Devil´s Advocate. Qantas is doing the right thing.

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juddles

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From Wiki: ¨In common parlance,a devil's advocate is someone who, given a certain argument, takes a position they do not necessarily agree with (or simply an alternative position from the accepted norm), for the sake of debate or to explore the thought further. In taking this position, the individual taking on the devil's advocate role seeks to engage others in an argumentative discussion process. The purpose of such a process is typically to test the quality of the original argument and identify weaknesses in its structure, and to use such information to either improve or abandon the original, opposing position. It can also refer to someone who takes a stance that is seen as unpopular or unconventional, but is actually another way of arguing a much more conventional stance.¨

I wish here to defend the changes in Qantas that have so offended the members who feel robbed.

It seems that any thread that bags Qantas gets the usual flurry of people supporting those negative views. To me, although some individual posts shed great perspectives, as a collection those threads are not very helpful or meaningful.
Alan Joyce may not be a favoured person here, and, as per the introductory quote, I am just here to explore, not be his friend. But my self doubts include the following:
1.- QF is aprivate company, not a government entity. They have to be profitable to their shareholders. Shareholders are more important than customers. This truth is valid for any company. They exist to make money, not to make customers happy. If you cannot accept that truth you should be striving to reestablish a government airline (and by Jesus wouldnt those employees rort the system!)
2.- QantasInternational competes in an extremely unlevel playing field. Just look at their costs per employee. In a truly free market they could never survive – the only thing that can keep them going is irrational customer loyalty (such as I have) or unbelievably lucky and succesful innovation (such as NZ)
3.- We as a FF community hate the new changes to earn. It is always hurtful to lose something, but IMHO it was ridiculous that someone could do two return BNE-BDB trips on QF (for about $200) and a whoopee ¨bullsh_t F¨ tour around the LOTFAP for about $1000, and be a full ranking WP with QF.
4.- WP are a dime a dozen these days. Hence the invention of WP1.
5.- WP1 complain about the lack of extra services/rewards. But maybe they really are the customers who should have been WP vanilla all along? It is the fault of all the other pseudo WP that their benefits have been eroded.
6.- Not a day goes by without an armchair expert bagging the QF corporate team. They may be right. But if they are so good at this stuff, why can´t they please leap in to the rescue? As in every business – easy to bag, hard to deliver.
Sorry to post this thread – it is me being sick of the whinging. I know that I post this with the risk (surety?) of being ostracized. But I have concerns as to the group-think that flourishes in some corners of AFF. And I am happy to be flamed for supporting my position. I have a thick skin.

But if anyone dares to support QF, or at least question the outrage, then please put that right here.
 
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Most of what you say makes sense. But shareholders more important than customers, rubbish. One will not exist without the other. What any business must do is keep enough customers happy (and I don't necessarily mean happy in an emotional sense, more in an overall willingness to purchase sense), to provide the maximum possible return for shareholders. Both are intertwined. In the QF context maybe shareholders are more important than certain subsets of customers (eg AA first status runners), but not more important than overall "target" customers.
 
From Wiki: ¨In common parlance,a devil's advocate is someone who, given a certain argument, takes a position they do not necessarily agree with (or simply an alternative position from the accepted norm), for the sake of debate or to explore the thought further. In taking this position, the individual taking on the devil's advocate role seeks to engage others in an argumentative discussion process. The purpose of such a process is typically to test the quality of the original argument and identify weaknesses in its structure, and to use such information to either improve or abandon the original, opposing position. It can also refer to someone who takes a stance that is seen as unpopular or unconventional, but is actually another way of arguing a much more conventional stance.¨

I wish here to defend the changes in Qantas that have so offended the members who feel robbed.

It seems that any thread that bags Qantas gets the usual flurry of people supporting those negative views. To me, although some individual posts shed great perspectives, as a collection those threads are not very helpful or meaningful.
Alan Joyce may not be a favoured person here, and, as per the introductory quote, I am just here to explore, not be his friend. But my self doubts include the following:
1.- QF is aprivate company, not a government entity. They have to be profitable to their shareholders. Shareholders are more important than customers. This truth is valid for any company. They exist to make money, not to make customers happy. If you cannot accept that truth you should be striving to reestablish a government airline (and by Jesus wouldnt those employees rort the system!)
2.- QantasInternational competes in an extremely unlevel playing field. Just look at their costs per employee. In a truly free market they could never survive – the only thing that can keep them going is irrational customer loyalty (such as I have) or unbelievably lucky and succesful innovation (such as NZ)
3.- We as a FF community hate the new changes to earn. It is always hurtful to lose something, but IMHO it was ridiculous that someone could do two return BNE-BDB trips on QF (for about $200) and a whoopee ¨bullsh_t F¨ tour around the LOTFAP for about $1000, and be a full ranking WP with QF.
4.- WP are a dime a dozen these days. Hence the invention of WP1.
5.- WP1 complain about the lack of extra services/rewards. But maybe they really are the customers who should have been WP vanilla all along? It is the fault of all the other pseudo WP that their benefits have been eroded.
6.- Not a day goes by without an armchair expert bagging the QF corporate team. They may be right. But if they are so good at this stuff, why can´t they please leap in to the rescue? As in every business – easy to bag, hard to deliver.
Sorry to post this thread – it is me being sick of the whinging. I know that I post this with the risk (surety?) of being ostracized. But I have concerns as to the group-think that flourishes in some corners of AFF. And I am happy to be flamed for supporting my position. I have a thick skin.

