination of those tweeks.

PS. This is one Platinum FF'er who has not been alienated by Qantas's FF'er program changes, as you know full well I am one who is happy with the changes, so please don't speak on my behalf.

 

[harvyk]

PS. This is one Platinum FF'er who has not been alienated by Qantas's FF'er program changes, as you know full well I am one who is happy with the changes, so please don't speak on my behalf.

No one is speaking on your behalf, yes there are quite a few QFF's which are happy with QF.

The whole problem is people stick with what they know. VA not only need to provide a great service, they need to convince people they have a much much better service than QF, and they need to make sure that every customer who decides to give them a go gets unbelievable service on that very first flight.

In sales, it's far easier to retain an existing customer, than to win a new one over (I believe it's somewhere in the order of a 7 to 1 ratio). That means that VA not only need to do everything QF is doing, they need to do it better for QF customers to even think about taking a VA flight.

Basically whatever QF set the bar at, VA need to aim 3 times as high. (and remember, each individual customer sets the minimum height they expect for the bar), furthermore VA need to make sure everyone who tries them,they first trip is a good one (because there will be no second chances). Nothing will set in the mind of a customer to "stick with the devil you know" faster than when they give the competition a try and the competition was lousy, furthermore they will warn all their friends at BBQ's about trying the competition.

Edit: Found the corect ratio showing how difficult it is to win a new customer compared with keeping an existing one.

 

[Nigelinoz]

That means that VA not only need to do everything QF is doing, they need to do it better for QF customers to even think about taking a VA flight.

Well if my last 8 QF flights are an example VA won't have to do much to be better than QF,and from speaking to my clients and friends that is not
an isolated opinion.
Cheers
N'oz

 

[harvyk]

Well if my last 8 QF flights are an example VA won't have to do much to be better than QF,and from speaking to my clients and friends that is not
an isolated opinion.
Cheers
N'oz

Ah, but if VA and QF both had exactly the same lousy service (and you knew it), would you consider swapping?

 

[Nigelinoz]

Ah, but if VA and QF both had exactly the same lousy service (and you knew it), would you consider swapping?

All things being equal then yes I probably would,but from my point of view then VA doesn't have to do much to offer a better quality of service than
I receive from QF on my once a week ABX to SYD return trip,I really only stick with QF because at the moment I think the FF program is better than
Velocity,but if the revamp comes up with a better scheme that offers me better options then yes I can see me changing,which by the way is a change
of heart from the way I felt only a month ago when DJ was relaunched.
Cheers
N'oz

 

[ajw373]

No one is speaking on your behalf, yes there are quite a few QFF's which are happy with QF.

Actually Medhead was speaking on my behalf when he said Qantas was alienating their Platinums. As I said this is one Platinum that has not been alienated, so would rather he said Qantas had alienated SOME Platinum's, clearly including himself. Clearly there are some (I would hazard a guess and say most) that are happy or neutral with the changes. In my specific case I like the new baggage allowances.

The whole problem is people stick with what they know. VA not only need to provide a great service, they need to convince people they have a much much better service than QF, and they need to make sure that every customer who decides to give them a go gets unbelievable service on that very first flight.

In sales, it's far easier to retain an existing customer, than to win a new one over (I believe it's somewhere in the order of a 7 to 1 ratio). That means that VA not only need to do everything QF is doing, they need to do it better for QF customers to even think about taking a VA flight.

Basically whatever QF set the bar at, VA need to aim 3 times as high. (and remember, each individual customer sets the minimum height they expect for the bar), furthermore VA need to make sure everyone who tries them,they first trip is a good one (because there will be no second chances). Nothing will set in the mind of a customer to "stick with the devil you know" faster than when they give the competition a try and the competition was lousy, furthermore they will warn all their friends at BBQ's about trying the competition.

Edit: Found the correct ratio showing how difficult it is to win a new customer compared with keeping an existing one.

