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What’s in a brand? Ruminations on Virgin Australia and Qantas

written by Gerard Frawley | June 24, 2011

My family and I flew on Qantas from Sydney to LA and back in May for a short holiday.

Remarkably, both flights left on time, they weren’t cancelled due to the discovery of rats on the aircraft, we didn’t divert into Noumea on the way home, all our bags came out at both ends unscathed, and we experienced no engine failures, or any other mechanical mishaps.

For all the misadventures of Qantas in the media of late, the flights were a showcase for all that is good about Qantas. Both flights were on A380s, which were clean, modern, comfortable (well, as comfortable as economy class for 14 hours can be), the Panasonic IFE systems worked perfectly (and were loved by our kids), the cabin crews – especially the crew going over to the US – were friendly, professional, and engaging with our young daughters, and the check-in staff were cheerful and proficient.

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At some point during the 28 hours or so flying to the US and back it struck me that if the A380 represents the pinnacle of Qantas service today, that experience is to a large degree thanks to now Virgin Australia CEO John Borghetti, who I interviewed for Australian Aviation (see p28 of the July issue) shortly after returning home. When Borghetti was the number 2 at Qantas he was a driving force behind much on show on the A380, from the revised Hans Hulsbosch livery, to the Marc Newsom designed interiors, to the cabin staff who had undergone training at Qantas’s $10 million Centre of Service Excellence.

These are all elements that make Qantas at its best, world’s best, and are similar to the  elements that Borghetti is now bringing to Virgin Australia in his new role as CEO there, from a new Hans Hulsbosch designed livery and branding, to new interiors with an emphasis on premium product, and enhanced service training.

But in listening to Borghetti speak, and observing the changes he has brought to Virgin Australia, you get the impression that at Virgin he has been given great freedom to put his stamp on the look, feel and strategy of the airline, whereas at Qantas he was constrained, perhaps by financial realities, perhaps by differences of opinion and strategy with then CEO Geoff Dixon.

A key point Borghetti pushed in the interview was the need for consistency – consistency of product, consistency of branding, consistency of service. That’s why the Virgin fleet is going through an aggressive repaint and refit program, why staff will undergo further customer training, why within hours of the Virgin Australia launch, elements like airport terminal signage, business cards, boarding passes, the website and more, featured the new branding.

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One of these airlines has its roots as a low cost carrier, one sprung from a premium 'legacy' airline. (Seth Jaworski)

On the other hand it is a lack of consistency that makes Qantas at its worst middling to ordinary – a generally ageing fleet with 20 year old 767s with tired interiors and ancient projector movie screens, sometimes disengaged flight attendants and service staff, 747s with problematic IFE, aircraft still in the old livery three years after the new livery was launched.

Then, for a ‘full service’ airline, there is the basic snacks offered as the inflight service on domestic flights, difficulties in redeeming frequent flyer points, now charging for emergency exit rows, codeshared Jetstar services where Qantas doesn’t fly in its own right (ie to the Gold Coast), and placing new limitations on domestic baggage allowances.

It is interesting to reflect that for so long the strength of Qantas was seen as its brand, but where the Qantas brand stands today is really highlighted by what Borghetti is doing with rebranding Virgin Blue as Virgin Australia.

So what does Qantas’s brand represent today? Brand new A380s with designer interiors, or ageing and sometimes unreliable 767s? A company that for all its Australian-ness that is increasingly associated with offshoring and outsourcing (think Jetconnect and Jetstar Asia)?

But a critical point needs to made here – Virgin is in a better position to make changes and introduce initiatives than Qantas, because, as Borghetti confirms in our interview, its cost base is significantly lower. And internationally, Qantas faces a raft of lower cost international carriers, from Singapore Airlines to AirAsia X to Emirates. One of the reasons Qantas is having intractable disputes with its pilot and engineer unions is that for so long Qantas management, whether it be under Geoff Dixon or Alan Joyce today, have publicly talked up the challenges facing Qantas, and talked down its potential, that they have become the ‘CEOs who cried wolf’, even while the airline has remained profitable.