But if anyone dares to support QF, or at least question the outrage, then please put that right here.

QF may be a private company, but when they wanted taxpayer money/guarantees do we have a right to comment?

Qantas is a private company but they are competing on the world stage. Are the managers saying they are not competent to deal with competition? Or to foresee the actions of their competitors? I would hope not. Competition is a fact of life.

Did anyone force QF into paying fines for price fixing? Or for contravening US DOT rules?

Armchair experts? Some people have qualifications. And some offer very real means for engagement, based on years of experience. But those calls go unanswered. What else do you expect? If QF doesn't want to listen to the suggestions there is not a lot people can do.

Changes to the FF system? Perhaps fair enough. But to try and wrap it in spin? That's where it starts to take the mickey. It feels like it is starting to treat some of us with contempt.
 
..... But shareholders more important than customers, rubbish.....

dajop, I hear where you are coming from, but I think I disagree in the detail. Any company that pleases customers but not shareholders DIES. Period. But many companies manage to satisfy shareholders even though the customers are not particularly happy.

Shareholders OWN a company. If it is not doing what they want, it folds.
 
... Are the managers saying they are not competent to deal with competition? ....

Maybe the managers, extremely profesionally, have taken the hard but true position that they cannot compete with foreign carriers in the overall Premium market. And have instead created an extremely succesful budget alternative. But in doing so have still been able to maintain the international Premium presence on the most profitable routes.

If your logic is that any ¨competent¨ manager should be able to ¨deal with¨ any competition, then every single company should be succesful.
 
From Wiki: ¨In common parlance,a devil's advocate is someone who, given a certain argument, takes a position they do not necessarily agree with (or simply an alternative position from the accepted norm), for the sake of debate or to explore the thought further. In taking this position, the individual taking on the devil's advocate role seeks to engage others in an argumentative discussion process. The purpose of such a process is typically to test the quality of the original argument and identify weaknesses in its structure, and to use such information to either improve or abandon the original, opposing position. It can also refer to someone who takes a stance that is seen as unpopular or unconventional, but is actually another way of arguing a much more conventional stance.¨

I wish here to defend the changes in Qantas that have so offended the members who feel robbed.

It seems that any thread that bags Qantas gets the usual flurry of people supporting those negative views. To me, although some individual posts shed great perspectives, as a collection those threads are not very helpful or meaningful.
Alan Joyce may not be a favoured person here, and, as per the introductory quote, I am just here to explore, not be his friend. But my self doubts include the following:
1.- QF is aprivate company, not a government entity. They have to be profitable to their shareholders. Shareholders are more important than customers. This truth is valid for any company. They exist to make money, not to make customers happy. If you cannot accept that truth you should be striving to reestablish a government airline (and by Jesus wouldnt those employees rort the system!)
2.- QantasInternational competes in an extremely unlevel playing field. Just look at their costs per employee. In a truly free market they could never survive – the only thing that can keep them going is irrational customer loyalty (such as I have) or unbelievably lucky and succesful innovation (such as NZ)
3.- We as a FF community hate the new changes to earn. It is always hurtful to lose something, but IMHO it was ridiculous that someone could do two return BNE-BDB trips on QF (for about $200) and a whoopee ¨bullsh_t F¨ tour around the LOTFAP for about $1000, and be a full ranking WP with QF.
4.- WP are a dime a dozen these days. Hence the invention of WP1.
5.- WP1 complain about the lack of extra services/rewards. But maybe they really are the customers who should have been WP vanilla all along? It is the fault of all the other pseudo WP that their benefits have been eroded.
6.- Not a day goes by without an armchair expert bagging the QF corporate team. They may be right. But if they are so good at this stuff, why can´t they please leap in to the rescue? As in every business – easy to bag, hard to deliver.
Sorry to post this thread – it is me being sick of the whinging. I know that I post this with the risk (surety?) of being ostracized. But I have concerns as to the group-think that flourishes in some corners of AFF. And I am happy to be flamed for supporting my position. I have a thick skin.

