TTF Leadership Summit – Alan Joyce
Thank you for the invitation to speak today.
I know that the annual leadership summit is the highlight of TTF’s events calendar, and this year’s program is extremely impressive.
The themes of access, competitiveness and productivity are highly topical, against a background of change in the global and Australian economies.
I think the tourism industry is in broad agreement on what its priorities should be over the next 10 years and beyond.
When the industry speaks with one voice, as it did on the Passenger Movement Charge, it is an effective advocate for those priorities.
What is good for tourism is good for the Australian economy, and TTF does an excellent job of making that point.
But tourism markets are fiercely competitive. And Australia faces significant challenges, including the strong dollar and a growing cost base.
We must develop a clear vision for the kind of destination we want to be. And we must build the branding, networks and infrastructure needed to support that vision.
We are going to have to be smart about how we do it, because public and private budget constraints mean the funding pool is not infinite.
There have been some positive developments in recent years, through the evolution of the National Long Term Tourism Strategy and the Australia Unlimited trade initiative.
However, there is no room for complacency. Many other countries have superb tourism attractions and are developing smart campaigns.
The field is expanding as governments around the world recognise the value of tourism for the national brand.
No company is more invested in Australian tourism than the Qantas Group.
So a strong Qantas Group means a strong tourism industry.
Like the industry as a whole we confront a range of challenges and opportunities, and we are making the changes necessary to meet them.
This means building on the strong parts of our business – Qantas Domestic, Jetstar and Qantas Flyer – and turning around the one weak part, Qantas International.
It means transforming our business through investment, training, new technology and more efficient ways of working.
And it means establishing new partnerships to build a global network better suited to the modern aviation marketplace.
It’s this last point that I will focus on today – the importance of global aviation networks to our national tourism performance.
In particular, I’d like to talk about the new partnership between Qantas and Emirates and what it can do for Australian tourism.
I’d also like to mention infrastructure, which is fundamental to tourism and transport productivity.
A global aviation network for Australia
Aviation access is the lifeblood of Australian tourism.
Traditionally, the industry was fuelled by the Kangaroo Route from Europe, the Pacific route from North America, and the trans-Tasman route from New Zealand.
In the 1980s Japan became a major player.
Now the broader Asian region is leading the way in visitor number growth, with China at the forefront.
The Qantas Group plays a big role on all these fronts, flying from Australia to every continent bar Antarctica.
The Jetstar-branded airlines provide a pan-Asian network which has huge capacity to draw visitors onto the Group’s domestic services.
Jetstar Japan commenced operations in July and serves five Japanese cities. It has great potential to increase tourism flows to Queensland via Jetstar’s established international services.
Through Jetstar Japan, the world’s third largest economy is discovering true low cost travel.
It is already more affordable than it used to be for Japanese tourists from across the country to connect with a Jetstar international flight from Tokyo or Osaka, and then on to Cairns or the Gold Coast.
On the other side of the Pacific, Qantas serves the US and South American markets through the gateway airports of Los Angeles, Dallas and Santiago.
These hubs link us to the vast networks of our oneworld partners American Airlines and LAN Chile.
So the changing international environment is creating opportunities.
But it has also increased the competitive pressure on Qantas’ international business, which we are moving swiftly to address.
As I said in early 2011, Qantas International is a great airline but a loss-making business.
We have made substantial progress in turning it around since then, and our global partnership with Emirates is another big stride forward.
The partnership remains subject to full regulatory approval and we do not take that process for granted.
However, the prospects are exciting.
This is the most significant airline partnership that Qantas has ever entered into. It is a 10-year agreement that includes integrated network collaboration, pricing, sales and scheduling, and a benefit-sharing model.
Qantas and Emirates are two of the most powerful brands in aviation and our route networks perfectly complement one another.
By combining them, connecting through Dubai, we will offer a truly comprehensive global network.
Qantas will gain access to over 70 Emirates destinations in Europe, the Middle East and Africa.
Emirates will gain access to more than 50 Qantas destinations in Australia, and we will coordinate our trans-Tasman services.
The partnership with Qantas will increase Australia’s magnetic pull as a destination.
It will grow the pool of source markets where we can sell Australia as a destination.
Our ability to aggregate demand and disperse it across Australia, via Dubai, will be greatly enhanced.
One of the examples I use is Germany. Qantas currently flies only to Frankfurt, once a day.
