It’s difficult to imagine that a company as detested as Qantas only three years ago can move along the brand spectrum from toxic to embraced by its customers. Dangling a boost in customer loyalty status certainly helped.
Sure, the company produced a “record” profit, but the numbers didn’t shoot the lights out and sent the share price down, so this was a performance that wasn’t about instant gratification for shareholders.
But brand revival is not all about shareholders – it’s a long game that begins with customers.
The metrics around brand and customer satisfaction have taken a significant turn for the better and are ahead of where they were in 2022, but Qantas wants to improve further.
(Remember Qantas also made a record profit in 2023 while Alan Joyce was in charge but the airline’s brand was trashed – not the kind of platform needed to grow future profits.)
Vanessa Hudson, the airline’s chief executive, has grabbed the largest carrot in the marketing arsenal to tempt its customers – the loyalty scheme.
Hudson has upped the ante in the airline loyalty wars with Virgin domestically and with the legion of international competitors on offshore routes.
Qantas’ 18 million loyalty members can now earn status points by spending on other goods and services rather than just flying.
And it is status points that enable loyalty members to move up through various tiers (starting at bronze through to the highest platinum one) to receive all manner of goodies such as lounge access, baggage allowances and priority boarding and better dibs on reward flights.
Additionally, Qantas will allow loyalty members to roll over some portion of their excess status credits to the following year.
The achievement of status or tier levels is what keeps customers sticky (and less price sensitive) at a time when numerous international airlines are upgrading their premium products with wider seats with better pitch, enhanced Wi-Fi, suites (rather than seats) with high thread count bedding in business and first class, vintage French champagne and menus devised by world-class chefs.
Beyond the improved loyalty perks, Qantas is bargaining that its fleet upgrade will also keep customers and shareholders happy.
The good news for shareholders is that the part of the new fleet which is already operating inside Jetstar is both a better product for customers and more fuel efficient.
Jetstar was the star performer inside the Qantas stable, with its domestic operations posting a 38 per cent improvement in earnings before interest and tax, of which 60 per cent was attributed to new aircraft, which enabled the opening of new routes.
Qantas is also at the early stage of upgrading its fleet – a move that was long overdue after years of lower expenditure on new aircraft under Joyce. It is a necessary but expensive exercise for the airline that needs to experience a return on this investment.
Capital expenditure in the current year is expected to come in at around $4.2 billion and move up an additional $1 billion the following year.
The half-year results released on Thursday also included the headwind of higher government and airport costs, which took some of the gloss off the company’s financial performance.
Part of Hudson’s plan is to run hard on achieving “transformation” benefits, which is code for reducing costs.
Of course there will be artificial intelligence related productivity savings. But Qantas achieved status as an corporate outlier when it announced it would create an additional 8500 jobs in the next four years. Some will be generated by a new cabin crew base in Singapore, but the rump of the additions will be in the cabin crew and pilots needed to staff new planes and routes such as Project Sunrise, which will fly non-stop from Australia’s east coast to London and New York.
Roll on, the new-look Qantas.
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