Delivering customer focussed low fares travel

Transcript

Gareth Evans:Thanks, Peter. Morning, everybody. Thanks, Peter, for that introduction. You'll have noticed a few changes from the photograph. I probably look about 5 years older for a start off. Tie's gone. Whoops. Beards come on, I'm in full low-cost mode. So the transition is complete. And Peter did touch on some of the background of me. I have been with the Qantas Group for nearly 19 years in a wide variety of roles. CFO for 5 years during what we probably term the difficult years, character-building years. But it certainly was great to be there as we started the transformation of the organisation and put in place the programmes and the changes and the disciplines that have got us into the position that we are today. 3 years as CEO of Qantas International and some of the changes that are just about to happen there including the rehubbing of 380s through Singapore and the direct flights between Perth and London were things that got into gear during my time running that part of the business. And now 3 months into the role as CEO of the Jetstar Group. And so it's been a fantastic career and opportunity for me to, to see all these different aspects of aviation. The disciplines, the structure that comes with being CFO, the premium airline experience that comes with running One of the truly iconic global carriers and then now the low-cost experience. And it's also great to be back at the CAPA conference. So it's really good to be here today and the last time I spoke I was in the international role. So very good to be here now as the CEO of the Jetstar Group. And also great that I'm taking over an airline that is Absolutely humming. We released our financial results last week. A record profit, first half profit. So the first half to December '17, a record profit for the Qantas Group and a record profit for the Jetstar Group of just over $300 million Australian dollars. About a third of the entire Qantas Group profit for the period. It's also been an interesting journey because I can see and I can compare and contrast the similarities and the differences between the premium airline and the low-cost airline within the same group. An airline that's 95 years old against an airline group that is just over 13 years old. And yet I can really see the cultural differences between the two. The energy and passion that we have in Jetstar is phenomenal. And the can-do culture really drives the organisation, drives the willingness to innovate, to communicate and collaborate, and it really makes Jetstar the airline that we are. Just one little example. This is a couple of weeks ago. I was speaking to my EA and I said to her, it was a Tuesday evening, I said, look, I've got a really awful job I want you to do. You're not going to like this, but we're an open-plan office. We're moving to activity-based working. I said, I don't need to sit in this little— this open-plan desk here. It's very nice to be next to the lawyers and the customer service people, but I could be sitting anywhere. So I think we should move around the organisation, have a week here and a week there, and within a year I'll have sat next to everybody and I'll know everybody. So she said, oh, okay. Came in the next morning, sat down, she said, all right, get up, we're moving to safety today. I went, oh my God, I'm not ready for this. This isn't what I'm used to. And that can-do, do it now, get it done, implement, take responsibility is right through the organisation. And that is the heart of good culture. So, you know, I'm very excited about the new role that I've got. And I'm very grateful and happy to be part of it. And I thought I'd talk today a little bit about the opportunities that exist for low-fares travel in Asia and how Jetstar plans to make the most of that opportunity. And specifically about the smart business model that we employ and our focus on our customers and investment in technology that helps us achieve this. I was looking through the agenda for these 2 days and actually on the flight on the way up yesterday, and it is good that I do touch on some of the themes that come through. Low-cost carriers working with full-service carriers, Alliances and joint ventures, technology, customer. Some of the themes that are talked about on panel sessions across these 2 days. So this is the first CAPA, I think, global LCC conference. And maybe appropriate that it is Jetstar that's talking because in one way you can look at it, you can see that we are one of the world's first truly global LCCs. As I said, it's 13 years or over, just over 13 years since Qantas established Jetstar. And we've grown to be almost a global LCC. We've got 133 aircraft in the fleet made up of a large fleet of A320 aircraft and 11 787-800 Dreamliners and a small fleet of turbos predominantly located in New Zealand. I had the pleasure just before Christmas of giving a prize to our 250 millionth passenger. In just over 13 years, that's a phenomenal amount of growth. That's 10 times the population of Australia in just over 13 years. We are the quickest, fastest growing airline in the history of Australasia. That passenger was actually a family from West Melbourne, and we did give them and their 3 children the trip of a