Couldn't agree more actually. Hence why if Virgin Australia do take business off Qantas it will be because of their hard work in offering a suitable alternative rather than any mistake on Qantas's behalf which is what is inferred in earlier posts.

 

[Nigelinoz]

Interesting article in SMH.
Qantas flying into trouble
Includes this comment-

Paul Fiani, the managing director of Integrity Investment Management, says that while Qantas needs to stay on the ball he believes the threat from Virgin is overstated.
''Their ability to attract the business market is going to take a long, long time. Virgin needs to spend a fortune to replicate what Qantas has in the business market and they don't have the money to do it,'' he says.

​

Cheers
N'oz

 

[LiamR]

Interesting article in SMH.
Qantas flying into trouble
Includes this comment-

I was reading this article this afternoon, and that comment stood out. I have to agree, just as an example look at how many lounges QF have around the world. DJ have what? 5? Qantas has been around for 90 years, so its going to take Virgin some time to get to the level that QF has.... But theres no doubt they are trying there best.


Do you think people are underestimating Virgin? Qantas certainly is.

 

[kamchatsky]

I was reading this article this afternoon, and that comment stood out. I have to agree, just as an example look at how many lounges QF have around the world. DJ have what? 5? Qantas has been around for 90 years, so its going to take Virgin some time to get to the level that QF has.... But theres no doubt they are trying there best.


Do you think people are underestimating Virgin? Qantas certainly is.

That's why JB is that good at setting up all these relationships with various airlines, so they don't have to build their own lounges around the world .... yet.

 

[Nigelinoz]

But Liam lounges are only one part of the puzzle,and you need to remember that domestic business is not losing
money for QF,it's the international division that is struggling and to be frank I don't really think lounges are the
solution,my family and friends couldn't care less about lounges when they travel overseas,what they want are
reasonable fares and good service and they say that QF is failing to deliver on those fronts and that's why they
are choosing to fly with airlines like Malaysian etc.
I'm sure that you (and the writer of the article)are correct that it's going to take a while for VA to haul QF in
(if at all)but I think it's time that QF started to try and claw back some passengers from the Asian carriers,and
I think the only way to do that is to provide what people want-cheaper fares and good service,and that's where
I think AJ has lost his way,let's hope that Lesley Grant's report comes up with real,feasible ways of returning
QF long haul to the premier position it once held.
Cheers
N'oz

 

[LiamR]

That's why JB is that good at setting up all these relationships with various airlines, so they don't have to build their own lounges around the world .... yet.

But Liam lounges are only one part of the puzzle,and you need to remember that domestic business is not losing
money for QF,it's the international division that is struggling and to be frank I don't really think lounges are the
solution,my family and friends couldn't care less about lounges when they travel overseas,what they want are
reasonable fares and good service and they say that QF is failing to deliver on those fronts and that's why they
are choosing to fly with airlines like Malaysian etc.

Sorry, I don't think I've explained it correctly.... You might have misunderstood what I'm trying to say....

Don't get me wrong, Virgin is a really good airline. But what I'm saying is, it takes a while to build an airline, you need to build up a large fleet of aircraft, add more routes, more flights and airport resources.

Having a few lounges, over a couple of hundred around AUS is just an example exposing the difference between a relatively new airline, over a very 'experienced' one. Don't think I was having rant about DJ not having enough lounges.

Now, the things you can do overnight, is what Qantas are failing at. Cheaper flights, and a better onboard experience. That's seems to be why Qantas aren't going so well on the international front. (At least what I think...)

 

[Nigelinoz]

No I understood the point you were making,I was just saying that lounges are just one part of the airline experience and that
having heaps of lounges doesn't seem to be helping QF at the moment and I don't think lack of them will hurt VA if their new
alliances allow them to offer codeshares on good airlines like Etihad.QF seems to be trying to compete with premium airlines
like EK and forgotten about their bread and butter market-the Y passenger.
Interesting times ahead over the next few years for the Aus aviation market.
Cheers
N'oz

 

[ajw373]

It is quite true. The problems with Qantas come from within and are related mostly to cost base. So even if the market share between Virgin Australia and Qantas were to remain as is Qantas would still struggle to generate sufficient return to stay in business. However if Virgin Australia do start to take market share, even the smallest amount Qantas's troubles will be significantly magnified.

