Bouncing back?

For Qantas the grounding – and the subsequent twitter fiasco – is a devastating blow to its brand and brand Australia for while the industrial dispute hardly garnered an international headline the nuclear option grounding was front page around the world.

Centre for Aviation Executive Chairman Peter Harbison said that the while the full effect is not measurable it will last for a long time.
“It will impact yields and sales. People are telling me that they are flying overseas next march and April and will not trust Qantas to deliver,” Mr Harbison said.

“Passengers don’t want uncertainty.”

“It took the airline at least 18 months to recover from the last dispute it had with the engineers,” Mr Harbison noted.

“This has raised Qantas’s negative profile and will be a magnet for bad news.”

Paul Harrison senior lecturer in marketing at Deakin University’s Graduate School of Business writing in the Sydney Morning Herald said that the decision to ground the fleet will inflict lasting damage on its brand and see the airline lose customers.

“The move by Qantas CEO Alan Joyce to ground the Qantas fleet around the world will cause significant damage to the brand, regardless of his motives for doing so,” wrote Mr Harrison.

Echoing Mr Harbison’s thoughts Mr Harrison said that “branding is all about perception, rather than some objective reality. And the key to branding is trust. This move has the potential to further erode trust in the ”flying kangaroo” among its key audiences, including business travellers and the government.”

Mr Harrison believes that the Australian public were conscious of the ongoing negotiations with pilots, engineers and baggage handlers and were willing to shift the blame for delays and cancellations to the broad concept of the ”unions”.

“This worked in Qantas’s favour; by announcing delays were due to ”industrial action”, it was able to handball any responsibility for the problems on to some other ambiguous and unidentified bunch of workers,” Mr Harrison wrote in the SMH.

However Mr Harrison says that “what Joyce did over that crucial 72-hour period, with his acceptance of a substantial pay rise, and then a day later, shutting down the airline, is to ”trash” any support for Qantas management in its negotiations.”

Mr Harrison added that “the fact that the announcement was a surprise to everyone but the Qantas board, which has opened the company up to speculation that it had planned the move, will do Joyce and the Qantas brand no favours at all.”

Worse says Mr Harrison “by surprising the government, and embarrassing them while hosting a major international event in CHOGM, Qantas will also have lost the support of another of their key stakeholders – the government.”

The winner says Mr Harrison is Virgin Australia.

“The business outcome is that Virgin will begin to take market share from Qantas, particularly with business travellers, who simply want a reliable service.

“Through this action, Qantas has forced many of its loyal customers to trial Virgin. This is explained by the Ehrenberg Awareness-Trial-Reinforcement consumer behaviour model, where a key component of any business strategy is to move consumers towards your brand by getting them to trial it. If consumers trial the brand, and are satisfied, then it increases the likelihood of their use of it in the future.”

Mr Harrison says that while some will return, Qantas’s market share, certainly in the medium-term, will be seriously damaged.

“Even if 10 per cent of Qantas’s passengers think twice before booking, there will be a flow-on effect on the Qantas bottom line. When it is all over it will take more than a bit of positive PR and a few full-page ads to get its customers to forgive it,” Mr Harrison wrote.

“Even if 10 per cent of Qantas’s passengers think twice before booking, there will be a flow-on effect on the Qantas bottom line.”

Who wins the peace?

Michael Pascoe, BusinessDay contributing editor, took a different perspective writing that “it’s not the battle that might or might not damage the Qantas brand, but the peace.

“ For all the occasional passenger’s impassioned promise to “never fly Qantas again”, we’re mostly a forgiving lot. Besides, there are handcuffs involved,” Mr Pascoe wrote.

“For those who fly more than a little – the ones who count most for the Qantas bottom line – a lost long weekend’s flying or a quick scramble for an alternative is not a particularly big deal. It happens. Volcanos erupt, the odd engine has an issue, fog closes airports, one union or another goes on strike.”

Mr Pascoe noted that while it can get “bloody annoying” most of us get over it – unless it becomes a habit.

“Which is why the steady build of Qantas flight cancellations was becoming a greater annoyance than two days’ total grounding.”

Mr Pascoe poured scorn on the myriad of instant experts on the value of the Qantas brand and the damage it’s suffered saying they don’t add up to much compared with the reaction of Qantas’ former chief economist, Tony Webber.

“When someone who was so recently a top insider deduces the real brand and bottom line damage that the building industrial campaign was doing, Alan Joyce’s weekend hand grenade makes much more sense.”