lifetime. And it was very appropriate, I think, that it was a family because Jetstar's philosophy has been about opening up travel for everybody, and we've certainly done that for very many, many families right across all the markets we serve over the 13 years. We have 4 airlines consisting of Australian domestic and international operations, including a successful long-haul LCC operation, and that airline also includes our operations across the Tasman to New Zealand and within domestic New Zealand. And then we also have joint venture airlines with local partners here in Singapore, in Japan, and in Vietnam. We fly directly to 3 continents: Australia, Asia, and North America. And in the continents and regions that we do not operate, South America, Africa, and Europe, we have airlines knocking on our door to put their customers on our network. And Jetstar Japan, just to touch on that, is the largest low-cost carrier brand operating Japan. And we do see fantastic potential for this business with low-fares travel still in its infancy. There is huge growth opportunity in that market and we believe we are well placed to serve the Japanese market as low fares increase. So we, we aren't just Australasian, we aren't just Pan-Asian, we're truly on course and working towards a global LCC franchise. Jetstar Asia, which operates here out of Changi Airport, is a great example about how global we've become. It has more than 30 codeshare and interline relationships and agreements with airlines as diverse as Emirates, Ethiopian Airlines, Jet Airways in India, LATAM, and United. And it's, as most of you here would know, it's not common for full-service airlines to connect their customers onto an LCC. So it's a real credit to the Jetstar Asia team led by Bara, who is here today, that we've, we've done this. And the connectivity right across the Jetstar Asian network is quite a significant amount of revenue that moves between our branded airlines. And the one that has the most volume of that connecting revenue is, is Jetstar Asia here in Singapore. Also, one thing that stands out for Jetstar Asia is its operational excellence, its on-time performance. In 2017, they were the most punctual airline of both full-service carriers and low-cost carriers in the Asia-Pacific and the most— second most reliable LCC in the world. Qantas will be putting even more of its customers on Jetstar Asia from later this month when we will be redirecting more flying from Australia to the UK through Singapore. So on the 26th, hub for London moves from Dubai— Europe moves from Dubai to Singapore. We have A380 services coming in from, from London into Singapore and from Sydney and from Melbourne. And the ability to hub and connect onto Jetstar Asia is a significant part of the business case that made that possible. So the combination of all the airlines here in Singapore makes the Qantas Group the 2nd largest group in this market after the national carrier. And what we're doing in terms of growth and connectivity certainly is great news for Jetstar Asia and for Changi and for Singapore as a whole. And while Jetstar started in Australia, it has grown to be this global airline group The opportunity does lie here in Asia. This is a huge market, the largest aviation region in the world with 1.2 billion passengers today, which is one-third of global aviation traffic. It will grow to 2.8 billion by 2034, or 40% of total global traffic and more than Europe and North America combined. This is staggering growth. There are more Jetstar aircraft flying to Asia or to and from Asia than in Australia and New Zealand, which has been our traditional heartland. And 50% of the Qantas Group's capacity is now dedicated to Asian routes. Jetstar flies to 13 Asian countries and territories and 54 Asian destinations. And we have over 100 services a week to China and its territories. So growing with Asia and continuing to grow with Asia is a key part of the strategy for the Qantas Group and very much so for the Jetstar Group. And the structure that we have is very much aligned to that growth opportunity. And we, we look to the future to continue to grow with the market. But also to take advantage of this opportunity, we've put in place a simple business model and we've partnered with strong local partners in key markets. Partners who know those local markets and we can leverage that local knowledge. Our business model is pretty simple. It's a low-cost carrier. We keep our cost base as low as we possibly can. We offer consumers a seat at the lowest possible price And we provide them with choice of extras depending on their individual needs and preferences. Last year, of 37 million fares sold, 2/3 were sold for under $100. We really have democratized flying and opened up the market to millions of people who were unable to fly before. And for those consumers who want to travel with Jetstar but want more, such as meals, in-flight entertainment, extra baggage, extra legroom, flexibility of last-minute flight changes, or other extras, they can do so for a fee. The other keys to this model, and it was a key element when Jetstar started, is the dual-brand strategy. This is where in Australia Qantas and Jetstar work together to segment the market and jointly make network scheduling