Transforming the long haul market

Qantas enjoys a virtual monopoly on business class travel in the world’s most robust economy and if the airline had made the right choices many years ago then some estimate that on fuel alone they would have been $300 million better off.

Those choices? The 777 in 1996 and premium economy in 1997.

The 777-200ER was perfect for many of Qantas’ leaner long range routes as well as off peak 747-400 routes and the airline would have certainly progressed to the -300ER and possibly -200LR.

It would have been an accountant’s dream to be operating double daily 777-300s on Sydney-Perth peaks rather than 747-300s.

A rather canny Qantas skipper told Contrails recently that for the 2009 year just ended Qantas would have saved $300 million fuel by using 777-300ERs instead of 747-400s for the 12 months.

Contrails understands that Qantas has been to the 777 trough about 7 times and in fact the A380 /A330 decision in 2000 was out of the 777 project.

Former CEO Geoff Dixon told Contrails a number of times that “our people could never make the business case for the 777.”

Yet it is the mainstay for the world’s most successful airlines – Emirates, Singapore Airlines, Cathay Pacific, Air New Zealand, Air France and the list goes on.

Dixon added that there were concerns about crossing the Pacific with a twin but he conceded when prompted by Contrails that the airline had been one of the pioneers of ETOPS both as TAA with the A300 for 90 minutes across Australia and Qantas with the 767-200ER for the Pacific.

Besides you don’t need ETOPS to fly to Europe, which Qantas largely abandoned because it didn’t have a 300-seater.

It is not too late to get aboard the 777 – particularly the 777-300ER as a 747-400 replacement for non A380 routes.

Australian Aviation, reflecting the industry views, raised premium economy with Qantas in 1997 and then CEO James Strong said the same thing. “We can’t make the business case,” which seems incredible for an airline the carries the world’s second tallest people the longest distances

Before he exited last year Dixon admitted not introducing premium economy earlier had been a serious mistake.

One is left wondering where these decisions, which are not rocket science broke down – middle or upper management.

One also wonders if the recent purge at Qantas has rid the airline of the people who have been road blocks or did Qantas’ focus on Sydney-London, Sydney – LA and business class blind them to the rest of the market and emerging threats.

It is sobering to remember that the last marketing initiative of Qantas was business class in 1979 with TAA DC-9 first class seats.

The question that Qantas management should be asking is why isn’t the airline leading not following and worse the airline is about to be blown away by some new competitive threats that Contrails is privy.

Part of the new Qantas must be greater incentives for staff. It’s no good singing the old “you are lucky to have a job line” as Australia moves towards another resource boom and other industries dangle massive salary hikes in front of its engineers, frontline staff and flight attendants.

The bench mark going forward are the part time dishwashers who can earn $100,000 in WA’s northwest on a two weeks on /one week off or the mining engineer who is a earning up to double that.

The new Qantas management has to come up with something far, far better than $1000 in shares and a $1000 of cash for record profits if it is to retain its best people and incentivize the staff in the coming years.

And it has to get onto the front foot in innovation if it’s to retain and grow its passenger base as liberalisation day by day strips away protection.

It would be folly to sit back and rely on the successful frequent flyer program.