Unlocking Jetstar’s Full Potential

Transcript

Jayne Hrdlicka:Thanks, Steven. Apologies, I'm losing my voice this morning, so if you can't hear me, speak up in the back. And I don't know, how many of you noticed that Peter is wearing an orange tie today? I didn't ask for that, Peter, but that is going above and beyond from a CAPA standpoint in convincing your speakers to come again and again to support you. It is a great pleasure to be here today, and thank you all for making the time. These conferences are great for the industry. I think this is my 3rd year in a row speaking at this event, and it's great, Peter, that you're moving it around. You're getting me out of Melbourne on cold winter's days. Last year I think was Sydney, so I'm appreciative again today. And of course it gives me the opportunity to go up and spend some time on the Gold Coast. We've got quite a big team there. So what I thought I'd do today is give you a sense of where we stand today as the Jetstar Group and what we're thinking about in terms of the outlook and our future, which is very bright. And it is 4 years almost to the day that I've been in the role of CEO of the Jetstar Group. It's hard to believe it's been 4 years. At the same time, it's gone really fast and it's been a very long time. Aviation can do that to you. So what I thought I'd do, Peter knows this well, but on the 24th of August, we were release our results announcement. So I'm going to be a little bit constrained in what I can and can't say today. And Peter, of course, will do his very best to get as much out of me as he can when we do Q&A. And I'll be resolute, at risk of bodily harm if I'm not. So with that, let me just start with a few things. We have had a great year. We had a very strong half year, as many of you would have noted. And our half year result actually was better than our best ever full-year result. So while I can't talk about our full-year result, it would logically dictate that we've probably had a pretty good year. And every part of the Jetstar Group has contributed to that. It's domestic, it's New Zealand, it's our long-haul operation, it's every one of our airlines up in Asia. We're really, really pleased with our performance this year. So in 12 short years after Jetstar was founded, we're now a multinational based in Melbourne, Australia. I just think that's pretty cool. It's not often celebrated, but it is. a great accomplishment of the Qantas Group to do that. Very few Australian companies have achieved that, and the Qantas Group certainly has. We now have a fleet of 127 aircraft. That means we're larger than Singapore Airlines, we're larger than Malaysian, and we're just a tiny bit smaller than Cathay in terms of aircraft numbers. So we're a big, big airline in the grand scheme of airlines in the region and LCCs in the region as well. We fly to over 80 destinations now, Stephen. And I'm no longer on the Woolworths board. And we do fly to 16 different countries. And that just continues to grow and expand as each of our airlines in the region find their wings and really leverage the opportunities to create opportunities for customers flying to places they otherwise didn't have access to. And our business in Japan, for example, is now flying internationally. So that's providing new connecting points pretty much every other month. So very exciting. We're also very proud to be named for the 6th year in a row the best LCC in the Asia-Pacific region. That's a great accomplishment. It comes down to a lot of hard work from our teams around Australia. And when you step back and look at the mix of things that we've achieved in in the last 12 years, there's really a lot to be proud of. And we're doing exceptionally well. But we're not satisfied with where we sit today. Because we do believe our role is one of setting the standard in low-fares aviation. We're a disruptor at our heart. And I'll talk about that more in a little bit. But that means we can't sit still. We have to continually be looking for ways to change the way we do things, to change the way the industry functions, to find opportunities to meet unmet customer needs. And that's our job. And so we won't sit still. We're not going to be complacent. There's always discussion about are LCCs going to be the legacies of the future. We're working really hard to make sure that's just not the case. We want to make sure we're at the forefront of global aviation in the region. And we're really focused on a handful of things. Our strategic focus is really the centerpiece of how we think about where we are and where we're going, and it's a big part of our success so far today. And what does that mean? Well, for Jetstar, it's pretty simple. We're a Pan-Asian business with a future that lies in the region around us. That's a simple thing to say, but it's just an extraordinary position to be in if you look at the macroeconomic factors that sit around us in the region. We clearly already have a very big presence in Australia and New Zealand. We also have a very strong and growing position domestically in Japan. And as I mentioned, we have a strong and growing international position out of Japan. Our airline in Singapore has just finished its best year ever on every dimension. And we hold quite a unique role in Singapore. Singaporeans and Southeast Asians generally speaking, and for over 26 full-service carriers because we're the only alternative to the Star Alliance to access Southeast Asia from Singapore. We're the only alternative to Singapore Airlines— Singapore Airlines Group airlines. So we play an important role and our business there is doing brilliantly in delivering against its potential. And then there's Vietnam. We're in one of the fastest growing aviation markets in the region and the fastest growing economies in the region. It's hotly competitive, but we're in a really unique position with Vietnam Airlines as our partner and a very strong robust dual brand strategy which is modeled off the strategy that we've used in Australia. So we're really excited about the world of possibilities ahead in the portfolio, and when you think about the region, you know, that's a pretty exciting proposition. When you add to that our long-haul Dreamliner network, which connects Australians to Southeast Asia and North Asia, it