Alan Joyce – Remarks to CAPA Australia Pacific Aviation Conference

Brisbane | Published on 5th August 2016 at 10:00


It’s great to be back at the CAPA conference.  Congratulations to Peter and the whole team at CAPA for putting on another great event.  And for bringing it to Brisbane, which is such an important hub for Qantas and for the industry as a whole.

The CAPA conference always falls just before our full-year results.  That means I can’t talk about the Qantas Group’s current performance in much detail.

So what I want to do instead is take a step back and talk about some bigger, longer term themes in our industry.

For Qantas in particular, we see huge opportunities ahead.

·         We’re transforming our business with our biggest change program since privatisation.

·         As we disclosed at our half year results, we had our best ever calendar year in 2015.

·         And off this base, we’re growing and investing for the future.

But it’s not just about the Qantas Group.  This is also the time for the industry as a whole to be thinking more than ever about the long term.

Let me talk a bit about why.

Clearing Skies for Aviation?

If you think back over the past 10 years in aviation, we’ve had it all:

·         Global recession, with a few ‘dead cat bounces’ along the road to recovery.

·         Record high fuel prices.

·         Record low fuel prices.

·         Overcapacity in some markets.

·         Geopolitical crises.

·         Growing regulation, for example on carbon emissions.

·         And, weather events like ash clouds on a scale we haven’t seen before.

To the industry’s credit, airlines around the world have risen to the challenge.

Navigated the volatility.

Consolidated where it made sense.

Formed alliances.

Stayed focused on customers.

Worked to improve safety.

And taken a mature approach on issues like climate change.

All of this helped make 2015 the most profitable year in the industry’s history.

Of course, the global economy is still volatile – look at Brexit.  And airlines have to stay disciplined so that we’re ready for future shocks as well as opportunities.

How Qantas is Thinking About the Future

It’s always tempting to just focus on the short term. It’s more insistent, that’s for sure.

And our industry can turn on a dime, as we’ve seen over the past decade.

But airlines also have to make bigger long term bets than most types of business.

Deciding on a new aircraft type can be a 30 year proposition – five years while you wait for a paper aeroplane to take shape from the manufacturer.  And another 25 years of having it in your fleet.

So we spend a lot of time thinking about the future.

And when we do that, we see four big global forces that are going to dominate aviation – and where we see big opportunities for Qantas.

Four Global Forces (and Opportunities)

Growth Markets

Our first global force is the rise and rise of growth markets – which is especially relevant to us here in Australia.

The Asia-Pacific took over as the biggest aviation region in 2009 and it’s the growth engine of the industry today.

By 2025, 20 of the richest 50 cities in the world will be in Asia.

By 2030, China and India alone will make up 35 per cent of all consumer spending in the world.

And by 2034, Asia-Pacific will be bigger than North America and Europe combined in terms of passenger numbers.

But the reality is, if you sit back and wait for that growth to happen, you’re going to be left behind.

That’s why we’ve spent the past few years positioning Qantas and Jetstar to catch the next wave.

We’ve been getting our network right: growing Qantas on business routes and Jetstar on leisure routes between Australia and Asia.

We’ve been getting our partnerships right: working more closely with Emirates, China Eastern, JAL and Vietnam Airlines.

And we’ve been getting our marketing right, including the new partnership with Tourism Australia that we announced this week – which is targeting markets like China.

We believe there’s going to be a premium on trusted airline brands that understand the region and have made a long-term commitment to the region.  And we want Qantas and Jetstar to be out there leading the way.

One final point on growth markets.

The rise of Asia doesn’t mean that North America and Europe will be irrelevant.

Qantas today has its biggest ever network to the US, with American Airlines, and our biggest ever network to Europe, with Emirates.  And we’re keeping a close eye on Latin America, where we have a great partner in LATAM.

But ultimately, we believe the long term opportunities for Qantas in Asia-Pacific are huge.

Digital & Data Revolution

The second global force is the digital and big data revolution.

