Qantas Q&A

Transcript

Peter Harbison:Well, I don't think I need to introduce John. He's probably better known than anybody else in this room. Except for you. Except for you. He's Head of Business and Government Sales at Qantas anyway, and I'm going to give him a fairly soft ride today. Because we're sitting on the Qantas stage and it might collapse. He's probably got the button for that. John, I'll give you a nice soft serve to start with. The— let's, let's talk about the fun item, the London-Perth nonstop, which comes in in the first quarter of next year. I mean, obviously in this, in this environment, we're very interested in talking about the corporate market. First of all, it's a great move. It's joining the 2 antipodes for the first time nonstop in history. which is quite a big event in its own. Unlike a lot of us think, it's not actually the first 787-9 that is coming into service. It's about the 40th, but it is at the same time a remarkable achievement. There are some— in other words, there are a lot of these aircraft flying around at the moment, but this one has to be a bit special, I guess, because it's flying so much further than most of them. And it obviously is targeting a more premium market, which presumably includes the business travel market. Do you want to talk a little bit about, you know, how you're positioning that service and how you think it's going to work?

John Simeone:Sure. Thanks and good morning everybody. And I think importantly, Peter, I think I want to congratulate our marketing department because you would believe it's probably the first 787 to ever enter service in the globe. And I think they've done a fantastic job. Importantly for Qantas, it is absolutely a new era. And I think having Perth as a western hub for Qantas connecting Australia to Europe for the first time, it's something that's never been done before. And while there's a lot of investment that goes into the hard product, and in particular the tube, there's so much work that goes on in the background and on the inside. And having done a little bit of research onto even some of the smallest things like the cutlery that's on board, David Cahon, who's one of our industrial designers, was— he's been there for a while— was asked to minimise the weight on the cutlery just so that we could get the absolute maximum benefit in getting this aircraft from London to Perth. Importantly for us, it is a game-changer in terms of corporate. You know, we know how time-poor corporate customers are and we know how time-poor we are. And importantly, being able to get from Australia to the UK in a little bit— it's only an hour, but we know, like I said, that it's an hour less. But like I said, I think it's important that every customer and every segment of the Australian and the population that's in Europe and the UK now has an opportunity to bring back that tyranny of distance a little bit. And I know from my relatives, I'm Italian background, they all seem to think that it's quicker to get from Australia to Italy than what it is to get from Italy to Australia. So hopefully they're all going to jump on a Qantas aircraft out of London and come back via Perth to Sydney.

Peter Harbison:Goodbye. Let's talk a little bit about some of the details of it. I mean, this is a transfer point in Perth where the local government as well as Qantas and others have taken a fair bit of time and expense to make sure that that transfer terminal is going to be a lot more effective and in a lot of ways easier than most transfers.

John Simeone:Yeah.

Peter Harbison:Quite a small terminal and a decent hub from that point of view. But at the same time, that aircraft itself is going to go through to Melbourne, not any other destination. So presumably in that respect you're looking at the Melbourne corporate travel market probably a bit more than others?