is a phenomenal asset to ensure that we're connecting all parts of our network and we're enabling Australians to see the very best of the region at great, great prices. And the opportunities that creates across the Qantas Group is significant. And for sure, the value of the Jetstar Group as a group is much higher than any of the component parts individually. Our investments in the airlines in Asia also give our brand quite a deep presence and a deep equity that serves us very, very well. This builds for us an asset over time that gives us strength that other airlines are envious of. Clearly there are plenty of smaller LCCs jostling for position around the region and forming new alliances in an attempt to replicate the scale that some of the larger LCCs have, like Jetstar. But for us, we've been working on building our scale, we've been working on partnerships since the first day we flew. Partnership is at the very core of what we do at Jetstar. Are. And so for us, we think we're in a very strong position going forward. We know what the low-fares traveling public expect. They want simplicity, transparency, and consistency. And we're working very hard to provide exactly that. We believe absolutely that the future of the Asian LCC market is going to be owned by brands that people know and trust. That's just logical. And the number of new passengers coming into the market in the region every day is pretty astounding. And they're looking for their entry into the industry. And that comes in through low fares. So brands that provide the next generation— in our mind, brands that provide the next generation of Asian travelers with the ability to realize their travel aspirations in the way that works best for them will deliver great opportunities. And that's what we've been doing for 12 years now. Our brand is synonymous, we believe, with great low-fares travel in Australia, New Zealand, Singapore, Japan, Vietnam, Indonesia, and well beyond, given the 17-odd countries that we're flying into. And we're determined to make sure that LCCs are in fact the choice for the 1.8 million— sorry, 1.8 billion people who are going to enter the Asia-Pacific travel market over the next 20 years. That's a doubling of the market size. In the next 20 years. There's no other region in the world from an aviation standpoint that has that to look forward to, and in fact will be confronted by that. Because the infrastructure challenges associated with that, the capital challenges associated with that are very, very significant, and it's an opportunity for all of us to step into. Now, the second thing that's really important to us is never ever, in the context of our strategic focus, never ever compromising on our fundamentals, the LCC fundamentals in the business. It's a key to make sure that we do not compromise our position in the marketplace. And it means a couple of things. It means firstly keeping costs low by staying absolutely true to our values, always, always keeping it simple, and finding lower cost ways of working every single day, every single week, every single month, every single year, and it is a relentless focus. It's tiring, and I'm sure, you know, a bit tedious at times for people in our business, but it is an absolute necessity because if we're not the lowest cost, we can't hold our market position. But that's not sufficient. We also have to be the market innovator, and we have to find new ways of adding value to our customers to drive up our ancillary revenue, to ensure that our margins are always in a position where we can continue to provide great returns to our shareholders, and we get that virtuous cycle of then being able to reinvest in growth for the opportunities that sit around us in the region. So it's that combination of always being focused on costs, but never taking our eye off our customers and the opportunity to innovate and really deliver great value to them in ways that sit beyond just the seat that we've provided. The secret sauce in all of that is a couple of things. One is our people. We've got to make sure, in order to deliver on our ambition, we have to make sure that our people are enabled to be the very best of themselves every day they come to work. And they're empowered to do the right thing by our customers and the right thing by the operation. So that's key. And the second thing is, Customer does have to be at the heart of everything we do. Despite the fact that we're an LCC, our business works like any other business. If we don't know our customers better than anybody else, we have a problem. So understanding our customers and really making sure that our people are passionate and empowered to be the very best of themselves every day, that's vital to being able to get the value out of our simple LCC fundamentals formula. Now, I spent a lot of time talking to people around the Jetstar network, not just in Melbourne. As I mentioned before, I'm off to the Gold Coast this afternoon. And what I would tell you is that our people are hugely passionate about delivering against our ambition. They see the power of the portfolio and the opportunities that we have in the region and what that represents for them. And they're a pretty infectious lot. So if you hang around with a bunch of Jetstar people, it can get a little exhausting. Because we're full of energy and there's lots to be done and people are very passionate about going after it. Now, one obvious but not broadly discussed aspect of our culture, and I mentioned it up front, is the fact that we're a disruptor. And it is a big part of how we think about what we do every day. Because we're always looking for different ways to come at the same thing, because that liberates cost or finds pathways to provide better outcomes for customers. It also opens up different opportunities that you might not otherwise have seen. So one of the recurring themes in our history has been a willingness to really challenge not only aviation norms, but also LCC norms. And I don't see that changing at any point in the future, because it is vital to us being able to participate in all that comes from 1.8 billion new travelers coming into the market. over the course of the next short while. And that goes right back to our beginnings. That goes back to the Qantas board being prepared