The Jetstar ascendancy is now on in earnest at Qantas.
Qantas CEO Alan Joyce set the airline on course for major changes in his briefings at the full year financial results presentations today.
The three year $1.5 billion ‘Q Future’ cost reduction program is officially about more efficient practices in aircraft procurement and fleet utilisation and processes in general.
This ‘in general’ focus on how its businesses operate really means further replacement of Qantas productivity and workplace practices with those of Jetstar, which made $137 million EBIT compared to a loss of -$77 million by the Qantas brands.
Jetstar will also break the taboo against competing for custom against the full service and money losing Qantas brands, starting with 5 flights daily between Melbourne’s main airport and Sydney in October to counter Tiger’s expansion on its most valuable domestic route.
(Tiger will have 9 flights daily on the route, the same as Jetstar which will retain 4 of them out of Melbourne’s more distant airport at Avalon.)
Joyce described this as flying the two brands in tandem to maximise the value and effectiveness of the dual brand strategy, and underlined that the Qantas schedule would remain at 32 return flights.
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But hands up anyone who has not had their Cityflyer merged into another Cityflyer and discovered that both flights fitted perfectly into the one jet.
That dual brand strategy has until today precluded having Jetstar options being made available on core Qantas Cityflyer routes.
Joyce has killed off that original policy, something he may well have wanted to do when running Jetstar as its first CEO.
Convenient Jetstar options will inevitably spread right across the Cityflyer network as Tiger advances into other key city pairs at a time when at least up until today, both Qantas and Virgin Blue have been retreating.
Stopping Tiger is clearly a higher priority than protecting a ‘full service’ Qantas product that is losing money.
That process will further erode the importance of Qantas staff compared to their cheaper, harder working Jetstar colleagues.
And it is not really something where Joyce has any choice in terms of response. The incursion of low fare alternatives into the once rich domains of legacy carriers is a global phenomenon, full of its own variations from the bare bones Ryanair experience to the likes of Virgin Blue and JetBlue which occupy the middle market zone.
In fact Joyce sent a signal that the race for the middle was on, saying there were new strategies on the way to attract the small and medium business market, because it offered growth compared to the major big business sector which had largely filled its potential.
It has been well known for some time that Qantas will cut back on long haul business class seating in favour of larger premium economy cabins. Joyce confirmed this but gave no further details other than emphasise that the operating efficiency of both the Boeing 747-400s and Airbus A380 would improve if they offered the sort of product that people, or companies, were prepared to pay for.
Joyce also buried any prospect of an order for Boeing 777s, the jet that is being used with considerable effect by major competitors Singapore Airlines, Cathay Pacific and Emirates, and is the fleet choice of V Australia.
His reason was that on routes where the 777 could have been used the Airbus A380 was more efficient and in some cases essential because of scarcity of landing slots.
He also took to the rather lonely ground of being a believer in the much delayed 787 Dreamliner making its first flight this year, and its second version, the stretched 787-9 being deliver to Qantas (for Jetstar) from mid-2013.
But just in case, four more A330-200s were to be leased for six years to allow Jetstar to continue its international expansion.