But the airline has been profitable precisely because of cost-cutting, offshoring, growing Jetstar and the continual drive for efficiency. And it is some of those strategies that are limiting career growth and development within Qantas mainline, adding to an evidently growing sense of frustration among staff as to where the airline is headed. Add to that mix unrealistic job security demands from unions, and inflammatory language from management (“rogue unions”, calling into question the viability of Qantas international), and it is no wonder Qantas finds itself at something of an industrial crossroads.

Reproduced from the author’s Notam column in the July issue of Australian Aviation.

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18 Comments

  • John Harrison

    says:

    This artical nail it, Qantas is always slow to act in all areas. IFE, New liverys, new anything. They could be some much more. They need much stronger CEOs with airline backgrounds, they so missed out not making
    John Borghetti their next CEO. I realise the long delays to B787 hasn’t helped with keeping the B767s longer,
    but other airlines have updated their B767s (look at Air Newzealand) So they (Qantas) are their own worst
    enemy.

  • Jimmy

    says:

    Though John how do you be innovate when you have to cut costs to return even the smallest of profits? Innovation costs! Until Qantas sorts out it’s cost base issue the airline cannot grow nor can it be innovative, so it is no surprise that Jetstar is the growth area and innovation on the back burner.

    As for the 767’s considering they are being used on domestic runs, doubt them being old and not up to scratch matters all that much. Qantas domestic is still, even with 767’s one of, if not the best domestic airline anywhere in the world.

    So yes Qantas is it’s own worst enemy, but not because of a weak CEO, he, after all is trying to do exactly what is needed to reduce costs. However the weakness is with the work force and unions hell bent on keeping work practices more suited to the days of the two airlines policy and protected international market instead of helping come up with practices that will help the airline survive and prosper, thus keeping most of the staff in work.

  • Mark Ferraretto

    says:

    John, Jimmy, I reckon you’re both right 🙂

    Innovation does cost. As does no innovation as Qantas is finding out. Qantas is too late with IFE and premium economy. And where are the 777s? It seems Qantas is the only one marching in step on that matter. I have yet to see an opinion justifying Qantas’ decision not to go with 777s or something similar. Putting all their eggs in the 787 basket has consequently bitten them worse than what it may have otherwise. Qantas’ product – even the new one – is nothing to write home about. Singapore and Cathay still outdo Qantas with their business class offerings even though Qantas’ is newer. To say nothing of Singapore’s first class offering. Even economy on Sinagpore is a much more pleasant experience and has been for a long time.

    But having said that, I think that the unions aren’t helping. In today’s environment no business can guarantee job security. And in a highly globalised environment such as commercial aviation even requests to restrict pilots to only Australians is not justifiable. Personally I have no problems with pilots based in Singapore or the UK or Thailand or wherever. Where a company with international operations bases its employees is a business decision and should not be arbitrarily restricted. Nor can wages be kept artificially high in a global environment. Manufacturing has moved to China, IT has moved to India. It is reality. Get used to it.

    The unions overplay the safety card and exploit Australians’ general lack of knowledge of Asia where much of the outsourcing is heading. Cathay’s fleet is no less safe than Qantas’. Neither in Singapore’s or Dragonair or most others here. HAECO (which I live very close to) is responsible for the maintenance of many airlines. I have seen planes from Delta, Continental, Air NZ and, of course, Cathay maintained there. Are Singapore pilots less safe than Qantas pilots simply because they are (ethnic) Chinese? At best that smacks of ignorance. At worst…

    Ultimately I do think Qantas is its own worst enemy. In my opinion I think Alan Joyce needs to be replaced. Qantas needs someone like a Rob Fyfe to restore confidence in the airline, to work with its staff instead of against them, and to innovate. None of this happens now. I’m sure a lot of staff have a love for what Qantas is. But I’m pretty sure that does not extend to management. And that is a big problem.

    The cynic in me suspects that Joyce’s plan is to replace Qantas with Jetstar. The cost base is likely much lower even if the distribution of costs between it and Qantas itself is not entirely transparent. Joyce may be happy to see the end of the Qantas brand and move to a brand that is much weaker but more cost effective to run. I think this is a pity. But then Qantas has no more right to exist than any other business.

    I would love to see Qantas come back from the ashes so to speak. To see it innovate and to see it harness the potential of its staff to bring about what could truly be a great and unique airline. But this won’t happen with Joyce at the helm.