to have a go at developing an LCC, have a go at building a new brand, have a go at a dual brand approach to the marketplace when no other airline had been able to make that work before. So disruption starts way back in our history and it started from the Qantas board having a mindset which was We should be a disruptor and we should have other aspects of our portfolio that think that way. The Qantas loyalty business is doing the same thing. And every part of the Qantas Group is now thinking disruption in various ways, shapes, and forms. But for us, this is quite an important thing. And as we travel around the network, I have airline executives all over the world who come up and ask me, what is the secret sauce? How did you do this? Because it is a hard thing to contemplate when you are a full-service airline. How do you set up alternative model which, you know, has the real risk of cannibalizing the core business. And as I've said many times in this forum, we did that with real clarity on what we were trying to do. We understood the market, we understood customers, we understood that by having 2 brands, both brands would be stronger. Qantas would be stronger, more focused on what drives premium travel, and we would create a market for travelers to come into the marketplace because we would take fares down. Over 20 million more trips take place every year in Australia today as a consequence of Jetstar being in the marketplace. Over 20 million fares were sold, seats were sold in the last year across the Jetstar Group for less than $100. And we'll have, obviously, a very happy day in a couple weeks' time when we talk about our results. So those 2 things go hand in hand with us, and it all comes down to disruption and how we think about, you know, the role we play in the marketplace and the role we play in the portfolio for the Qantas Group and for Qantas shareholders. Now, we also take the social side of our responsibility quite seriously because we're enabling people to travel for the first time. So we are genuinely making the world more accessible, and that's a big responsibility, and part of what drives that great passion I talked about in our people. And people flying for the first time, people flying more often than they were otherwise able to, or small businesses getting some oxygen to really grow and expand beyond geographic boundaries, that's a big responsibility. We're really clear about the role we play for our customers. And we take our role quite seriously. And we respect the fact that they have important things they need to get on and do. And our job is a big one in making sure that that all works seamlessly. And that we look for ways to make their jobs easier in the way that they engage with us. So disruption being at the heart of our culture, you see it in a few different ways. You see it in the decision to go offshore. The way we've done that, working with other partners. All of our airlines in Asia are joint ventures. We don't control any of them. We work very collaboratively as one business. But in effect, we have a variety of separate businesses that work together as one. That's a really unique business model and I haven't seen another quite like it. But that comes down to us trying to find a way because we believed it was so important for Qantas shareholders and for our business in Australia. The decision to take Jetstar long haul. There's no other LCC in the world at that point who had done long haul profitably. And we're doing it very profitably with very happy customers. And we made the step to invest in the Dreamliner and to be the first in Australia to do that. Because we wanted to deliver the very best experience and to do that in the most economic way that we possibly could. And so the Dreamliner was an obvious choice, but a point of disruption. And the decision for us to partner with over 40 full-service carriers around the world, we didn't take that lightly. And it's not an obvious thing for an LCC to do. But it's actually a pretty interesting way to think about it because all of our full-service partners are carrying customers who are flying with that airline because it was the best price on the day. Because full-service carriers also sell low-fare seats. So we provide a network reach into leisure destinations that most full-service carriers can't do. So the sales combination between full-service carriers and our network is pretty powerful. So, again, another point of disruption and creative thinking in how we've faced the marketplace, thought really deeply about who we are and why we're there, to make sure that we're lining up against the best commercial opportunities we possibly can, while serving our customers and staying true to our position in the marketplace. And all those decisions have paid off handsomely for the Qantas Group and our shareholders. And every single day, we ask ourselves, what's next? I'm sure Peter will ask me that again in a few minutes' time. But that is a constant, and we're always asking ourselves, gee, that looks really hard. I'm not sure we can do it. Well, what would it take to be able to do that? And that always surfaces opportunities that we hadn't seen before. And for sure, for us, disruption comes down to a handful of things. One, it's customer at the center. Because finding unmet needs for customers is at the heart of disruption. And we reject out of hand that low fares mean shabby service. We do think customer has to be at the center of any business. And for us, it absolutely has to be at the center of ours to achieve what we set out for ourselves. And we know that doing a great job goes hand in hand with many other factors in our business. There's a lot that's out of our control in aviation. So you do have to focus on the things that are in your control. And for us, it's focusing on the basics, modern aircraft, good infrastructure, and amazing people. Because we do appreciate that our people actually are the differentiator for us in our business. So to that end, we've completely revamped how we think about training our people. We've taken a leaf out of the Qantas book. We're simply focused on training for people skills. The functional capability of our team is beyond reproach. But we have an opportunity to continue to invest in helping them be the very