and sales decisions. And together that makes us a pretty formidable competitor. In the Australian domestic market, the 2 brands, Qantas and Jetstar, account for more than 80% of the profit pool. And we have great flexibility to target segments of the market and quickly make changes and that make the market dynamic. And this is done at a significant level of detail. We've broken the market in Australia down to 7 customer segments leveraging the huge amount of data that we have. We know which segments point towards the Jetstar brands, which segments point towards the Qantas brands. We analyse by time of day, by day of week, by time of year. For Jetstar, the holiday periods, special events are key times of year. And we can shift capacity quickly between the 2 brands to make sure we have the right brand on the right market at the right time. The Gold Coast is a fantastic example of where this works. When Jetstar first started, the Gold Coast, which is a leisure— primarily a leisure destination, Qantas pulled off the Gold Coast and left the market completely to Jetstar. But a few years ago we noticed that there was an increasing amount of business travel and small to medium-sized enterprises. And so Qantas came back onto Sydney-Gold Coast and then Melbourne-Gold Coast operating alongside Jetstar at key times of the day when business travellers want to fly. And now both Qantas and Jetstar are performing extremely strongly on this market. An international example is Honolulu. When Jetstar first started, we all within the Qantas Group thought Honolulu, it's a leisure market, That will ultimately end up being a Jetstar route. Jetstar started with Qantas still on there, and today still both brands operate because there is a market segment that wants the premium experience and is willing to pay for it, and a market segment that wants the low-cost experience and wants to take advantage of those fares. We've just reintroduced Qantas onto Bali for exactly the same reason, and both brands can exist side by side focused on the key customer segments because those customer segments exist on those markets. We've taken this dual brand strategy into Asia as well. We operate a dual brand strategy with JAL in Japan. We operate a dual brand strategy with Vietnam Airlines in Vietnam. And to a certain extent, you can say we operate a dual brand strategy here in Singapore with Qantas. One that will actually become more important as Qantas adds capacity into this market before the end of the month. So getting our network right, working with our partners, taking advantage of Asia is key for us. Another key focus is focusing on investing in our customers. We are a customer-centric organisation. Jetstar is a customer-centric organisation and we put our customer at the centre of what we do and we need to be clear about our relationship with the customer. This doesn't mean that we have to give the customers everything that they could possibly want but we have to be clear and simple and transparent about what we do and don't provide and we have to communicate in the ways that— with our customers in the ways that they want to be communicated with. One of the first things that I did as CEO of the Jetstar Group was appoint a Chief Customer Officer. This will ensure that we can maintain the momentum that exists for customer initiatives and take them even further. When I came in, I think about customer strategy from a low-cost carrier perspective and compare it with customer strategy from a premium carrier perspective. It's actually more difficult. When you're running Qantas International, your customer strategy is set for you. You've got to have lounges, you've got to have flatbeds, you've got to have really nice food on the planes. You get a choice of what colour you can paint the lounges and how much stuffing you want to put on the flatbeds, but you've got to have them because that's the market you're in. Whereas a low-cost carrier, you've got a whole range of choice in terms of what customer proposition you want to provide. There's a brutal low-cost model, there's a soft low-cost model, there's everything in between. And you really have to be clear and transparent with your customers and with your staff about where you sit in that spectrum because you live or die by the relationship that you have with your customers. And we at Jetstar are all about putting customers at the centre of our model. All of our cabin crew teams and airport teams, around 3,500 people, have gone through customer service training. Which focuses on not on the functional side of customer service but on the people side of customer service. Not how to pour the drinks but actually how to interact with people when they might be having a bad day or you might be having a bad day or you, you know, you're in a disrupt situation or you've not got what it is that that particular person wants. It's about giving our people the tools to positively interact with customers. We're also improving how we listen to our customers. Last year we launched a customer panel in each of our major regions aimed at helping us design our products and services in line with what 35,000 customer members who have opted onto our panel are telling us. And we've made changes to our business as