John Simeone:I think Victoria gains significant benefit from the 787-9, not just on the Melbourne-Perth-London option. Also the 787 in a couple of weeks starts Melbourne-LA. So out of Victoria you'll have an A380 flying Melbourne-LA and a 787 flying Melbourne-LA, and that's that's phenomenal for the Victorian corporate market and in general the Victorian market. When you think about the connections that Qantas has from a domestic frequency perspective, um, you know, into Perth, out of Melbourne, out of Hobart to Melbourne, out of Canberra to Melbourne, you know, 1 to 2 stops into the UK and into Europe, it's going to be very hard to beat. And it's not just about the Melbourne market, this is about ensuring that Adelaide and Canberra— we've retimed some of those services as well so they connect. into Perth. So we're really opening that option for the Australian customers to get through. Importantly, and you brought up a good point around Perth and the airport, there was a lot of work done with the Western Australian government and with Tourism Western Australia just around the support Qantas needed to ensure that the customer proposition was seamless. And I think you'll find, you know, we're building a transit lounge in Perth. It's the first outdoor transit lounge in Australia. And that lounge is going to have some things in there which will just be mind-blowing. You know, there'll be a wellness spot. Neil Perry will be over there flipping a few bangers on the barbecue for everybody in the outdoor area. So I think, you know, really when you talk about the next level of customer experience and the next level of customer design, it's not just about the aircraft. And I think that's the important message. We've done a great job in launching the 787-9 in Australia. You know, and it's been flying around the country over the last 3 to 4 weeks. You know, we're doing some test flying on the domestic networks on Melbourne-Sydney and Melbourne-Perth. But the reality is you can have all that, which is fantastic, but you need to be great on board and great on the ground. And corporate customers are extremely— you know, they want to make sure that when they're paying, they're getting what they deserve for their money. And I think we're absolutely doing that in terms of the investment that we're putting into it. You talked about the design earlier. You know, we've done some work with Sydney University and the Charles Perkins Institute where we're working on, you know, options around jet lag impact. We're working on menu design. We're talking to Charles Perkins at the moment around giving some customer— sorry, some customers volunteering around wearing some technology that will be able to track the impact on their body on a flight like London-Perth. So when you think about even in general terms technology and personalisation, We're trying to understand the customer and what impacts the customer on these journeys a lot more. And that really is the next stage in evolution of air travel. And you think about just not understanding just the data and the analytics that go behind the customer, but also what makes the customer tick. How are they going to end up in London? It's great having a direct flight Perth-London, but we want them to end up there so they can go straight to work if need be, or stay at a Sofitel hotel if required.

Peter Harbison:Well, I'm with you on that, John. But also, yeah, I mean, if you can do anything about jet lag, yeah, please let me know.

John Simeone:I'm the worst at it, so I'll be looking forward to it too.

Peter Harbison:I think Alan said that— Alan Choisey, your boss, said that this whole— is he your boss still? This whole exercise was probably worth $70 million plus in terms of marketing. But more to the point, he's also very publicly pushing Boeing and Airbus to try and find an aircraft that'll go from the east coast of Australia to New York, or to the east coast of America. Is that again— that presumably is something in a lot of ways, obviously for the Sydney crowd, is much more interesting than going via Perth. How far away do you think that is, and are you getting much response from the corporate market on that?

John Simeone:We're getting a few questions. I think, you know, in the first instance it's important to understand that this has probably been spoken about for 10, 15 years at different times. But Alan and the exec team, when we started talking about Perth-London, then said, righto, well, we really have to put a challenge out to Boeing and Airbus around what is the next step in the evolution of airlines and airline travel. And like I said, we've opened one frontier.

Peter Harbison:Yeah.

John Simeone:Perth to London and one stop into Europe, and that could open opportunities for further markets in Europe. But, you know, more importantly, you know, in the next 5 years, you know, what can they deliver that will take 4 hours off that trip? So you talk about jet lag, you know, 4 hours less flying direct Sydney to New York, you know, leave Sydney in the morning, land at New York in time to hit a bar in the evening. I mean, how good would that be? And, and then, you know, the reality is It's important to keep challenging and innovating. And I think, when I think about, you know, probably the last 10 or 15 years within Qantas, you know, when you think about A380, you know, you think about 787-9, we need to be thinking what's our next stage of innovation in the business. And I read a stat the other day that, you know, in 1948 it took 3 to 4 days to get to London and there was 9 stops. Well, that was only in 1948 and I think when Sol was saying house prices were $50,000.

Peter Harbison:Yeah.

John Simeone:Um, but the reality is now we're looking at doing a direct flight Sydney to New York. So it's important that you, you know, you challenge the aircraft manufacturers, um, because I think we challenge ourselves internally and we challenge ourselves to be innovative around what's next in airline travel. But we're not just innovative in airline travel and I think for those of you who've, who've probably, you know, who probably know a lot about Qantas, we are in the media a fair bit. It's about innovating in different parts of our business.