best of themselves every day. And so we're making big investments for our people to be the very best that they can be every day. We also recognize in the path of putting the customer at the heart of everything that good service starts before you even get to the airport. So we've overhauled how we think about our contact centers. The way they get paid is on outcomes for customers now, not on how many calls they took, because there's sort of a perverse relationship with the contact center. If they get paid for calls that they've taken, they're not really very motivated to solve your problems. So our contact centers have been revamped. We've changed the way we've incented them. We've overhauled our digital platform. We've made it very easy for customers to talk to us via Ask Jess and ask questions. We've got online live chat that augments the contact centers, and then you can graduate to the contact center if you have a problem. We're doing everything we can to ensure that the experience our customers have with us is simple, easy, and they can get outcomes as quickly as possible. And obviously, the more we do to leverage technology, the less expensive it is for us. So technology is another key aspect. of disruption for us. We think the competitive advantage that comes from innovation through technology is very significant. There's a cost involved, and sometimes for LCCs, you know, you look at a $5 million, $6 million cost to invest in something new, and that's a lot of money for us. But we look at the business case from an end-to-end standpoint. We really think through, does this make sense or does it not make sense? And gee, we always find a way at much lower cost to innovate, to leverage technology, and to create better experiences for our people and our customers at the very same time. And we're creating points of competitive advantage for ourselves at the same time. So that's very exciting. You'll see in all of our websites around the region a very new look and feel. There's no reason why buying a plane ticket should be any more cumbersome than buying a tennis racket. I can go online and in 5 minutes a new racket, have chosen the right grip size, have chosen the strings, got the right tension, and have sent it to myself. And I'm done in 5 minutes. We've worked really hard to make sure you can do exactly the same thing in buying a seat on Jetstar. And there's more innovation to come now that we have the platform set as it is. And we think it's every bit as important for us to retail effectively as it is for Amazon or anybody else out there. And so that's a key part of our platform for the future. And the other aspect of disruption for us is new business models. And I talked before about some of the things that we've done to that extent, but there's a long list of things. We always look through different ways of setting platforms through joint ventures, through partnership, through collaboration, commercially, operationally. Really, sky's the limit from our standpoint, because there's nothing that's off limits. When we think about our business model. Because we're not stuck in any particular way of doing things. We have so many different ways of doing things today that adding a new one actually doesn't increase complexity at all. It's just part of the way we operate. So thinking through new business models as a part of the sort of 3 prongs of disruption for us is key. First is customer, second is technology, and the third is business models. And that's been a big part of our history. It'll continue to be a big part of our future. One of the big disruptions from a business model standpoint that we executed this year was New Zealand and introducing regional flying. We had, in the past, said we would never fly smaller aircraft. And well, we held true to that because we're not. QantasLink is. So in partnership with QantasLink, we did for New Zealand regional customers a very great thing. We enabled them to have choices in how they fly. And as a consequence, prices are down over 20% and the number of trips are going up. And Air New Zealand will be better off as a consequence and customers will be better off as a consequence because the total market size will grow, prices will come down a little bit, and we'll all work harder to ensure that there are more options, more choices for customers throughout New Zealand, and that's good for everyone. And that's before you even start thinking about the economic impact of people being able to move more freely, throughout the regional areas of New Zealand. And for those of you who don't spend much time in New Zealand, that's a really important thing. Because the regions being better connected to the major cities helps trade. So we're really proud of the innovation in business model, the disruption that that enabled. And that's just one example in the last 12 months of something that we've done which we're really proud of. It has a huge social consequence and impact. It's very energizing to our people. It demonstrates the collaboration across the Qantas Group and the power that comes from really thinking outside the box. So there's lots to come from that. And, you know, as we look forward to the next wave of disruptive innovation for us, you know, we'll be thinking about, you know, what are the new business models of the future that we can launch to bring our low fares to more people throughout the region. make the world of possibilities a reality. So in summary, I think for us today, we're in an amazing place. Tomorrow looks even better. There's a long list of opportunities ahead of us, and our job is to prioritize carefully and make sure that we are tackling the biggest ones, and we're doing that in a really constructive way that creates great outcomes for our shareholders. There are 4 key things for us. The first is our strong and integrated Pan Asia brand. The second is an absolute unwavering commitment to our LCC fundamentals. The third is that deep, deep passion for our people and for our customers, because that's at the heart of who we are as a business. And the fourth is that burning desire to keep challenging convention and seeing what the world of possibilities might bring. So thank you for listening, and Peter, over to you.

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