Alan Joyce, Qantas Group CEO, tells Graham Newton about how the airline aims to build on recent growth, and why more female participation in technical roles is the best way to cope with air travel demand.
In recent years, the Qantas Group has restructured to better serve the growing demand for air travel and as CEO Alan Joyce explains, working hard to improve the infrastructure and create successful joint ventures will further the airline’s ability to expand. However, most crucial is the need to appeal to a wider market in recruitment.
How is 2018 shaping up for the Group?
We talk about the trifecta of delivering for our customers, our shareholders, and our people. That’s how we judge success.
We’re still a few months away from reporting our full year financial performance, but we had a record half year. And I think one of the more interesting indicators for our shareholders is the fact we’ve bought back almost 25% of the airline, through on-market share buybacks, since 2015.
Our customer satisfaction data is positive, and we have launched our direct Perth-London service, which was a huge milestone.
New aircraft are always good news for an airline, and we’ll have eight new Boeing 787 Dreamliners in the Qantas fleet by the end of the year. Our dual brand strategy, with low fare carrier Jetstar and full-service carrier Qantas, continues to work extremely well. We keep tweaking that model as the market shifts and it really delivers.
Like all airlines, we’re facing pressures around rising fuel prices. And in our corner of the world, we’re still seeing quite a lot of international capacity growth.
The competition is intense, on both pricing and product.
What is the near-term strategy for the various divisions?
We’re a portfolio business, so the Group’s success ultimately comes down to each division working towards the same strategy.
This kind of approach allows us to leverage our dual brand strategy to offer customers more choices, more seamless travel, and it also helps to develop smarter ways of doing things across our operations.
With Qantas Domestic we’re seeing the benefits of investing to generate margin growth. We’ve added free Wi-Fi and we’re continually investing in our lounges.
Lounge renovations are a bit like painting the Sydney Harbour Bridge. By the time you’ve finished refreshing the whole network, it’s time to start at the beginning again.
Jetstar remains focused on offering low fares, which in turn stimulates demand to a growing list of domestic and international leisure destinations.
In the 2017 financial year (FY17), out of 37 million fares sold by the Jetstar Group, 24 million were under $A100 and it still manages to maintain strong margins. Jetstar will start taking delivery of 18 A321neo’s from 2020.
As for Qantas International, this is an important transitional year. It’s setting up a bright future. We’re unlocking a lot of efficiencies with the Boeing 787-9, from which I think a lot of airlines have benefited.
We’ve started new routes like Perth-London. We’ve started flying between Singapore and London again. And we’ve extended our relationship with Emirates for another five years, which means Qantas customers can still benefit from the incredible reach that Emirates has from its Dubai hub.
How important will the American Airlines tie-up be?
American was our first ever codeshare partner. It’s a relationship that goes back almost 30 years. A joint business agreement allows us to evolve the partnership to better serve our customers together.
It will allow us to expand the number of codeshare routes we both operate and make available a wider range of lower fares and discounts to more customers. Importantly, the joint business will give American and Qantas the opportunity to launch additional routes between the United States and Australia and New Zealand, including new flights to city pairs currently not served by either of us.
What do these new types of joint businesses deliver above alliances or codesharing?
Having a joint business with anti-trust immunity means a level of cooperation that goes much deeper than a codeshare can. That doesn’t make codeshares any less valuable. They are a very important part of our partner network. But a joint business means coordination on a range of factors, including revenue sharing and schedules.
Qantas was founded in Winton, Queensland on November 16, 1920 by Paul McGinness and Hudson Fysh. Both men served in World War I, and the first plane bought on behalf of Qantas was an Avro 504K for £1425
Do you think of Qantas in purely business terms—delivering value for shareholders—or, given Australia’s size and distance from other countries, is there a public service element to your strategy?
We’re a business first and foremost. But delivering for our customers is ultimately how we deliver for our shareholders. I think all airlines are acutely aware that their job is connecting people.
It’s probably more acute in Australia because of its sheer size and the remoteness of some towns. We did start life as a mail service in the outback. But it had to add up then and it has to add up now.
Being an end of the line carrier has certainly shaped the challenges we’ve taken on though. Project Sunrise is a good example of that. Qantas is challenging Boeing and Airbus to deliver an aircraft capable of flying regular direct services like Sydney-London, Brisbane-Paris, and Melbourne-New York nonstop with a full payload by 2022. How important is the new Sydney airport?
We are a big supporter of Western Sydney Airport for the economic opportunities it will bring and its potential to introduce some healthy competition for airport services and charges in the Sydney Basin.
But it’s important that the airport is fit for purpose, particularly given it’s likely to be used by low-cost carriers in its early life.
Regionally, what are the opportunities, trends, and challenges?
The region that Australia operates in puts us on the doorstop of incredible growth across many sectors, including aviation. We see four big global forces that are going to dominate: the growth of Asia-Pacific, the digital and data revolution, meeting the needs of new generations of customers and employees, and climate change and resource constraints.
Each of these mega trends will provide both opportunities and challenges for aviation and the key is building agility into your strategy so that you make the most of opportunities and stay ahead of disruption.
What about Europe and the United States? Are they still major markets?
We fly to more destinations in the United States than any other country we operate in, it is a key market for us.
Our partnerships with American, WestJet, and Alaska Airlines help us offer strong behind and beyond networks for our customers.
And thanks to our partnership with Emirates, we offer customers more destinations to the United Kingdom and Europe than ever before with three ways to get to the United Kingdom (Perth, Singapore, and Dubai) and over 30 codeshare destinations in Europe on the joint network.
Before our Emirates partnership, just over 400,000 customers traveled on Qantas code to Europe each year. Under the Emirates partnership more than 1.2 million customers travel on Qantas code to Europe.
Is the Carbon Offset Reduction Scheme for International Aviation the answer to aviation’s environmental problems?
We are long past the stage where there is any doubt about the credibility of carbon offset markets. At Qantas, we have had a voluntary offset scheme for a decade now and we see the real, concrete impact that our customers’ contributions make in cutting carbon emissions.
What’s clear though is that offsetting alone isn’t going to deliver the carbon reductions we need. That comes down to advances in technology and ultimately biofuels, and those things are going to be driven by the economics of the industry as much as anything else.
Why is the Pilot Academy important and is flying still an attractive job proposition?
Boeing estimates the world will need about 640,000 more pilots in the next 20 years, with 40% in the Asia-Pacific region.
That level of demand makes the academy important, not just for Qantas but for Australian aviation more broadly so that all parts of the industry have access to qualified pilots in a country that relies heavily on air transport. Such demand has put added emphasis on Qantas’ Pilot Academy for the future of the company, and Australian aviation as a whole.
With a global average of 97% males in the profession, key in all of this is addressing the gender imbalance among pilots.
If we’re leaving out almost 50% of the population in our search for the next generation of pilots, we’re clearly not tapping into all the talent that’s available.
As an industry, we need to do a much better job of removing barriers and encouraging women to become pilots and have an exciting career path.
We’ll only close the gap by reinforcing the message that girls and women can excel in technical jobs and by encouraging them to study the subjects they need to take them on. That’s one of the things with which the academy will hopefully help.
Why is the IATA AGM important to the industry?
The IATA AGM is a key event on the annual calendar, bringing together the best in the industry to discuss the many opportunities ahead and to explore ways to prepare for disruption.
I know delegates are going to love spending time in Sydney. We are excited to welcome everyone here as the host airline.