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Qantas, Joyce version, needs to score some good media fast

The Qantas contras are out-headlining Joyce and Clifford, who need some great big gold plated stories to thwart them immediately.

It would be fair to say, whether one admires or detests Qantas under Joyce, that it needs some very good media as soon as possible.

Just read today’s AFR, starting with this story, to see why. The content, which talks about small non-ASX-reportable stakes in the airline by disaffected shareholders Geoff Dixon, Peter Gregg, Mark Carnegie and John Singleton, is not of itself going to surprise anyone following Qantas. Who would have thought they might have some shares?

But it signals trouble soon for the struggling Joyce administration, under chairman Leigh Clifford, because the theme that keeps recurring in the stories about the contras is a ‘change in strategy’.  Joyce and Clifford have been strategic calamities for the airline if measured by stock price (stuffed), dividends (none) and successful strategic declarations to date (none).

It is a woeful mess. Although some readers, bless their contented stomp-on-me-harder souls, seem to enjoy what has so far been wrought.

The usual way Joyce has sought respite from failure has been to bring out the big guns in terms of media. Minority owned non Qantas airlines to cross subsidize long haul Qantas to be based in Malaysia, Singapore, Mongolia or Micronesia or anywhere. Or union death threats that didn’t go anywhere chargeable. Or the ultimate Pyongyang style media event, with a declaration of war against recalcitrant workers, which involved shelling the customers, which was a huge success, costing $194 million in the 2012 financial accounts.

All while the market share was pillaged at home and abroad by smarter, even not so smarter carriers, who stuck to the incredibly passé formula of flying where there was demand in well equipped modern jets that were cheaper to run, despite the advantages Qantas should have enjoyed from the fuel purchasing and capital funding benefits of a strong Australian dollar.

But hold on. What do the contras want, and how exactly would they benefit Qantas customers and shareholders?

What they want, in their own words so far, is the under valued assets held by Qantas, such as $3 billion in cash, and the liquidated value of Jetstar’s Asian franchises and the Qantas loyalty frequent flyer grocery and petrol buyer scheme.

It is not about making Qantas play catch up with the Virgins, who have been stealing the lollies from the pantry for some time, but about looting it.  It can be argued that is also what the current management has been about too, except that it couldn’t even organise an inside job. But that might be too cynical.

The point is, neither the current management and board nor the contras have articulated a vision that will make Qantas better.  The former have a proposal that will make Emirates better, and the latter want to get their hands on what would be fairly priced at around $2.50 a share rather than $1.275 on Friday’s market close.

Dixon et al are correct about the value of the Qantas frequent flyer scheme, but its sale would, duh, mean that it was no longer of continuing benefit to post-pillaging shareholders, and no one in their right mind could imagine for a second that any new owners of the FFP wouldn’t immediately set out to squeeze every last drop of loyal blood out of its members and those enterprises which buy points for halo marketing purposes.

There are I think, a few tragics out there would think the loyalty program is about rewarding them for choosing Qantas. It isn’t. It is about turning the data base into a selling opportunity. This is true of all such programs. The current Qantas program is the best and most generous in the world. It won’t stay that way if Qantas sells it. And most likely, not stay that way if it keeps it, although the process might take more time.

The contras are not there to improve Qantas for you, or me. They are there to make money, as fast as possible. That is, do what Qantas under Joyce and Clifford has failed to do.

What headlines might the immediate future offer for Qantas? Well, new jets for Qantaslink, and a further extinguishment of the extravagent legacy terms and condition for Qantas pilots, engineers, cabin attendants, support staff and anyone who dares to draw a salary would be a start.

And the Hong Kong authorities approving the Jetstar Hong Kong venture could be compared to a 21st century Australian gold rush in China, sort of like a reverse of the history of the Australian gold rushes of the 19th century if the publicists go totally over the top, but then again, both the decision, and the ultimate consequences of whatever decision is made, are beyond the control of Qantas, and might never repay such enthusiasm.

Joyce and Clifford need good headlines, and they need them now.

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  • 1
    jm
    Posted November 24, 2012 at 10:16 am | Permalink

    The issue that I am surprised is missed is around LCC strategies. As I recall all other major airlines (BA, DL, UA come to mind) started LCC’s but then eventually closed them. I assume this was for a number of reasons, and I suspect also because they had a negative impact on the main airline.

    In the QF model, we are seeing its death and Jetstar continues to grow. That seems to be the only strategy.

  • 2
    Aidan Stanger
    Posted November 24, 2012 at 10:29 am | Permalink

    jm, BA didn’t close down its LCC, it sold it to Ryanair. Or possibly Easyjet – I can’t remember which, as the other one bought KLM’s LCC.

  • 3
    moa999
    Posted November 24, 2012 at 12:16 pm | Permalink

    AS I understand it BA, DL, UA LCCs were not greatly divorced from the mainline parent and thus quickly picked up mainline costs.
    Jetstar is far more separate.

    Would also be interested in seeing the size of Qantas mainline today versus say at IPO – fleet size, ASKs etc. I suspect that Qantas has still grown, just not as quickly as Jetstar (or indeed the market) but think that would be no different to Singapore vav JetstarAsia/AirAsia/Scoot or all of the Euro legacies vav RyanAir

  • 4
    TN Kangaroo (Blue Tail)
    Posted November 24, 2012 at 3:10 pm | Permalink

    JETSTAR the modern day Trojan horse….!

  • 5
    Dan
    Posted November 25, 2012 at 8:55 pm | Permalink

    “The current Qantas program is the best and most generous in the world.”

    What?!?!?!?!? Have you even compared QFF to any other program in the world? Please say you were being ironic with such a ludicrous statement?

    SYD-MEL one way on Qantas is 8,000 points plus about $50 in fees. The same flight on Virgin is 6,900 points plus $25 in fees.

    SYD-JFK in Business on Qantas is 128,000 points plus about $600 in fees. The same flight using American Airlines miles is 62,500 plus about $100 in fees.

    I could list literally countless other examples but they would also come the same conclusion – QFF may have been a good program about a decade ago, but a decade without any significant competition in the Australian market after Ansett’s program went under with Ansett has already left QFF as little more than a successful sales and marketing tracking database which happens to have an airline attached to it. There was analysis on the CAPA website a few months ago which showed that QFF was the most profitable frequent flyer program in the world – it earns three times as much per member as the US based programs. More money for the airline means less value for the actual flyer.

    Members have become so accustomed to the “enhancements” (devaluations) which QFF has made over the last decade that they will uncritically think “it’s the best in the world”, letting blind loyalty to Qantas prevent them from comparing the program to others around the world and realise they are being wholly fleeced.

    If all your points are primarily earned from credit card spend then overseas programs are harder to use, but even in that situation you’d be mad to use QFF and should be using Virgin Velocity because you get more bang for your buck. Using the SYD-MEL example above, you need to spend $8,000 on the fee free Qantas Amex to get that, while you only need to spend $6,900 on the fee free Velocity Amex to get the same flight on Virgin.

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