While the Frankfurt route has been underperforming for some time, and pulling out would have been inevitable, the Emirates partnership actually multiplies our presence in Germany.
We will be able to sell Australian itineraries in four German cities: Dusseldorf, Hamburg, Munich – and Frankfurt. Emirates flies to these cities nine times a day.
Similarly, the Qantas code will appear in new cities from the Atlantic to the Mediterranean:
At the same time, people all over the world will see Emirates adverts encouraging them to visit places like Cairns, the Gold Coast and Tasmania. These destinations, among others, will become part of the Emirates network because of the Qantas partnership.
On the Tasman, Emirates’ A380 services will be integrated with Qantas’ high frequency schedule. The Emirates code will appear in Wellington and Queenstown for the first time. And we will consider launching new routes such as Perth-Auckland.
This combination of network and sales power would be effective on its own.
But it’s going to be amplified by dedicated joint marketing campaigns and closely aligned frequent flyer programs.
Emirates customers with large points reserves will be incentivised to travel within Australia.
And we will fuse our customer service philosophy with mutual customer recognition and exclusive benefits.
The other great benefit of the partnership is the decoupling of Qantas’ Asian hub from the Kangaroo Route to London.
Our services to Asia have always been based on the requirements of onward flights to Europe.
Now we will concentrate on the region in its own right.
We will offer more dedicated capacity to Singapore and Hong Kong – plus retimed flights that enable better onward connections from these hubs into Australia.
We will also codeshare on Emirates flights between Australia and South East Asia, adding further capacity from the region. Our position among Australia’s most dynamic trading, tourism and investment partners will be far more competitive.
Over the coming months we will be working hard to prepare for the launch of the partnership in April 2013. There is a great deal of work to do, but we have been delighted by the positive response we have received from the tourism industry.
I think most in the industry recognise that the nature of global aviation is changing profoundly.
This partnership anticipates that change, and it helps position Qantas for a strong, sustainable future. That, in turn, is good news for Australian tourism.
Infrastructure – a national challenge
If global aviation networks bring overseas visitors to Australia, infrastructure determines how efficient and enjoyable their journey is.
Of course, it is also central to national productivity and Australia’s quality of life.
Everyone agrees that we need more and better infrastructure.
But the question is how do we pay for it at a time when government funds are scarce?
Passing the costs through to the user years in advance is not viable, as I have stated in relation to BrisbaneAirport.
Nor do most businesses have the capacity to build their own infrastructure, as some mining operators have done in Western Australia.
Despite the good work of Infrastructure Australia, there is still little consensus on what our national infrastructure priorities are and how we can get them built.
There are divisions between the federal government and states, between public and private sectors, and between industries within the private sector.
The debate over Sydney’s aviation capacity is another example.
We now have a smart new vision for KingsfordSmithAirport which addresses the specific challenges of the Mascot site and the global trends shaping aviation.
This is a proposal that everyone in the aviation industry should get behind as a means of maximising the efficiency of an existing infrastructure asset.
But it has taken far too long to launch the process of building a second airport – while other countries in the region have pressed ahead with their own ambitious airport building programs.
As I’ve said before, China is building an airport every 23 days – yet we’ve been debating a second Sydney airport for 23 years.
There is no easy solution, but at a national level we must bring focus and rigour back to the discussion.
We do not have the extensive sovereign funding resources seen elsewhere in the Asia Pacific, or in the Middle East.
Instead we have to consider innovative funding models, asset sales where appropriate, the role of superannuation funds and other fund managers.
Equally, we have to acknowledge that we cannot do everything at once.
The private sector will only step up if stringent cost-benefit analysis has taken place – and government will not step in unless clear national economic benefits are articulated.
Looking ahead, I think there is huge potential for the Australian economy to thrive as a tourism and trade destination in the globalised economy.
We have solid economic fundamentals. We have the skills, knowledge and human capital, not to mention a national brand that resonates in all corners of the globe.
We are close to the world’s fastest growing region, but retain strong links with our traditional source markets.
There are certainly headwinds – structural challenges in the economy and a tightening financial environment.
However, if we can build the right networks and infrastructure to make us truly competitive, then I believe we can unlock our natural advantages.
The process of transformation will not be easy, but the eventual rewards will justify it.
Thank you once again for your time this afternoon.