Qantas – The Next-Generation Premium Airline

In his address to the National Aviation Press Club, Chief Executive Officer Alan Joyce announced Qantas plans to introduce new world leading technology, infrastructure and process to revolutionise the domestic check-in experience.

I want to acknowledge that today is Remembrance Day, when we recall the sacrifice of all those who suffered or died for Australia’s cause in all wars and armed conflicts.

Our good fortune today is based upon the sacrifice of so many, past and present. We owe them a debt of gratitude. And I am really pleased to be here today. It has been a busy time at the Qantas Group since December 2008, when the new leadership team took over.

So this is a great opportunity to catch up with Australia’s aviation journalists. Over the past year we have dealt with the consequences of the Global Financial Crisis, through the decisive management of our flying operations, capital expenditure pipeline, cash flow and cost base.

We have taken out nearly 600 management positions, making ourselves leaner, flatter and faster. This is an important basis for a stronger culture of innovation and a platform for us to form wider, deeper and more enduring relationships with our customers.

And we have consolidated Qantas Operations. By pulling numerous business segments within a single Airline Operations unit we can deliver more integrated and seamless service to our customers through direct control over all these core elements of our Qantas business.

We relaunched our Frequent Flyer program to a huge response. Our 6 million member Frequent Flyer base provides us with an unrivalled – even unique – ability to understand customer preferences. We have also been undertaking detailed research to understand niche market segments and explore opportunities to service them effectively.

So we have been repositioning ourselves for the future. And it’s the future I want to talk about today.

We are entering a new era of aviation.

The end of the Second World War signalled the march towards the Jet Age. This was the period of immense aviation growth, when global networks were established, and full service airlines reached their peak. Jetsetters were the aspirational class with the wealth and privilege to enjoy convenient global travel.

In the early 1970s, Southwest Airlines launched the birth of a new age by introducing the low cost carrier. Here was the democratisation of travel and it opened up a world of new destinations to new customers. The low cost carrier model has developed since then and still continues to evolve, with Ryanair one of those at the forefront.

The Qantas Group is in the rare situation of having two outstanding brands in both the premium and low fares categories: Qantas and Jetstar. We believe each has a major role to play in the next era of aviation.

We certainly don’t take the view that one size airline can ever fit all. There’s no future for the middle of the road: the hybrid model is a lost world strategy.
The basis of all that we in the Qantas Group do today, and all that we plan for in the future, is our commitment to core aviation excellence and building shareholder value through our two distinct and powerful brands.

Since commencing in 2004, Jetstar has kept growing strongly and we have significant plans for Jetstar’s future growth.

We have equally exciting plans for our premium carrier Qantas. But before I tell you about some of them, I have to say I’ve noticed way too many advance obituaries for premium travel. Well, I can assure you that the reports of the ‘death of premium travel’ have been greatly exaggerated. Yes, demand for premium flying has been affected during the global downturn, and pretty seriously. But our research confirms that there is now, and will continue to be, an appetite for premium travel among both domestic and international travellers.

That does not mean, however, that premium flying will return to business as usual, 1960s style. Modern premium flying is going through an important evolution. Or rather, we believe it should go through an evolution to maximise its position in a more sophisticated and segmented marketplace.

So far from joining the pessimists, we believe there is a big opportunity to invigorate premium flying for a new era. In fact, Qantas aims to be the first ‘next generation’ premium carrier, shaping the future for premium travel.
To do this we are ready to re-engineer how our products and services are delivered, even in radical ways. While I expect this will be a game shift in the airline sector and for Qantas, it is not an untested concept.

Successful premium brands in other sectors have transformed themselves in recent years.

The modern evolution of luxury has seen some of the world’s top brands broaden their market reach without diluting their core values or brand equity. Mercedes in the car world and Tiffany in fine jewellery are good examples. They have shown that it is possible to create value based on their core brand strengths, by going beyond mere incremental improvements in the way they deliver their products and services to customers.

Mercedes has refocused its people and resources to identify and appeal to new and more customers. From two core car ranges, Mercedes has moved to a multitude of platforms, effectively serving customers it had never sought to serve before. At the same time it has improved consistency and lowered the cost of delivery.

Tiffany’s long-standing prestige has been based on consistent quality and brand excellence. But through different product ranges at different price points, they have found ways to grow their customer base without compromising their core proposition.

The three point star and the duck-egg blue box remain powerful symbols of aspiration.

Another example is Apple. By developing high quality, elegantly simple products, Apple has been able to reach out to niche segments while nurturing the strong values that define its brand. Apple fans are happy to pay a premium for the product – I’m one of them.

Qantas already has a strong track record of innovation in premium travel – by seeking out new markets and anticipating changes in customer preferences. People forget that the Qantas Group actually invented Business Class travel in 1979 – it’s now a global standard.

We were the first airline to introduce specialised cabin lighting on long haul flights in 2003 to promote well-being and reduce jetlag – an innovation quickly followed by many other airlines.

We introduced our market leading Premium Economy in 2008. It has been a great addition to our premium range and has stayed strong through the economic downturn.

Our lounge offerings are among the best in the world. Our First Lounges in Sydney and Melbourne have set new standards. We believe we are the only airline in the world to offer multi-tiered Domestic Lounges: Chairmans, Business and Qantas Club for our various passengers. And the only airline to offer dedicated Domestic stand-alone meeting and small conference facilities with our Qantas Meeting Rooms.