Peter Harbison:Mm-hmm.

John Simeone:And not just airline. It's about customer experience. It's about technology. It's about our loyalty department, you know, now being part of, you know, health insurance and now being part of banking with the Qantas Mastercard. You know, the reality is as an airline you've got a certain component but you have to innovate across your whole business. And Scott Wilkinson's here from our SME team and earlier this year we launched Qantas Business Rewards. You know, we had the Acquire program which was doing a doing a fine job, but I think the way we've elevated that to the next level, just probably for everyone's knowledge, and you talked about Alan, he doesn't want us to be complacent. So I think the last thing you'll see us do is be complacent or arrogant. We want to continue to challenge ourselves and challenge ourselves as a business because we know it was only 3 years ago that we were in quite a challenging and strenuous position. And we had to make some really, really tough decisions as a business.

Peter Harbison:Yeah, quite a turnaround. Good always to be reminded of that because it's not always— hasn't always been quite so good.

John Simeone:It's not all rosy all the time. You know, uh, you know, we always keep an eye on the fuel price and we keep an eye on what's happening in market and the economic indicators that Sol spoke about. You know, when you think about some of the numbers he put up around business travel out of Australia, we know that was driven by some fairly hefty capacity increases as well by some of our competitors overseas, and that wasn't necessarily driving um, you know, business into Australia. It was driving business out of Australia. Um, and I think, you know, like I said, we've all been— I mean, you've been around a bit longer than I have, but, you know, when you think back—

Peter Harbison:Quite a bit.

John Simeone:Quite a bit, yeah. When you think back to, uh—

Peter Harbison:I remember those days when flights were actually—

John Simeone:I hope you don't remember that 1948 flight that took 3 days and took 9 stops. But, um, but, um, you know, I think it's important because we, we don't want to be complacent, and, and Alan continually challenges us as a leadership team to not be complacent. And that's just not in the— that's not just at Mascot head office. That's in our airports. That's on the ground. That's in the air. Because, you know, there'll be a lot of conversation over the next couple of days around technology and the improvements in technologies. We know how fast the demographics are changing in the world. You know, we know that we're looking at, you know, a different workforce coming in. You know, how do you maintain that workforce? How do you keep them motivated to want to work for a a brand that's now 97 years old. You know, it's not a young brand. But you want to make sure that you're bringing people into the organisation who are staying there and actually totally motivated so that we're there for another 100 years. I mean, we only— the 97th birthday was a couple of weeks ago. And in 3 years we'll be turning 100. So when you think about the demographics changing and the kids coming through, how do we get that message through to kids to ensure that they understand that Qantas is a great airline, not just to work for, but to fly. And we've seen some really good uptake recently with— we've developed a program called the Qantas Avro Program, which helps with startup incubator organisations, brings them into the business. And they're able to pitch ideas at us about ideas that will help generate new ideas for the airline. And I think importantly, we see the Qantas sign and everyone who works at Qantas is very proud of it. But the reality is you've got to continue to innovate and be new and be fresh. And I think we're doing that with the evolution of the 787 and with the challenge to Boeing and Airbus around the London fly.

Peter Harbison:One of the other things, John, that's important internationally obviously is partnerships. You've got a great partnership with American across the Pacific. And probably in a lot of ways the turnaround was due to the partnership with Emirates. in terms of sort of, you know, a lot of that new capacity coming into the market, the ability on codeshare anyway to serve a couple of dozen, 3 dozen points in Europe under the Qantas code. To go back now to Singapore, I mean, I, for me, I'm pretty even about it, but a lot of people have said to me that we are so glad that Qantas is now going back into a Singapore hub. to go to Europe and elsewhere, obviously. And you obviously— Asia is a big focus of that now. Talk us through just how the thinking is from a corporate point of view. Is that something, the sort of response you've been getting from corporates?

