Qantas suspends First class product on certain routes

[NickN]

Here is a great story from The Australian.....

Qantas loses money as Jetstar, QantasLink and the QF Frequent Flyer program make money
Tuesday, 21 April 2009



A report in The Australian by Andrew Main, Business Editor over the weekend paints a pretty dire picture for Qantas, with the report quoting Geoff Dixon in his farewell speech to shareholders on November 28 as saying, "I leave Qantas very confident indeed of its soundness as a business, the depth and talent of its management team and the scale and quality of its operations."

With Dixon handing over to current CEO Alan Joyce, The Australian says its a statement worth dissecting a few short months later as Joyce dramatically remoulds the business.

First, how "sound" is the business today?
For the first time since the SARS epidemic of 2002-03, Qantas is running at a loss, as chief financial officer Colin Storrie admitted last week, adding that back then the airline cut 4,000 jobs in one go.

Joyce was quick to point out yesterday that Qantas was in good company as "the vast majority of long-haul, full-service airlines are losing money".

He wants us to know we're in a different world from November 28, when Qantas shares were at $2.32 as they dipped last week to $1.74 before staging a recovery to close up 4c at $2.

Asked whether he'd been expecting conditions as bad as this when he took over, Joyce replied that "this has not been forecastable", picking the collapse of Wall Street investment bank Lehman Brothers on September 18 as the moment when things started to turn seriously nasty, which suggests a bit over two months of night terrors before he even started the top job.

Was it tough being the chief executive of Qantas at the moment?
"It's tough being the CEO of any airline at the moment," said Joyce, who's not quite the professional Cassandra that his predecessor Dixon liked to be, but he's working on it. He did say later that yesterday was his toughest day in the job so far.

Since Dixon announced his resignation in July, Qantas has reduced its pre-tax profit target from about $751 million to $500 million, and then to $100 million-$200 million.

"The last quarter was the worst performance that we've seen to date," Joyce said.

Qantas has, unfairly or not, also been battling perceptions that safety and customer satisfaction standards have slipped., with a series of mid-air incidents damaging one of Qantas's most valuable assets - its Rain Man-inspired reputation for safety.

Qantas is addressing the perception issue and, as Joyce pointed out, twice, yesterday Qantas's on-time record for domestic flights for the past six months has been better than Virgin's. That's one benefit of the reduction in aircraft movements.

The other line he took is that passengers won't miss much, since Qantas won't be pulling out of routes but just reducing frequency slightly, and the number of jobs being lost looks to mirror the grounding of 10 aircraft.

At least cash isn't a problem as fuel prices have thumped back to affordable after a horror spell last year and Joyce putting off $800million in capital expenditure for next year by delaying aircraft deliveries, and the airline also raised $500million without difficulty.

So what of the "depth and talent" of the management pool?
Someone pulled the plug as they're axing 590 management jobs as Joyce has quickly stamped his authority on the airline.

Almost all of Dixon's key managers have gone, including CFO Peter Gregg and John Borghetti after missing out on the top job.

What about the "scale and quality of its operations"?

This is a case of never mind the width, feel the quality.

While the international business-class and Qantas domestic lines struggle, the airline is making good money from Jetstar, QantasLink and the Frequent Flyer program, which as Storrie said yesterday has at least $2billion in deferred revenue waiting to hit the bottom line.

The best way to look at Qantas now seems to be to draw a veil over the expansionist hoopla of last year, which included Dixon hosting a junket to Toulouse to pick up the first giant Airbus A380., with Qantas taking 10 A380s in all but numbers 7 through 10 "can take a deferral of a year" as Joyce put it, so they'll actually be getting six in the near future.

"What you haven't seen, you won't miss" sums up Joyce's approach for coming months, with clearly the cuts affecting Qantas staff more than its passengers.

http://www.etravelblackboard.com.au/...id=91132&nav=2

[NickN]

DJ already have a decent share of business class travelers. Obviously not more than QF but a fair amount.

