Jetstar to replace Qantas? Here's why that's absurd

No-frills people-mover Jetstar is unlikely to replace its well-established cousin.
No-frills people-mover Jetstar is unlikely to replace its well-established cousin. 

When Qantas invented Jetstar a decade ago, it aimed to be everything Qantas wasn't: a no-frills way to move people with dirt cheap fares and, it was hoped, handsome profits.

So basic was the model pursued by Qantas boss Geoff Dixon and the executive he eventually appointed to run Jetstar, Alan Joyce, that it did not even pursue any style of customer service apart from having the minimum number of flight attendants permissible for the purpose of staffing the exits and the food trolleys.

That was in stark contrast to the world's biggest low-cost carrier Southwest Airlines, which is now America's biggest domestic airline of any type on the back of its quirky, cheery in-flight service.

In fact, when Sir Richard Branson was setting up Virgin Blue in Australia in 2000, he thought so much of the Southwest style that he ripped it off Down Under and the remnants of it are still apparent in Virgin Australia's customer service.

Jetstar's no-service model has performed exactly as intended, until recently, delivering steady annual profits. The recent slide into losses has been suffered by all four domestic airline brands as a result of too many seats chasing too few bottoms – "overcapacity", using the trade lingo – and a soft Australian economy, which has reduced discretionary consumer spending.

But, for almost its entire life, there has been a subterranean "fear" fanned by Qantas unions and others, that the "real" agenda is to replace Qantas with Jetstar.

And almost every year, in the lead-up to the airlines' annual meetings, crackpot stories like Jetstar becoming Australia's main international airline get a run.

Suggestions that Jetstar "is set to become Australia's main international carrier" are absurd.

So is the idea that further cuts at Qantas's international arm will more than halve Qantas's overall size, which is necessary to realise the above doomsday forecast.

It IS quite true that, since 2008, Qantas international has been slashed, led by the axing of three of the airline's five daily services to Europe – the Bangkok to London and Hong Kong to London flights in 2012, and Singapore to Frankfurt last year, leaving just two services – one from Melbourne, the other from Sydney, to London via Dubai.

And Qantas International, which is hemorrhaging cash when only six years ago it was earning record profits, will be targeted for further savings in the next three years.

That will include measures as simple as changes in schedule. "Fleet and network adjustments are earmarked to save up to $600 million over three years for the Qantas Group from the overall $2 billion cost reduction target that is at the centre of the airline's turnaround plans," the airline said on Friday.

That was part of an announcement of an increase in Qantas international services to North and South America, which includes the rescheduling of Sydney-Los Angeles flights with a morning and evening service to better suit business travellers, and the introduction of three extra evening non-stop services per week from Melbourne to Los Angeles.

This coincides with United Airlines' decision to resume Melbourne-Los Angeles non-stops with its new Boeing 787 Dreamliners from October, and Virgin Australia's decision to axe Melbourne-Los Angeles and beef up Brisbane-Los Angeles to daily.

Qantas 747 non-stop services from Sydney to Santiago, Chile, will increase from three to four per week and the daily Sydney-Dallas service will switch to A380s non-stop in both direction six days a week from next month.

The idea that Jetstar would become Australia's main overseas airline is fanciful. Yes, Qantas's once-dominant position has been reduced from more than 40 per cent two decades ago to less than 20 per cent.

But its 16.6 per cent market share among carriers flying into and out of Australia is still by far the largest and dwarfs Jetstar's 7.7 per cent – which, incidentally, is the same as Virgin Australia's international market share with its flights from Sydney and Brisbane to Los Angeles and Sydney to Abu Dhabi, as well as 737 flights from five capitals to Bali and five a week from Perth to Phuket, Thailand.

After Qantas, the next-largest international carrier to Australia is Emirates with just 9.5 per cent, followed by Singapore Airlines with 8.8 per cent.

Just as ludicrous is the idea that Jetstar would get all Qantas's passengers if Qantas international shut down. If that doomsday scenario ever occurred, the beneficiaries would be Qantas's competitors like Emirates and Singapore Airlines, not Jetstar.

In 2009, Qantas spent $10 million on a "centre of excellence" in Sydney to train and retrain flight attendants in the art of customer service and now claims its "net promoter score" among customers – the measurement now widely used in the marketing industry – is higher than it has ever been.

The next chapter in the Qantas saga will be the eagerly anticipated Qantas annual meeting on Thursday, closely followed by Virgin Australia's AGM on Friday.

The results of both will be of more than passing interest to customers of both airlines.

Does Jetstar rank on your international flight choice list? If Qantas wasn't an option, who would you fly with?

Comments