John Simeone:So the classic story, I remember 5 years ago when we did the deal with Emirates, there was a certain CEO of a major organisation who said to me, I'm never going to fly you through Dubai. He just goes, I won't take your flight via Dubai. I only go through Singapore. And I saw him 3 weeks before we announced the change back to Singapore and he said to me, I love Dubai. That'll be right. So look, I think it's important for a few reasons. The technology's here for us, like we touched on, for us to be able to do Melbourne, Perth, London. We have the aircraft and we know the growth in Asia. We know that by, you know, there's only 1%, for example, of Chinese tourists Coming into Australia and the opportunity for China in itself over the next 20 years into Australia and the growth is phenomenal. We know Asia's going to take 50% of the growth in airline travel. And it's important we have a representation in that hub of Singapore. What it allows us to do also is it allows us to give our corporate customers, our leisure customers and our SME customers an opportunity to hub via Perth, hub via Singapore, or go via Dubai if they're heading into Europe. The partnership with Emirates, I have no doubt, was a critical component of our turnaround and our transformation. It's— the authority's now extended the partnership for another 5 years, and our corporate value selling proposition is absolutely to sell the Emirates partnership, the Qantas metal, um, and I think what it does is it allows options for all segments of the market to have a choice. And it's not just about Emirates. You know, we've recently, you know, we keep expanding the relationship with LATAM. China Eastern's a key component of our strategy and our alliance strategy heading into Asia. You know, we've just recently announced some additional things with Fiji Air and El Al, you know, via Tel Aviv. So it's like I said earlier, it's not a case of sitting on your laurels and thinking, well, I think we're great because we've got Dubai. It's a case of how do you continue to expand? The market's growing. You don't want to just think about outbound Australia. You want to also think about inbound. You want to be able to tap into those markets that potentially will have some growth in the future. And we are strategically positioned in an ideal position to capitalise on what's happening in Asia. I mean, when you think about, like I said, 10 years ago and you thought about where was Australia a hub for, Australia was probably only a hub if you were flying from South America to Japan or Japan to South America and you were using Australia as a hub, such as Sheraton. me that a few years ago. But that was really the only way, the only place we were a hub for.

Peter Harbison:Mm-hmm.

John Simeone:Now we're going to be, you know, Perth will be a hub and we'll absolutely maximise that opportunity we have to continue to grow the network and grow our partnerships. Given where we're positioned, you know, we have an exceptionally strong domestic framework. We have a very strong international network. We've got probably, you know, an exceptionally good low-cost carrier as part of our group. in Jetstar, but we also have the hard product to balance that. You know, we've got the best meals on board, we've got the best lounges in Australia and globally, and, you know, the first class lounge in Sydney and Melbourne, I think whoever goes in there usually doesn't want to go out. So they'd like to spend a bit of time in there. So I think, you know, it's really important that it's, like I said, it's not just about the shell of the aircraft, it's about everything that combines around it, and it's really important that our people buy into that and the people that work at Qantas Qantas, like I said earlier, seem to have an extreme passion for ensuring that the airline succeeds.

Peter Harbison:Isn't it a bit dangerous that you seem to have got everything right now? Where do you go from here?