    Mark

    Mark

  • Joe

    says:

    One of these airlines has its “routes” as a low cost carrier, one sprung from a premium ‘legacy’ airline. (Seth Jaworski)

    I think that’s “roots” instead.

  • australianaviation.com.au

    says:

    Thanks Joe, fixed.

  • Bob F

    says:

    Hello John, Jimmy and All.

    I am a Qantas long haul pilot and offer my perspective. Its very easy for us to say as a nation collectively that we need to be internationally competitive but with regard to current Qantas management you really need to understand just what their desired position is before you can judge why we as Qantas pilots and Qantas passengers should be demanding more.

    Qantas likes to talk about our competitors such as Cathay Pacific, Singapore Airlines, Emirates etc when engaging in these discussions. That is the price point at which they want to sell their tickets to the public however when it comes to their wage expectations their real target is at the Air Asia X end of the market.

    In my life before Qantas I both worked for Asian airlines and extensively trained asian pilots. I can vouch that, at their best, they are as capable as any airmen in the world but at the wage level that Qantas seeks to target they will not be poaching any pilots from any of the first world carriers I mentioned previously, they will literally be scraping the bottom of the barrel with the types of pilots that would never be considered for employment with Qantas, Virgin or Jetstar.

    The scenario however gets dramatically worse when you consider that these “average operators” I am referring to are the Captains, the situation with First Officers is even worse and presents an even greater danger to flight safety. Qantas management via Jetstar in NZ engaged in the following sort of process, which is a template for how they would seek to train and employ pilots under their “asian solution”:

    Offer Cadetships to novice pilots, candidates either pay up front much more than 100k for their basic qualification and/or are bonded to their employer. Following their basic training they commence specific aircraft endorsement training such that this pilot, now with several hundred hours total experience, can qualify for the role of First Officer.

    Again this is at significant expense for which most candidates must be bonded. The bond is reduced over a period of 3 to 5 years however here is the kicker and read carefully so that you understand.
    If for any reason over the bonded period they loose their employment, downsizing, illness or discipline etc they owe the company the ENTIRE AMOUNT of their original debt.

    I can absolutely assure you that on a daily basis we are continually confronted with a number of issues that are not black and white, we as pilots are continually in need of exercising our best judgment to pursue a safe outcome. Many of the decisions we make cost our employers money however we do what we do without the threat of unemployment and the possibility of financial distress.

    Would you like to send your loved ones under the knife if you knew that if the surgeon concerned made a decision in your best interest and exercising his best judgement that never the less cost his employer money he potentially not only faced the sack but potential financial ruin?

    I could go on and on, the next issue is “Authority Gradient”. Quality employers spend time and money to ensure that co pilots are adequately trained and experienced such that the feel free to “speak up” when they observe their more experienced colleagues stuffing up. This freedom is essential as many smoking holes in the ground over the years have resulted from errors that were observed junior crew members who felt incapable of speaking up.

    Again systemically here we have a problem, experienced but average Captain who for obvious reasons is not first pick for a quality airline accompanied by a completely inexperienced First officer, potentially financially encumbered to the airline.

    Now lets throw into the mix language difficulties as both pilots first language might not be english and neither a language in common, challenging weather, aircraft serviceability issues (everything I refer to is mirrored in the maintenance department) and “Legal” but completely irresponsible rostering resulting in a permanent state of fatigue and you have a recipe for disaster.

    Fatigue: let me explain to you the difference between “Legal” and “Safe”. in Qantas when we fly from Japan to Australia we are always 3 crew, proper rest is assured for each pilot in a proper bunk. In Jetstar they operate 2 crew, no rest facility and legally both pilots must remain in their seats except for toilet stops. No body wants to crash at the other end so what frequently happens is that one pilot rolls up his coat and sleeps on the floor whilst the other watches the aircraft!

    Every day on these routes we dodge massive thunderstorms and the types of conditions the felled the Air France AF447 Airbus last year in the South Atlantic, this is hard to do when one pilot is asleep on the floor if the other one nods off in his seat because it is 4.30am and no one is there to watch him. The reason why we have not had a problem so far is that the australian Jetstar pilots, irrespective of working crazy rostering policies, are good australian operators. How would this situation play out when a Qantas Asia or Jetstar Singapore crew consisting of a Mexican Captain and a inexperienced Malaysian First officer play out?

