Recorded at CAPA Global LCC Summit, 1-2 Mar 2018

Delivering customer focussed low fares travel

Jetstar Group, Group CEO, Gareth Evans


Gareth EvansThank you Peter.

Morning everybody, thanks Peter for that introduction. You will have noticed a few changes from the photograph. I probably look about five years older for a start off, tie is gone. Oops. Beard's 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 five 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.

Three years as CEO of Qantas International and some of the changes that are just about to happen there including the rehubbing of 380 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, three months into the role as CEO of the Jetstar Group and so it's been a fantastic career and opportunity for me to see all of 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. Sorry, 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 dollars, 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 difference 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 yeah, 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 gonna 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 open plan desk here, it's very nice to be next to the lawyers and the customer service people but I can be sitting anywhere. So I think we should move round the organisation, have a week here and a week there and within a year, I will 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, and 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 customers and investment in technology that helps us achieve this.

I was looking through the agenda for these two 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 adventures, technology, customer, some of the themes that are talked about on panel sessions across these two days.

So, this is the first CAPA, I think, global LCC conference and it may be appropriate that it is Jetstar that's talking 'cause in one way, you can look at it, you can see that we are one of the world's first truly global LCC. As I said, it's 13 years or 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 price 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 three children the trip of a lifetime and it was very appropriate I think that it was the 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 four airlines, consisting of Australian domestic and international operations, including a successful long haul LCC operation and that airline also includes their operations across the Tasman to New Zealand and within domestic New Zealand and then we also have joint venture airlines with loca partners, here in Singapore, in Japan and in Vietnam.

We fly directly to three continents, Australia, Asia and North America and then 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 in 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 aren't just Australasian, we aren't just Panasian. 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 code share 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 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 Jetstar Asia here at Singapore.

Also, one thing that stands out for Jetstar Asia is its operational excellence. It's on time performance. In 2017, they were the post punctual airline of both full service carriers and low cost carriers in the Asia Pacific and the 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, our hub for London or Europe moves from Dubai to Singapore. We have A380 services coming in from London into Singapore and from Sydney and from Melbourne and the ability to hub and connect on to Jetstar Asia is a significant part of the business case that made that possible.

The combination of all the airlines here in Singapore makes the Qantas group the second 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 roots.

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 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 that individual's needs and preferences..

Last year, of 37 million fares sold, two thirds were sold for under $100. We really have democratised flying and opened up the market to millions of people who were unable to fly before. For those consumers who wanna travel with Jetstar but want more such as meals, inflight entertainment, extra baggage, extra leg room, flexibility, flexible in 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 two 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 make the market dynamic.

And this is done at a significant level of detail. We've broken the market in Australia down to seven 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 two 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 primarily a leisure destination, Qantas pulled off the Gold Coast and left the market completely to Jetstar. A few years ago, we noticed that there was increasing amount of business travel and small to medium size enterprises. And so Qantas came back on to 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. 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 a 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 with our customers in the ways that they wanna 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 gotta have lounges, you gotta have flatbeds, you gotta have really nice food on the planes. You got a choice of what colour you can paint the lounges and how much stuffing you wanna put on the flatbeds but you've gotta have them because that's the market you're in.

With the low cost carrier, you've got a whole range of choice in terms of what customer proposition you wanna 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 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 are 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 and helping design our products and services in line with what 35,000 customer members who have opted on to 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 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 A323 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 a 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 with airline network. So this is a fantastic use of technology and 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 80 320, 321 ... an additional 80 320, 321neos on order with Airbus which we will take delivery of through the 2020s and can be strategically deployed 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 gonna hold my mobile phone up there 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 wanna interact with airlines and how well [inaudible 00:21:06] carriers, particularly LCCs do in this space is gonna define the winners and losers across the next decade.

We are very focused on, in Jetstar, we've improved our mobile 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, how we personalise it, what products we provide, what ancillary options we provide to our customers through mobile devices is gonna be key.

We've also focused on things like mobile assistance. We've got a mobile assistant called Jess on jetstar.com and currently she has answered nine million customer queries direct without the intervention of people. Around two thirds of our customers today are using Facebook to make inquiries about their booking so we've expanded Jess' capability on to 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 three quarters of those issues instantly.

We're also using technology 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 the 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 these ports can adjust their work flow 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 off time and when gate updates are received.

But there is 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. As a low cost carrier, our future depends of 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 Panasian and working towards being truly global.

I have 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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