Alan Joyce, CEO, Qantas, is determined to continue winning and finding cost savings.
Last year saw a record performance from the airline. So what are your targets for 2016?
In a nutshell, it’s to repeat the three wins we managed last year, which means a record financial performance, record customer satisfaction and record employee engagement.
The bigger picture is making it sustainable and finding the areas where we can really build a long-term, competitive advantage for Qantas in what is a tough market.
Let me give you a couple of examples. Australia’s economy is in transition away from mining and towards services and tourism at exactly the same time that demand for those things is growing in Asia—and especially in China. It’s a huge opportunity if we can get our network, our relationships, and our marketing right. And we’ve got solid foundations with the China Eastern joint venture and the way Qantas and Jetstar are expanding in the region.
The other really exciting opportunity is big data. There are 11 million Qantas frequent flyers and we’re talking to them all the time to get insights into what we could do differently. That feeds into the decisions we make on customer service, but it’s also helping us set up new ventures and move into areas that aren’t traditional for Qantas. We recently launched a health insurance joint venture with an established underwriter that incentivises people to earn frequent flyer points for exercising. If you’d pitched that to me a few years ago I would have said it was marginal, but, by looking at the insights and talking to our customers, we picked up that there was pent-up demand for something different in the insurance sector.
So, data is hugely powerful if you know how to use it. I think we’re only really scratching the surface of what’s possible.
Is there any internal restructuring left to do?
Yes. We’re $1.4 billion into the $2 billion program we launched in early 2014, so there’s about $600 million of cost savings and revenue benefits still in the pipeline. But, the reality is that you can’t put an end date on the need to evolve.
I think airlines have woken up to the fact that we can’t go back to the old boom-bust cycle where you make hay in good times and ride out the bad times.
What we’ve tried do with the transformation at Qantas is create a mindset where people understand that change is a constant and see it as an opportunity to do things differently and better, rather than a threat to the way things have always been done.
Has the Emirates partnership worked as you expected? What have been the challenges or unexpected bonuses?
In a lot of ways, it’s gone beyond our expectations. We’ve flown almost $2 billion in bookings on the partnership code, Qantas’ codeshare bookings to Europe are up four-fold, and customer satisfaction with the partnership and the Dubai hub is up there with the best on our network.
The other thing it’s done for Qantas is free us up to move our assets and investments to higher-growth regions in Asia and the Americas, rather than lower-growth markets in Europe.
It’s inevitable with this kind of partnership that you’ll find things to improve, and we’ll keep looking at ways to do that that. But overall, we’re very pleased with how it’s going.
Are innovative partnerships like this the way forward for a profitable, sustainable industry and do you still see value in the oneworld alliance?
There’s still a role for the multilateral alliances. We know that our frequent flyers get a lot of value out of our oneworld links and those relationships will always be important to us.
I do think it’s bilateral partnerships that are going to have the biggest impact on the industry in the future, as the Emirates deal has done on our links into Europe, and as we expect the American partnership will do on the Pacific and the China Eastern partnership into China. The joint venture model works because it gives you a deep relationship without any of the complexity of taking equity. And over the longer term, I think our experience with these sorts of relationships will stand us in good stead as and when the time’s right to look at greater consolidation.
What’s the latest on the new Sydney airport and what is your view of the airport infrastructure in Australia in general?
We’re big supporters of a second Sydney airport. It’s great that work’s underway after so many years of talking about it. But it’s important to manage expectations around size and scale: this is going to be a secondary airport that caters mostly to LCCs [low cost carriers] and freight, so let’s not build a Taj Mahal. Let’s get the foundations right and grow from there.
Airport infrastructure generally in Australia is in decent shape. We’ve been fortunate to have a lot of control over Qantas’ domestic terminals, which has given us an opportunity to really tailor the customer experience in terms of check-in lounges and so forth.
The challenges I see are making sure that the pricing model is fair—we appreciate IATA’s campaigning against pre-funding—and getting the integration right between planning for airports and land transport infrastructure. With population growth, there’s a risk that airports become bottlenecks and that’s bad for Australia’s reputation as a destination at a time when we want tourism to step up and have a bigger role in the economy.
Airservices is seen a proactive air navigation service provider. What is working well and where would you like to see further enhancements to ATM?
Airservices has been hugely supportive of what we’ve been trying to with new technology. We now operate required navigational performance (RNP) flights into most airports in the country, which adds up to big benefits in terms of lower fuel use and lower emissions. We’d love to see RNP come to our hub in Sydney, but obviously there are some constraints that need to be worked around.
Where are you looking to innovate in the passenger experience?
It’s a two-pronged approach. We’re always going to invest in the fundamentals: new aircraft like the Dreamliner; new lounges like the ones we’re building in London and Brisbane; and tools and training for our frontline people. One of the big opportunities for innovation is in mobile technology—giving people the information and entertainment options they need at each point of their journey. On the one hand, that could be flagging a customer’s risk of missing a flight and giving them the option to rebook.
On the other, it could be super-fast inflight Wi-Fi, tapping into the high- speed satellite technology that’s just starting to come online in Australia. We think there’s potential to open up things like live sports streaming or Netflix that would leapfrog the industry standard.
How can we get governments to understand the value of aviation? Is the industry’s communication everything it should be?
I think the industry’s done a great job in some areas and could do better in others. Climate change is an example of IATA helping get the industry behind a common position and we’ve seen it cut through with governments as a result.
But, the industry still gives out a lot of mixed messages and that leads to inconsistent policy. A market like Hong Kong has made its name on being open to trade and investment, but the decision to knock back Jetstar’s application to set up an LCC there was widely seen as protectionist. I think we’ve gone backwards a bit when it comes to aviation policies that allow airlines to compete on a level playing field.
Is the global MBM—which should be agreed at the ICAO Assembly—enough for aviation to win over public opinion about flying’s effect on the environment?
It’s a step in the right direction, but it’s not enough on its own. Every airline has a responsibility to be accountable for its own emissions and explain what it’s doing about them.
There’s actually a great story to tell here because a lot of the innovations that make airlines better for customers and shareholders also have an environmental benefit. Look at the reduced emissions of the next generation aircraft from Airbus and Boeing, for example.
The IATA AGM is being held in Dublin. Why is Ireland such a great aviation nation and why has Aer Lingus proved to be such a great training ground for many airline senior managers/CEOs?
I’m tempted to say small doses of kerosene in the Guinness. I actually think a lot of it comes back to Aer Lingus being way ahead of its time when it came to managing people. I got moved around every two years and was exposed to almost every part of the business, so it was perfect training for rising through the ranks and eventually becoming a CEO.
When I first came to Australia it felt a lot more like airlines were organised into fiefdoms. We’ve put a lot of effort into breaking that down at Qantas and making sure that we give our leaders the chance to experience different roles.
What makes a great airline CEO? What skills have you found most useful during your time at Qantas?
I can’t think of a business as complex as an airline that is also in the public eye as much as an airline, particularly a national carrier. So, a big part of the skill set is being able to balance competing priorities and focus on the issues that actually need the weight and influence of the CEO.
Surrounding yourself with a talented, diverse team helps—the era of command and control is long gone—but you have to be willing to make the hardest decisions yourself and explain and defend them.
2008 Appointed Chief Executive Officer and Managing Director of Qantas in November 2008.
2003-2008 Founding Chief Executive Officer of Jetstar
Prior to Jetstar, Joyce spent more than 15 years in key positions at Qantas, Ansett Australia and Aer Lingus.