    I’m sure I have said too much and lost you along the way, the press and public in Australia seem to only want soundbites and throw away lines. When we refer to job security we are not demanding “jobs for life”, we are not that stupid. Qantas management has told us that literally “it doesn’t matter how cheap you are, we will never offer you any form of security and we will always seek to pursue a cheaper option”. In aviation the cost of this attitude is measured in hull losses and body bags.

    What we are looking for is the opportunity to on Qantas Aircraft be given the chance to continue offering to the public what they deserve when they pay for a ticket on a first world airline.

    Cheers,

    Bob

  • NJP

    says:

    Bob, you couldn’t have said it better – 100% support you

  • Mark Ferraretto

    says:

    Bob,

    If you are not asking for a ‘job for life’ then what are you asking for? I don’t say this as a criticism but simply because I don’t know! There hasn’t been much detail of your demands in the mainstream press. Ben Sandilands has been a big supporter over at Crikey but there also the details have been a little light.

    Incidentally, Cathay pay its pilots at the same level as Qantas yes? If not higher even. I know Cathay pilots here on very generous packages – salary, housing, school for the kids etc. Surely Emirates must also pay at a similar level. Singapore? Maybe this whole pilots’ wages thingy is a furfy.

    If management, however, have the intention of replacing the existing international operation with another or with Jetstar I wonder if there’s anything you can do anyway…

    Mark

  • John

    says:

    Bob,

    Really your arguments are obfuscation and scare mongering because you are assuming that by paying QANTAS pilots (for example I don’t know what has been proposed) 20% less than they are on now would result in Malaysians and Mexicans flying the planes. The reality is that Virgin 737 pilots get paid about 20% less than QANTAS equivalents and Virgin 777 Captains get probably 35-50% less than QANTAS equivalents. They do so just as safely and just as professionally. You can’t cry poor here, you are employed in an extremely competitive industry where the NEW normal is not the 300-400K that long haul captains earnt before. Cathay Pacific no longer pays the excessive A scales. My information is all the US majors pay around $200000-$250000 a year and this is similar for Singapore and BA (as examples), I am happy to be proven wrong about this as it would change my opinion.

    The rest of your post about inexperienced FOs is one sided. How do the militaries of the world manage to get by with low time pilots in the right hand seat. They actually have a decent training system and ongoing monitoring of performance. So it is possible and this aspect of your post has nothing to do with the cost of training or remuneration.

    Having said that I understand where you are probably actually coming from. Management is treating you without respect, many in the airline are concerned about their promotion prospects, and you are concerned about taking a pay cut (or having to work harder). These I think are the real issues but dressing it up as primarily a safety case is not doing you any favours because people aren’t buying it. Oh and by the way I am not singling out pilots here, your flight attendants and baggage handlers (for example) also get paid too much for doing too little.

    Good luck with it though.

  • Greg

    says:

    John,

    Get your facts right before you comment!! Baggage handlers are not employed by Qantas but are subcontracted out and are on around $17 an hour. If you think that’s excessive, I’d hate to see what you think a poor or decent wage is!!

  • John

    says:

    OK That hasn’t always been the case but on that minor point I stand corrected.

  • random

    says:

    It’s just about impossible to initiate innovation when you’re scarcely able to run a short-term loss because it might scare the market, frighten shareholders and hurt the short-term bottom line. Until someone works out a way to tell the shareholders to lengthen their financial focus then shareholding ownership will continue to be a scourge on the day to day running of the airline. Blame the widespread involvement of superannuation in the Australian sharemarket perhaps?

    I am constantly astounded that Qantas advertising has all but disappeared, that new route pairings are barely announced more regularly than every few years (and the opening of new routes does not supplant the closure of old routes, or their transfer to Jet*), & that innovative events like the 747-400 non-stop delivery flight from London-Sydney are scarce if at all. Emotive advertising using themes like Local Hero from Dire Straits are long gone, and with it any sense of flying being an exciting and somewhat special past-time – everything that made Qantas a “brand of distinction”. Despite many people globally trying to change flying into a glorified bus service, it remains anything but that.

