How can Qantas International find new revenues.

[rechoboam]

Looking at Y fares from SIN, QF sometimes has sales down to around $800SGD ($640AUD) return to MEL/SYD/BNE. Even at that price, we see O9 in its availability throughout the entire sales period for most flights. After which, the sales is extended, with which O9 stays there again for the entire sales period for most flights again. It seems to me that either they have the whole Y cabin at sales price, or they might as well just shut up the shop here. Basically, I see SQ taking all the pax who would pay extra for better services, while value travelers have options from middle eastern carriers to MEL/BNE, and budget pax just wait out for the JQ sales.

All that aside I have a flight next week cash price over 10000 dollars and I have to check a website to work out what delays there are and whether I should bring checked baggage due to strikes. Doesn't seem to happen with the other carriers, at least non-European ones. There is seriously no future for QF international if this sort of thing continues.

 

[Moopere]

Other airlines are irrelevant. Different routes, different market.

Other airlines offer F out of Australia and they seem to find it viable. So, different airline, same route, same market.

If First class was viable, QF wouldn't have scrapped it.

No argument from me. QF is selling hamburgers for caviar price. Its hard to find many carriers charging more for a given route than QF. Its fine to be at the top of the price tree, but you have to be at the top of the service provision tree to maintain it. Australian companies struggle, even on a good day, with service provision and consistency so its no surprise that QFi couldn't make this work.

However, not to lose sight of the OP. QFi might want to:

- Understand their own company processes and people realistically and see whats possible and sustainable. ie; no F because they can't do it well in todays climate and competition (QF can't even do dom priority boarding for goodness sakes!).

- Understand that higher cost base = higher fares which is nothing to be frightened of, but that service provision (hard and soft) has to match price asked. For pitys sake, send senior and middle management out on a plane now and then ... and not via the CL either. Is there any inherent reason why QFi couldn't be a 5 star airline of SE Asia/Oceania?

- Send your managers, at all levels, out on a marketing course which details the basic market segments as HarveyK mentions above. The phenomena of the three markets (Cost, Value and Luxury) is real and successful companies in all industries understand how to market to the different segments. None of the segments are more or less important than the others. Cost gives you volume, Value and Luxury (if done right) gives you margin.

 

[dk4]

I fly frequently - I expect more "onboard perks" than others on the same ticket type.

...argument only holds true in an inelastic market with full capacity.

Given the great mathematical modelling skills that Qantas (as a whole) has, I agree and think that it is safe to assume that Qantas has found the sweet spot in elasticity (for the current product), where lowering prices will not result in sufficient increase in demand and raising them will result in a greater percentage decrease in demand. (Of course not withstanding their use of sales promotion & pricing tools to deal with seasonal and other cyclical fluctuations in demand.)

So if we assume that they have the right price for their current product, then to adjust pricing they must also adjust their product.

PRODUCT EVOLUTION
As already posted RedQ seems an attempt to do this, by creating an even more premium product (on a lower cost base) located in a strategic offshore gateway (presumably Singapore). And at the same time they are adjusting their existing product by removing First Class, going horizontal in International Business and increasing utilisation of Premium Economy. They have also addressed pricing concerns by introducing a wholly new product “Jetstar”, positioned towards the mid to lower end of customers’ value expectations.

Qantas has streamlined its “gateway strategy” - to rely more heavily on partnerships in far flung places around the globe, to help improve its network (at reduced cost, but with the side effect of further reducing product consistency), unfortunately they have not dealt with the inadequacies of their EU strategy, which is too heavily reliant on BA. (IMO “premium connections” to "major" EU destinations should be one stop out of, at least; SYD, MEL, BNE & PER which requires a strong QF gateway in the middle-east/south-east Mediterranean not LON LOL.)

Additionally Qantas attempts to influence elasticity of ticket prices with its loyalty program, but there is a reasonable argument that management has been too focussed on delivering it as a ubiquitous frequent “buyer” program rather than a “flyer” program, (but as one of the most profitable areas of the business it is perhaps an understandable deviation). Presumably though, they hope to refocus on core premium flying loyalty, with the launch of Platinum One.

So overall, on paper Qantas seems to be tackling pricing and product concerns, and other than using accounting tricks (e.g. selling its fleet to an offshore company and then releasing it back) only leaves “costs” as a major focus (which they are diligently pursuing).

Anything else would need radical change in the Qantas business model, so to paraphrase a previous CEO a revolution rather than evolution.

PRODUCT REVOLUTION
To initiate a revolution, IMO Qantas needs to wholeheartedly embrace one word – “upgrades”, “upgrades”, “upgrades”.

That is as loyal customers we should EXPECT (single-class) seat allocation upgrades (but that would mean [at the very least*] keeping 747 First Class seating for use as a predominantly upgrade hook, and increasing/adding Premium Economy) - but to achieve this their current yield management handbook (and pre-conditioned staff) needs to be thrown out the window. [*I think that future success needs to come from a more complex/sophisticated onboard product line, rather than 3 simple hard products, and I estimate that Qantas has the mathematical and technological capital to achieve this.]

IMO the one tool that they need to use is; the one thing that they fervently won’t!