“Qantas has suffered from unreliability turbulence recently enough and managed to fly on. Most of us have quickly forgotten how abysmal Qantas’ performance was during the last round of union action in 2008, reportedly suffering an average of 584 cancellations a month for four months with the percentage of on-time arrivals falling into the 60s,” Mr Pascoe wrote.

The reality for frequent flyers says Mr Pascoe “is that there are limited domestic alternatives and the Qantas product is pretty good by comparison, including by comparison with similar domestic operations overseas.”

However he notes that Virgin Australia is providing some “real and improving” competition.

This argues Mr Pascoe is why Qantas couldn’t afford a repeat of 2008.

Mr Pascoe says Qantas’ greatest insurance against limiting brand damage is its frequent flyer program.

“They’re not called loyalty programs for nothing.

“The Qantas Frequent Flyer program has purpose beyond apparently being the company’s most profitable division in its own right, Mr Pascoe said.

“So, with the planes flying again, it will soon enough be a matter of schedules, price, convenience and status points again, rather than Alan Joyce’s pay packet and the spinning of unions and management.”

However he cautions that “Qantas will need to win the peace, reliability will have to be restored, or the brand will suffer the much-mentioned lasting damaged.”

Harder line

Not surprisingly perhaps former Qantas CEO Geoff Dixon took a tougher line on who had damaged the airline laying the blame squarely at the union’s feet.

According to The Australian Mr Dixon told an Australian Institute of Company Directors lunch on the Gold Coast on November 23 that any assessment of the effects of the two-day shutdown should take into account the damage done to the Qantas brand by unions.

“It was a short, sharp shock, but coming up to that [grounding] Qantas was suffering from rolling industrial action,” Mr Dixon said.

“They were suffering from very clear statements being made about a year-long campaign and some union officials advising people not to book Qantas because they’d suffer disruption.

“To me, that is a much, much worse message out there in the world than the short, sharp shock which happened.”

However Mr Dixon did concede that “the timing could have been a bit more flash” but added that he believed Qantas management had acted in the best interests of the airline, its employees and shareholders by grounding the fleet.

“Yes, there were 60,000 people affected, and I understand if I was one of them I wouldn’t be that happy,” he conceded.

“But Qantas carries close to 40 million passengers a year, so what they were doing was trying to ensure some certainty for all those many millions, at the expense, or the pain, of a smaller number of people.”

However Mr Dixon told The Australian that he did not subscribe to the view that Qantas was in any danger as a result of its troubles.
“I think it’s a resilient brand, but I also think the Australian brand is very resilient,” he said.

Value of the brand

According to BrandMatters, a Sydney based strategy and research driven brand and marketing consultancy, Qantas, “perhaps more than most national airlines, plays a strong role in the national ethos.”

It suggests that Qantas’ reputation for reliability, friendliness and of course safety has made their brand alone be valued by some at $1.1billion.

It a special review Qantas flies into cloudy brand territory it says that the airline’s brand has a unique role to play in the Australian psyche, a brand we exclusively call “our own” and one that has no local competition for our loyalties, unlike say Holden and Ford, which are both (of course) of US origin”

It suggests that the public have been making big withdrawals from the Qantas brand equity “trustbank” ever since the aborted Airline Partners Australia bid to buy the airline in 2006 with a series of incidents testing the public’s loyalty.

However it suggests that the grounding was far worse.

“This is a much more dramatic and significant withdrawal from the brand equity “trustbank”.”

BrandMatters highlights that the stranded passengers stories “were told to their relatives and friends, and their frustration was shared across Twitter, Facebook and the media.

“Getting through this turbulence will be much harder for Qantas to explain, and they will find it more difficult to regain the confidence of consumers some of whom have vowed never to fly Qantas again.”

BrandMatters also says on the positive side that Qantas has apologised in national press and given away free flight tickets but cautions that “it will take more than this to restore the faith of their customers and the equity in their brand trustbank.”

B&T magazine Australia’s leading marketing, advertising and media journal suggests that Qantas’ brand value is up in the air. It questioned leading brand experts who suggest the jury is out.

Future Brand’s managing director Erminio Putignano told B&T’s Madeleine Ross that “considering how big the debacle is, it’s going to affect the brand quite heavily. For ordinary people, and even more so for tourists, it’s very hard to understand what is happening in terms of the negotiations with the unions. For them, it’s Qantas that is behaving like that. So definitely there will be big damage to the brand.”