But if anyone dares to support QF, or at least question the outrage, then please put that right here.

1) Firstly, The last time Qantas shareholders reaped the benefits of profitability was when?
A company cannot be profitable without customers. Company's make profit by attracting customer to repeatedly buy their product. It is wrong to think that customers will be attracted if they are not kept happy. That is a truth that you need to accept. Shareholders stand to gain more from happy customer who want to keep buying the product.
Then lets look at the management actions to drive profit for the (yet to be realised) benefit of shareholders. Just how profitable are aircraft sitting around in France doing nothing? What is the ROE of sinking capital into aircraft that make no revenue? What is the ROE of sinking money into unprofitable airlines all around the world.
There are plenty of easy wins that the pointless customers can suggest in Qantas mainline that will drive profit. Rather than hand waving comments about profit, how about outlining exactly how the current strategy of sinking masses of capital into a thousand Jetstar airlines is making profit; or how staving Qantas mainline of needed investment is making profit.

2) Qantas international has a large number of advantages that management are ignoring. Taking advantage of the strengths of Qantas international is one way to level the playing field. But management doesn't seem at all capable of such basic thinking.
How does dumping the most expensive aircraft to operate on Qantas international help reduce their costs? Why not leave the more expensive aircraft to operate with Jetstar and their lower other costs, that has apparently been profitable so far. Then move the more efficient, lower operating cost aircraft to Qantas international. Then the lower operating costs could offset the other cost of QFi also given a better chance at profitability. Those other costs can also be addressed over time.

3) What is the cost of a platinum who takes 4 flights on QF metal a year, and half a dozen in the USA? Such a hypothetical person costs Qantas next to nothing.
What is the cost of the changes in terms of pushing away the people who do fly a lot on Qantas metal? What is the cost of burning their loyalty and giving them the freedom to fly BFOD?

4) That is a ludicrous conclusion. Prove it? What is the basis for your claim? Still how does burning the loyalty of the people who spend a large amount of time on your aircraft going to help shareholders.
Personally, platinum is pretty rare on my flights, no more than about a dozen on absolute peak hour flights.

5) No it is the fault of management trapped in a low cost mentality who seem to be incapable of adjusting to the reality of competition. Burning the pseudo platinums is not going to help turn a profit.

6) I'm more than happy to leap in to the rescue. Seems Qantas management don't think they need help, they haven't asked me yet. In fact, they seem to fob off any feedback that I offer free of charge with trite expressions of concern. Hell I'd even do their website proof reading for free. I'm sure I could improve that out of sight.
Anyone, it is interesting that you choose to bag armchair experts following 5 points that are full of armchair expert opinion. You close off about being sick of whinging also seems to nullify your claim to being a devil's advocate. It suggest true belief in your position rather than promoting an alternative for the discussion.

dajop, I hear where you are coming from, but I think I disagree in the detail. Any company that pleases customers but not shareholders DIES. Period. But many companies manage to satisfy shareholders even though the customers are not particularly happy.

Shareholders OWN a company. If it is not doing what they want, it folds.

That is not the case at all. Shareholders may own the company, but the company is not going to fold if a shareholder is not happy. All the shareholders can do is sell their shares. Selling shares doesn't make a company fold, having a low share price doesn't make a company fold. A company folds when it's not profitable, a company that keeps customers happy, and buying the product, is more likely to be profitable. Being profitable will keep the shareholders happy. You seem to have made an unsound assumption that shareholder happiness and customer happiness are mutually exclusive.
 
People have been giving suggestions to Qantas that have worked at other airlines and that Qantas customers want. People have also offered suggestions that would help lower costs and more suggestions that would achieve managements cost cutting aims while also not alienating their customers.

Qantas has ignored all of these suggestions. This indicates that Qantas does not want customers.
When your customers offer suggestions - for free - that will lower costs and increase revenues, you are a fool not to listen.
 
The main issue (IMHO) is the LCC mentality of Aj and his push (right from the beginning) for QF to mirror the LCC model - regardless of what it loses in reputation along the way. He will not be content until QF has morphed into a J* clone. I am just incredibly disheartened by what I see happening and have sadly started to vote with my feet.
Oh, and I do agree - juddles your post does not read as a devil's advocate rather that it is your own view. Your Point 6 seems to indicate that.
 
dajop, I hear where you are coming from, but I think I disagree in the detail. Any company that pleases customers but not shareholders DIES. Period. But many companies manage to satisfy shareholders even though the customers are not particularly happy.