John Simeone:I think the good thing about our industry, mate, is even when you think you get it right, something's going to pop up and surprise you. And look, over the last little while, you know, fuel's gone the other way now. Fuel's sort of tracking up a bit. So I don't think, like I said earlier, I don't think you ever sit on your laurels. I think what we do is we continue to innovate. And where we go from here is we continue to challenge our suppliers and we continue to work with our key corporates and our key partners because you don't want to get stale in terms of the insights you're sharing with corporate customers. So I think it's important for us even as a corporate sales team that we go out and see our corporate customers and we share insights and we continue to learn with them. and work around options that are important to corporate customers in terms of the future of travel. And like I touched on earlier, you know, the Qantas Business Rewards program, which we only launched in February, has— and we've got a lot, we've got 46 or 47 partners now, I think. So, you know, that just means we're branching out and we're looking at different ways to continue to innovate. And I think innovation's the key. And technology. So, you know, Sol touched on, you know, being able to book online. You absolutely can, Sol, as long as you book Qantas both ways you can do it. You'll be glad to know over Christmas they're putting some 737s in so there'll be more capacity in Tasmania so you'll be able to take us both ways. And I think, you know, we just have to continue to change and innovate and we know competition's going to come. So we know there's still growth out of China. We know there's, you know, there's 9 to 10% capacity coming out of China into Australia. You know, we've launched Melbourne-Tokyo. We've done Beijing this year. We start Osaka in a few weeks. And, you know, today we're opening our brand new lounge in the UK. So I suppose the key message is you just can't sit still. You just have to keep evolving. And it's fantastic today. You know, we're opening the brand new lounge in the UK. You know, at the end of March, our customers who fly Melbourne, Perth, London will land in a brand new lounge. And the guys who are flying via Dubai today—

Peter Harbison:Dubai.

John Simeone:We'll land and be able to use a brand new lounge pretty quickly. But it really involves being a strong sustainable business for the future for Australia. I think a direct contribution of the Qantas airline to the tourism industry is over $10 billion. So when you think— when you're at the airport and you see a flight and you think about the additional benefit having that type of frequency and service adds to the economy, That's the— that's what we need to continue to do and we need to continue to deliver.

Peter Harbison:Well, talking of changes, you've had a pretty good run in the domestic market in the last 2 or 3 years. Do you see a bit of a revival coming from your major competitor in the market and how are you going to handle that?

John Simeone:I wouldn't say it's a revival. I think there's been a bit of change which, you know, which we're well aware of. A bit of change in personnel which could also mean there might be a bit of of a change in strategy and what the approach is in market. You know, when I think back, you talk about the revival now. Being in the corporate world for the last 3 to 4 years, you know, you're right, Qantas is in a very good position. But the reality is we've been managing that, you know, and the guys, the VA guys have put a lot of money into lounges and investments, right? And I think if you look at the results over the last 3 years between both I mean, you know, people can see that, see that for themselves. But I don't think it's just a revival now. I think it's been an evolution they've taken over the years. And I think we're well positioned, you know, with Qantas and Jetstar to be able to look after our key segments of the market. You know, Jetstar can look after basic business and low leisure. We have a great SME proposition for the customers who are starting businesses in Australia. We have a fantastic corporate proposition. which we touched on. And when you're leading, I think— and like I said, it's no way complacent or arrogant— when you're leading in that particular segment, you always realise people will be coming after it. And it's a psyche in Australia where we do like to knock the top dog at times. But we don't view ourselves that way. We view the competitor as a very decent competitor in the Australian landscape.

Peter Harbison:John? I think it's very important to recall that, well, first of all, it's very important that we've got 2 quite powerful flag carriers in the domestic market and internationally. I think also to remind ourselves that we've got, without doubt, the best domestic system in the world, which comes out of that competition. Absolutely.

John Simeone:So I, and I've said that before, you know, the reality is when you I mean, I was just in Europe this year and I spoke to someone who just came back out of the States the other day. You know, we sometimes are extremely spot on. Both carriers have good on-time performance. Both carriers now have a level of service where you think there's a full-service option. You know, we still think we're better in terms of the full-service option, in particular for corporates. We think we're much better. But the reality is the Australian traveller has it very good. You know, you get A to B on time. Cancellation rates are relatively low. It's not a zoo when you go to get on the aircraft. But, you know, sometimes we do get spoiled. And that also creates, you know, customers who have a high expectation and then have an even higher expectation. But I think it's always good to put a reality check. And I think it's a valid comment that we are in an environment in Australia that that, you know, really promotes air travel because we need it to get around.

Peter Harbison:Well, let's hope we can keep it that way, John.

John Simeone:Let's hope so.

Peter Harbison:Thanks very much for that.

John Simeone:Thank you.

Peter Harbison:Good talking to you. Thank you.

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