It took radio almost 40 years to get 50 million listeners.  Facebook had 16 million users in its first year, and has 100 times that number today.

According to some estimates, global flows of information and data now have the same impact on GDP growth as the goods trade.

Yet despite that, EY reckon about 80% of the data available to companies around the world is not being taken advantage of.

So the opportunity for airlines is how to use data more strategically – while also making sure that we have the highest standards of data security.

For the Qantas Group, a big part of our transformation has involved centralising our data and investing in the capacity to analyse it.

We’re using the insights we get from our data to make strategic decisions like airport and lounge investment.

Tactical decisions, like where Qantas and Jetstar fly each season.

And operational decisions, like how we deal with weather disruption.

We’re also using data and insights to make the business case for new ventures: like Qantas Assure, the health insurance business we launched with nib, which encourages people to stay active and earn Frequent Flyer points.

Digital is already a powerful tool for us.  And we believe there is a lot more to come over the next few years and over the long term horizon.

New Generations of Customers & Employees

The third global force is new generations of customers and employees.

Generations Y and Z already have $200 billion of annual spending power.

By 2020, they’ll make up more than 50 per cent of the global workforce.

And they’re very different from the Baby Boomers and Generation X, who’ve filled most of our planes over the past 20 years.

That doesn’t mean we need to reinvent the wheel. But it does mean making sure that the Qantas and Jetstar brands appeal to younger generations.

A lot of that comes down to engagement.

We have a massive Qantas presence on social media.

We have a blog which is taking people behind the scenes of Qantas in a really accessible way.

And we’re holding hackathons, inviting young coders to come in and create products and services with us.  In fact, we’ve got one happening this weekend.

The Qantas brand is our greatest asset. We want to make sure it resonates as much for the next generations as it has for the generations before them.

Climate Change & Resource Constraints

The final global force is climate change and resource constraints.

We know the scale of the challenge here. There are 50 years of proven fossil fuels left.

Even oil companies believe that renewables will be 30 per cent of the energy mix by 2035 – other estimates think it could be as high as 50 per cent.

But this is an area where aviation has an opportunity to turn a challenge into an opportunity.   And we’ve done some great work already.

Airlines were the first industry to voluntarily agree to sectoral approach to climate change.

Earlier this year, ICAO agreed strict emissions limits for new aircraft.

And later this year governments are going to be finalising a market-based carbon offset mechanism for the industry, to come into effect from 2021.

Those policy frameworks are important.  But when you think about it, this is an innovation challenge for the industry.

How do we make sure the next generations of aircraft and engines are even more efficient than the Dreamliner?

How do we work with regulators to make sure that we’re all flying as efficiently as possible?

How do we build up carbon markets where airlines can get the best value for money and benefit communities at the same time?

And how do we get the biofuels industry up to commercial scale?

Once again, we want the Qantas Group to be a leader on this front.

We’re working with GE to use big data to improve our engine performance.

We’re launching a new corporate carbon offset program for our major business customers.

We’re talking to biofuel companies about potential future partnerships.

And obviously we’re continually talking to Boeing and Airbus about engines and airframes of the future.

Climate change is often framed in negative terms.

We need to turn that logic on its head.

And see climate change as a chance to become a more innovative and sustainable industry.


Let me sum up.

We’ve spent a lot of time over the past few years talking about sustainability at Qantas, even while dealing with all kinds of external shocks.

And what we mean by that is that we need to be sustainable in the widest sense of the word.

We’ve been successful for 95 years – we want to be successful for the next 95 years and more.

We want to provide the best customer service, create great jobs for our people and generate returns for our shareholders over the long term.

That starts with the transformation program we’re still working through today – and a commitment to keep evolving, year on year.

But to be sustainable we know we also have to take the long view – as Qantas has done throughout its history.

We want to use the opportunity we have today to build the strongest possible future for the Qantas Group and for the industry as a whole.

So watch this space.

Thank you.