In international flying we’ve just opened a new Business Lounge in Hong Kong and a refurbished First lounge in Hong Kong is due to open soon. We’ve upgraded Business Lounges in Sydney, Melbourne, Auckland, Perth, Narita, Los Angeles, and Honolulu.

With the A380, we have created the world’s first passenger aircraft interior wholly conceived by one acclaimed designer: Marc Newson.

So we know about premium. But to ensure Qantas retains its iconic status, global reputation and commercial strength, we must continue in the great tradition of our company…and keep on innovating.

Over the coming months we will unveil a series of initiatives which will illustrate how we are going to achieve our goals and demonstrate what the next generation airline will look like.

And today I am absolutely delighted to share with you one of those major initiatives: we are calling it Airports of the Future.

Our research with our domestic customers has told us that airport check-in today is nothing less than “a point of pain”.

Check-in takes too long. It causes too much stress. Our customers know what they want: speed and ease.

We all know that time is the new luxury. Convenience offers the edge. And getting there and home again with ease represents the ultimate advantage for the corporate traveller.

So we have embarked on an initiative with two interlinked elements. We call it next-generation check-in.

First of all we are proposing to give all Qantas Frequent Flyers from Silver through to Chairmans Lounge, and all Qantas Club members, their own personal boarding pass, with an associated permanent bag tag.

And here it is: as simple as your existing Frequent Flyer Card, embedded with an intelligent chip.

You’ll be able to speed through check-in, simply swiping your card on the reader. And head to a radically simplified baggage drop or straight through a smoother security process to your lounge.

With your personal boarding pass and permanent bag tag, checking in baggage will no longer be a chore. Instead of stickers and weigh-ins at the desk you’ll just scan your personal boarding pass and drop your bag with its permanent bag tag on the belt. And while the process will be wonderfully simple, the technology behind it will ensure the full range of security checks remain solidly in place.

Our Bronze Frequent Flyers and non-frequent flyers will also see significant upgrades to their check-in arrangements with hosted kiosks and rapid bag drop.

Then there is security, another bottleneck. We all know security is vital and none of us will tolerate any compromise here. So as part of the project we are developing new technologies and associated processes to speed up the security process without compromising our rigorous security protocols.

The personal boarding pass will be a guarantor of recognition, ease and speed through all the airport processes. Once you are onboard the aircraft, the ease is set to continue. We are planning to offer domestic advance seat selection by the end of the year and you can already pre-select a special meal or buy additional baggage allowance. We don’t think premium should be all things to all people – it should be an exceptional experience as defined by each one of our passengers.

After your flight, there is still another clear point of pain, which is baggage collection.

We are working on a separate project to improve that process too, cutting the time-lag from disembarkation to baggage pick up and speeding you on your way faster than ever.

What we are proposing with our airports of the future is at the aviation forefront.

It is genuinely a big challenge, and especially the permanent bag tag component because it is an absolute world-first. We are pushing the boundaries here and we will obviously be working in close concert with various regulatory and other authorities and partners in the aviation industry. But we are not afraid to step into the future and I’ve asked our people to work to an ambitious timetable.

We plan to be trialling by mid-next year in Perth, commencing in Sydney at the end of next year, with Melbourne in early 2011 and rolling out to other CityFlyer ports progressively through that year.

Our plan is to halve check-in time. Or better.

It’s going to change the customer service experience for Qantas passengers at the airport as well. This revolution will enable our employees to focus less on process and more on customer care.

In the long term, it’s about enabling us to put people where they really matter: we are provisioning for long term growth, both in the airline and in the number of ways we serve our customers.

What the airport of the future is all about is that seamless and convenient journey from ‘curb to gate’.

At various times people have suggested that Qantas is going to be Jetstar-ised. Well, no, and never. Qantas is our iconic, premium airline brand. It has enduring value. Far from downgrading our commitment to the premium status of Qantas, we are reinforcing it.

Though we have cut capacity during this downturn, we have a core Qantas network commitment that will not change and stands ready to be expanded as demand requires. But we equally know that the next generation premium airline cannot win if it operates in the same way as many of the lumbering legacy businesses of the past (and some in the present). We must be nimble and creative. That’s where our Q Future program comes in. This is a three-year drive for innovation right across Qantas.

Q Future is about how we at Qantas can work smarter, how we deploy new technologies more intelligently, how we give our customers even better product and service, and along the way, realise significant margin improvement. Our airports initiative is an example of this. Yes, there will be significant up-front capital expenditure. But by processing more passengers through our existing facilities, we can achieve long term growth at lower cost, while delivering better service.

Incremental change won’t be enough for the next generation premium airline. People, processes and technologies must all combine to deliver maximum punch, at minimum expense.

We see opportunities in everything from our information technology processes to aircraft configuration to fuel conservation; from fleet simplification to supply chain management.

The evolution of Qantas as a premium brand will involve more initiatives like this – where we re-design processes and operations to meet the evolving preferences of our customers.

Next year is our 90th birthday and Qantas is part of the fabric of this nation.

The best way to pay tribute to our past is to build an exciting and sustainable future.

To do this, we are going to be more creative, more efficient and more effective than ever across our operations.

We are challenging ourselves to be smarter and more streamlined, in order to deliver fantastic product and service to our customers.

That’s how we will continue the great tradition of Qantas innovation – by becoming the world’s next generation premium airline.