 

[medhead]

So are you saying that Virgin's product changes of late are just a reaction to Qantas pissing off Platinum FF'ers? Hmmm yeah right. Please give Virgin Australia some credit. As I said all their product changes over the past 10 years have been minor tweaks and what we see now is the culmination of those tweeks.

PS. This is one Platinum FF'er who has not been alienated by Qantas's FF'er program changes, as you know full well I am one who is happy with the changes, so please don't speak on my behalf.

No I'm not saying that at all. Are you being deliberately obtuse? If you're having troubl with basic reading comphrehension here is the first sentence again:

No, it is not the work of virgin that I'm talking about.

So you can see that I'm not talking about what Virgin is doing as a catelsyst for change but the thing that is going to keep those who are switching. But these are 2 things that are happening at the same time and I suspect that having developed their plans in detail Virgin are now pushing the go button to maximise their gain from the Platinums who have been pushed away.

As for speaking for you - I didn't. Again basic english comprehension is required. I didn't make any specification (not all nor some) as to the number of platinums who have been alienated by Qantas. Except that it is more than one. Now I know more than one who is annoyed so I guess we can say that I speak for them.

So just to clear one thing up. I wasn't speaking for you, since you are clearly so happy. That you think I was is simply you're misinterpretation.

Actually Medhead was speaking on my behalf when he said Qantas was alienating their Platinums.

 

[LiamR]

No I understood the point you were making,I was just saying that lounges are just one part of the airline experience and that
having heaps of lounges doesn't seem to be helping QF at the moment and I don't think lack of them will hurt VA if their new
alliances allow them to offer codeshares on good airlines like Etihad.QF seems to be trying to compete with premium airlines
like EK and forgotten about their bread and butter market-the Y passenger.
Interesting times ahead over the next few years for the Aus aviation market.
Cheers
N'oz

Ahhh, I see. I agree with what your saying completely. A lac of lounges isn't going to kill VA. But QF forgetting their Y customers is. Just today I was looking at flying to Geneva in November. In Y, QF is at least $500 more than EY/VA in J QF is $1000ish more.

On the domestic front...

QF Full Fare Y costs considerably more than the VA Premium Ticket for OOL/BNE-SYD. Its hard to justify QF when VA are nearly half the cost!

I see now why Virgin put popcorn in all of the VA lounges. Its going to be an interesting time over the next year or so.

 

[ajw373]

So you can see that I'm not talking about what Virgin is doing as a catelsyst for change but the thing that is going to keep those who are switching. But these are 2 things that are happening at the same time and I suspect that having developed their plans in detail Virgin are now pushing the go button to maximise their gain from the Platinums who have been pushed away.

Doubt this very much. Virgin would have had their changes planned well before Qantas changed their FF'er program and I have no doubt it was in the wind before Borghetti joined. As I have been saying look at how Virgin Australia's product has developed, it has quite clearly been a gradual evolution over several years rather than a revolution or button pushing because you and some other platinums have supposedly been pushed away. I mean to say at present, apart from 4 or so aircraft Virgin doesn't even have it's new product so can hardly be attracting that many disgruntled Qantas passengers.

 

[gumpy]

No Virgin Australia are making mileage of the hard work THEY have done over the past 10 years, in particular keeping costs down, rather than benefiting from any Qantas mistake. So hats off to them.

Qantas was riding high in the early 2000's simply because of the Ansett crash and their ability to quickly expand and soak up the extra capacity, something that the then Virgin Blue couldn't.

The problem with Qantas now is simply their cost base, which is what Joyce is trying to fix. But work a work force in denial and unwilling to work to become relevant Joyce is pushing the proverbial up hill.

The best analysis I've read.