The reason they havent all flocked to DJ? Because you can earn QF FF points traveling JQ and you can't with DJ.

[Daniel F]

So a meal or snack won't make a difference... but 1000 Qantas FF points will?

[Rhys Xanthis]

Originally Posted by Daniel F

So a meal or snack won't make a difference... but 1000 Qantas FF points will?

Not to mention that you can still get loyalty rewards in the form of velocity from VB.

[Ash W]

Originally Posted by NickN

The facts are..... QF have handed over routes to JQ because QF could not manage them based on their own full service model.

QF have now handed over NZ domestic ops completely to JQ.

JQ are growing ever bigger in the Intl market while QF cut back flights and capacity.

QF are going to run a loss this half, JQ will be profitable.

Plus JQ will now operate into YMML to compete with DJ and TT so their own subsidiary will eat away at their pax. Will businesses still send their staff with QF if they can buy that seat cheaper with JQ? Its a 1 hour flight a meal or snack from QF wont make a difference.

I understand your a loyal QF supporter, thats great, QF needs people like you, you are what keeps QF going.

Moving forward however it is highly likely QF will face even harder challenges than those being faced currently.

Nick, Qantas are adjusting their businessed (inlcuding Jetstar) to cater for demand. Qantas as we know it will be around for a long time to come, same too with Jetstar. Sure Jetstar will take on more Qantas routes and no doubt in time Qantas will start some new routes themselves, but it is not the end of their model. Simple as that.

PS as for this first class business, unless I am miss reading there are no plans to rip first class seats out. All they are have done is stopped selling first on certain routes. No doubt when demand rises again they will start selling it again. So for the time being it will be good for the loyal customers, who will no doubt get first dibs at the first class seats and good for the airline as a whole, until the current fiscal crisis is over.

[Andrew Ewen]

Originally Posted by Ash W

...PS as for this first class business, unless I am miss reading there are no plans to rip first class seats out. All they are have done is stopped selling first on certain routes. No doubt when demand rises again they will start selling it again. ....

I think that should read " there are no plans to rip first class seats out at this stage" .

If demand rises to a sufficient level then I am sure that they will start selling F again on these routes , on the other hand , If demand does not rise on these routes and continues to fall on other routes then I am sure that QF will review the F question again .

It was not all that many years ago that QF operated F on most/all of their international network , and I am sure that if we could go back in time we would see that some people thought it was the beginning of the end of QF when most routes started to go to 2 class.

I am pretty sure that in a few years if QF retain F class at all it will only be on a handful of the A380 routes .... is that the end of civililsation as we know it ? No , not even the end of QF as we know it , just a reflection of changing times and travel patterns .

The fact that QF is responding to those changes actually gives me more confidence in their long term future , not less . It is those carriers who stick to the "we have always done it this way" model of thinking who will disappear.

[Ash W]

Originally Posted by Andrew Ewen

The fact that QF is responding to those changes actually gives me more confidence in their long term future , not less . It is those carriers who stick to the "we have always done it this way" model of thinking who will disappear.

Very true Andrew. That is the point I was trying to get through to Nick in particular.

[Owen H]

Qantas have operated 3 class aircraft on routes and sold them as 2 class (using the old terminology before that pesky premium econ!) before... and they haven't had first class on some LA and all FRA flights for a long time.

If you can't sell a seat as a first class seat, but have a fighting chance of selling it as a business class seat, then it makes perfect sense to do so.

I agree with those that believe that this is a sign that Qantas is at least taking steps to mitigate the premium issues that are there at the moment. I'd far rather them sell a few 744 flights as Business than depart with 14 empty seats to preserve the first class image.

[NickN]

Ash, I do understand your point. Lets get that clear. You and I just have differing opinions.

[Ash W]

Ash, please do not quote the whole post directly above you, it is not necessary. Please use the reply button instead -mod


So what do you think Qantas should do then? Just sit stale and then fail, or put in place things like JQ or adjust their product to suit market conditions?