a result of listening to the panel. For example, we started flying from Singapore to Okinawa and we start our sales earlier introducing new payment methods as a result of of feedback we've had from our customers. Finally, I just wanted to talk about another key focus which is on making smart investments in technology. Without doubt, the future for airlines lies in technology and digital and that's all airlines. Our biggest investment in technology is still in our fleet and last week when we announced our results it was a great number for the Qantas Group and for the Jetstar Group. But the most exciting announcement was around the fleet and the fact that we would be taking 18 Airbus A321neoLRs into the fleet from 2020. This new technology aircraft is important because not only does it bring new technology to the group, not only does it bring a much more efficient and effective cost base into the group, But it brings significant flexibility to our network. This aircraft can fly much longer distances than the existing Model A320/321s, and it opens up new opportunities. For example, we can fly this plane during the day domestically in Australia, and then back of the clock, we can then operate an East Coast Australia to Bali service, one of our key markets, freeing up existing 787 capacity that can fly to additional destinations or add frequency to existing destinations. 321s will be super high utilisation aircraft with a fantastically low cost base which free up higher value assets, effectively wide-body long-range aircraft to do other things within our network. So this is a fantastic use of technology. The ability to use it flexibly. These 787s can then be deployed to places like Vietnam, to China, to Hawaii, or to new destinations. We've around 80 A320, A321— an additional 80 A320, A321neos on order with Airbus, which will, you know, we will take delivery of through the 2020s and can be strategically deployed in right across the group and we're certainly very excited about the opportunity that that opens up for us. The other big investments in technology are on the digital side. I have no doubt that the future interactions with customers are moving much more to— I was going to hold my mobile phone up now but I actually gave it to one of the Jetstar people so I didn't get off-sided by my phone buzzing in my pocket. But it's to do with our interaction on mobile devices. That's how customers want to interact with airlines. And how well all carriers, particularly LCCs, do in this space is going to define the winners and losers across the next decade. We're very focused on it in Jetstar. We've improved our mobile— our online website significantly. I think we've still got work to do on our mobile site. But how we communicate, what we communicate, when we communicate it, how we personalise it, what products we provide, what ancillary options we provide to our customers through mobile devices is going to be key. We've also focused on things like mobile assistants. We've got a mobile assistant called Jess on jetstar.com. And currently she has answered 9 million customer queries direct without the intervention of people. Around 2/3 of our customers today are using Facebook to make enquiries about their bookings. So we've expanded Jess's capability onto Facebook Messenger. And she leverages artificial intelligence technology to retrieve bookings, resend itineraries, and add ancillary services to existing bookings. During the recent Bali disruption caused by the Mount Agung volcano, Jess assisted 3,000 customers and resolved almost 3 quarters of those issues instantly. We're also using technology to help with our operation, and that's the other side. It's about your customers, but it's also about streamlining your operation. Our pilots are currently using iPads, which makes their cockpits and the load control work that they do effectively paperless. And we've also invested in smartphone apps and systems that allocate tasks to our ground staff in real time, optimised so that our staff both front and back of house in, in these ports can adjust their workflow to the environment that we operate in. They know where they need to be, when they need to be, when passenger loads change, when the schedule becomes disrupted or gets, gets off time, and when gate updates are received. But there's much, much more we need to do in this space, and we're very focused on where we make smart investments. These investments in technology have a huge positive impact But as a low-cost carrier, our future depends on us making even more smart investments in the future. So in wrapping up, I'm delighted to have been given the opportunity to take this role, to learn more about the different aspects of aviation, to bring some of the experiences that I've had in the past to bear in a new environment, in a new model, in different geographies. In an airline which is truly Pan-Asian and working towards being truly global. I've no doubt that the success will be found by focusing on our customers, by investing in technology, and by taking account of our unique business models. So thank you for listening. I hope that was helpful and informative. I've now got some question and answers with Peter.

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