Brand agency Tank’s managing director Neil Shewan, told B&T that “most people think of Qantas in terms of reliability and safety. We look at brand signals, so I suppose in the short term the brand signals aren’t good. There are thousands of people are caught in this and those people will have some long and lasting memories about this.”

Brand valuation firm, Brand Finance estimated to B&T that the value of the Qantas brand has declined by $100m since January, bringing it down close to the $1 billion mark. The current situation will only serve to weaken that further, the firm’s managing director, Tim Herberden told B&T.

Mr Shewan says that Mr Joyce’s communication has been a plus.

“Alan Joyce, although some love him and some hate him, at least he is out there and he’s talking to people. He’s speaking very clearly about what they’re doing and how they’re doing it and being very front and centre and putting a human face to it. So they seem to be doing the right things in a very challenging situation.”

Of course Mr Joyce himself has worked hard on defending the brand. At one press conference he said; “I think the Qantas brand is an amazingly resilient brand and we’ve gone through very significant industrial disputes before. In 2008 we had industrial dispute that went on for a lot longer than this, had a lot bigger impact on our reliability, had a lot bigger impact on our customers and actually our customer ratings took a bigger dive back then, much bigger than we see now.

I think the brand will recover this time a lot better than it did in 2008 because we didn’t allow the strike to be prolonged and we didn’t allow hundreds of thousands of passengers to be disrupted by the strike.”

However Future Brand’s Mr Putignano, told B&T that the damage will be significant, extending beyond the Qantas brand itself to affect Australia’s own reputation.

“The more concerning thing for me is the big hit on Australia as a country brand. This is typically one of the types of events that can lead to big negativity in the performance of a country as a brand. For many people travelling from overseas, Qantas in many ways is the single most important brand, the biggest ambassador for the whole of Australia.”

All brand executives interviewed agreed that while large withdrawals were being made from the Qantas “trustbank”, Virgin Australia was making large deposits and working overtime to leverage brand standing and poach clientele.

Future Brand’s Mr Putignano summed up for B&T; “Virgin is going to leverage this wonderfully – they couldn’t ask for anything better. They’ve just relaunched themselves, rebranded themselves. If Qantas keeps making these decisions it will be a God send.”

Worrying Portent

And an almost biblical storm in Perth on Tuesday December 7th highlighted the differences between Qantas and Virgin Australia, with the former suffering a public relations disaster by stranding 18 planes with 2600 passengers up to eight hours during an unprecedented thunderstorm (See Contrails).

While the facts were still emerging at press time the reality was that while Qantas could not get planes away or unloaded for whatever the reason Virgin Australia was largely unaffected by the storm and not one other airline stranded passengers on taxiways.

The brand damage for Qantas in Perth was staggering with talk back radio and television alive with passengers who were both confused and furious at being trapped for hours.

The incident appears to have the underlying hint of industrial discord ay insiders at Perth Airport and suggest that harmony at Qantas, a critical element, in securing brand loyalty may some way off.

And the much reported Twitter campaign, which asked followers to described their dream luxury inflight experience to win a handful of items also exposed Qantas to the public’s raw nerve.

Within minutes, thousands of users hijacked the #qantasluxury hashtag to vent their anger at the airline.

But Leon Gettler well known business and marketing strategy commentator writing for The Age Business Day suggests that Qantas has dodged a brand bump and has not crashed landed although it is vulnerable.

“Business history shows that brands with iconic status, like Qantas, are as durable as Oprah Winfrey,” says Gettler.

“But the airline has lost ground. It has plenty of work ahead to regain its status and if it doesn’t manage this properly, it will be a sitting duck.”

Gettler highlighted that a Roy Morgan poll a week after the grounding found that 56 per cent blamed Qantas management.

Gettler highlights that the airline’s brand will be damaged long after peace has been declared with the three unions. “Restoring it is the huge management challenge.”

“Qantas has plenty of work ahead to regain its status and if it doesn’t manage this properly, it will be a sitting duck.”

However Gettler maintains that “evidence and studies show that long-standing brands with strong track records are resilient. The business world is littered with examples of big brands that stuffed up, alienated customers and still bounced back.”

Gettler cites Toyota “recovering the ignominy of auto recalls, defying the so-called experts who at the time said the Toyota brand was finished.”

Gettler suggests that Qantas “must engage better with its customers which it has not been doing.”

There seems little doubt that Qantas’ brand will bounce back – but to what extent and many would argue that the brand had been damaged well before the grounding.

While the frequent flyer program is the glue that will hold the airline together in the short to medium term it is clear from a consensus of analysts and commentators winning long term peace with the unions is critical.