    On a different note, it’s interesting that everyone is ambivalent about huge fuel cost increases, and managerial wage increases but there’s hell to pay constantly because general staff wages are too high! Are the management happy to concede the cost of highly trained staff to the profit margins of the oil barons without so much as a collective whimper? The arilines should be fighting for their staff not against them. They should be reinforcing to everyone who will listen that the pay is deserved.

    The staff are still doing a very complex job at high speeds, requiring consumate skill, enormous diligence, a relatively calm manner, and lateral thinking. You can’t just park an airliner behind a cloud or pull over to the side of the sky when there’s a problem. None of this has changed really in the last 30 years even if the technology has… that just requires a different type of acumen, not a different level of acumen.

    Just because some people are doing it on less money or with less resources, and less sleep doesn’t mean that this is an accurate reflection of the worth of the skill! I would argue pay peanuts get monkeys perhaps but that probably denegrates a great many good staff who spend bloody long hours and sacrifice much to maintain that high level of acumen – working far beyond what they are being paid as more businesses get their way and devalue the net worth of skilled crew as a function of capitalistic supply and demand.

  • Mike Simpson

    says:

    Like the author of this article, my son and I flew to LA in May, returning in June. However our experience was somewhat different on the outward flight. We booked on QF11/QF12 wishing to travel on the A380 in Premium Economy. On the outward flight the A380 was substituted with an ancient B747. Shortly after leaving Sydney, we were asked ‘Is there a person with medical experience on board’, never a good sign.

    We ended up with a person being laid out in the Premium Economy galley, and were told because of this, no food/drinks could be distributed. After 2 hours we were then told we were returning to Brisbane to drop the person off. This took 2 more hours dumping fuel, then 2 hours on the ground refuelling and restocking the galley. The fuel gauge failed and further delayed refuelling. We eventually left Brisbane at 7pm, 6 hours after leaving Sydney and did not get fed for a further hour or so. We had had nothing to eat or drink for 7 hours apart from one bottle of water and one apple.

    The staff were surly and of no help at all. Made even worse when the lights were finally extinguished and the crew kept the lights on in the galley and sat there chatting most of the night. All in all a terrible flight.

    On the other hand, the return flight from LA on 2nd June in an A380 was excellent, the flight crew were younger and much more helpful and caring. The A380 was clean, comfortable and what we expected for the extra fare paid.

    Mike

  • Chris

    says:

    Before we go making more of a hero out ofJB let us not forget that he had plenty of input at QF which led to 767’s still flying today, high wages, low staff morale etc etc.

  • chris quick

    says:

    @ Mike Simpson. Your comments above are quite ridiculous. My family and I just returned from a wonderful week in the snow and on the drive home we were delayed several hours at a complete standstill on the Monaro Highway due to a fatal head on collision between a car and truck. The line of cars went for several k/m as they attempted to clear the wreckage. Our family too was put out and went without food and drink for hours and hours. However, we were more concerned with the poor individuals involved in this tragedy and the personnel attempting to help rather than our personal inconvenience. Perhaps a little more empathy from you for the crew involved on your flight would have been more appropriate given that the crew were probably under duress, pushed to duty hour limitations (I would imagine on a flight to LA) and probably had limited catering provided ex-BNE (not their fault). How would YOU feel Mike if you were the poor person laid out on the galley floor??

  • Mr R Fordham

    says:

    I have been a staunch supporter of Qantas and a F/F for many years, but I have no hesitation in condemning the policy they are following, in denying the their engineering staff a 15% pay increase, since they had no hesitation in handing out the outrageous $5million increase to their chairbound CEO.
    Priorities PLEASE Qantas, safety on the ground and in the air, should I suggest take precedence over high rise office staff, maybe some more of the flying public should think about this, before whingeing about delays to their flights.
    CEO’s!!??, a dime a dozen, they float between comfortable office seats, changing companies at a whim, and with criminaly, exhorbitant pay off’s. (not so when engineers loose their jobs).
    What price our engineers we should be asking??, they of course, only have our lives and safety in their hands.

    I rest my case, Roy Fordham, Platinum Frequent Flyer, Cairns, Queensland.

  • Mr R Fordham

    says:

    Awaiting moderation!!??, whatever happened to freedom of speech and opinion??, I am 80 years of age and appalled.

    A very disappointed, Roy Fordham.

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