Shareholders OWN a company. If it is not doing what they want, it folds.
I didn't have a problem with your other points but sorry can't agree with your first. I do agree that companies have a duty to their shareholders and need to run a successful profitable company. However you seem to feel it is one or the other whereas I see it as irrevocably linked. You cannot have a successful company ( and thus happy shareholders) unless you have a majority of happy customers. I have had my own private company for nearly 30 years and I can assure you there were times when we became arrogant and complacent and it always led to a drop in business and profit. We then reinvented ourselves became more customer focused and the business picked up again. Obviously you can't keep everyone happy and so the question is more whether the changes have made enough customers unhappy to cause problems. If Qantas has the balance right then all the whinging on here won't cause problems for them. If not then you will see more changes in the future to lure people back. So while I wouldn't say your first point is totally wrong, I think you don't fully understand the customer /business dynamic.
 
dajop, I hear where you are coming from, but I think I disagree in the detail. Any company that pleases customers but not shareholders DIES. Period. But many companies manage to satisfy shareholders even though the customers are not particularly happy.

Shareholders OWN a company. If it is not doing what they want, it folds.


I guess in the sense of doing what the shareholders want they are more important, but if their aim is profitability (which isn't always the case I guess) then making your customers "happy" is central to that. I think the problem lies with the word "happy", customers may not be particularly happy in an emotional sense, but will still buy the product - I mean read AFF there is a lot of emotional unhappiness with what QF are doing, but at the end of the day many also comment that despite this, they will go out and buy the QF product - i.e. Fly QF and earn QFF points via their credit card. So the cold hard truth is that QF have satisfied the needs of their customers, so in a sense have kept their customers happy.
 
The single biggest problem is the sheer amount of middle managers there are.... Far too many. Shed 50% of your entire management team, from entry level right up to board level.

Then make what's left far more accountable for their actions.

That alone will probably save $10M +
 
The current direction at QF is towards JQ as the end goal. Which direction has the investment been heading in the last 5 years?

In the true spirit of current management, QF would rathercomplain endlessly about QFi competition instead of doing something about it. Undercurrent strategy, the only way QFi can become profitable is to shrink until itreaches a point where it is completely irrelevant. Why are there no 789s arriving for QFi, where you can run cheaper staff (eg A380 lower crew costs)along with greater efficiency over the 330?

Instead the 788s are ‘given’ to JQ and wasted on bogan runs to DPS and HKT. QF have customers who would likely be willing to pay a premium simply to travel on a 787, yet are rather given a 25 year old 767.

What is the legacy of Joyce to QF? The only possible positives I can think of are opening up DFW and SCL (but only as replacementsto SFO and EZE) and the opening of some new lounges (SIN/HKG/LAX). Where is the fleet investment? Apart from some replacement 737s and a few new 330s for QFd. Instead the investment is in 320s at NRT and Toulouse that are either under utilised or never going to fly!

Want to encourage QFF members to actually fly QF? Rather than implementing new earning charts that require a degree to read, simply increase the number of QF squiggles or have a base % for QF flights. Increase this proportionately to each higher status level. Don’t punish loyal customers for travelling on partner airlines when QF doesn’t event fly there!

QF and JQ represent two very different market segments. QFcustomers do not want to fly JQ. For a company to expect QF customers to happily migrate onto a JQ flight with no recognition of status, or being forced to pay $5 for a packet of Pringles is a complete joke. The idea that QF pax(travelling in J) will be willing to transfer at SIN to a JQ320 is just laughable and demonstrates the contempt the current management has for QF passengers.

QF has an identity that many airlines in the world would do anything to have, with a strong history and enviable safety record. All it needs is leadership that actually recognises this…
 

But if anyone dares to support QF, or at least question the outrage, then please put that right here.


There are numerous inaccuracies with what you've written but it comes down to one simple fact.

There would be no negative comments if Qantas was doing the right thing.
 
Smoke and mirrors are great accounting tools. You have to wonder though when an airline company apparently spends more money on spin doctors to push "it ain't fair" than on analytically justifying internally its fleet operational choices. Reminds me of that MBA coaching series - 'Happy Days' - where the top dog cannot admit making a mistake.

Spin doctors are masters at blaming evil foreign governments who subsidise their home grown airlines. Trouble is the Govts who did subsidise the airlines (and could be proven to be doing so) were mainly European and we saw what happened to them.

Equally the finger is pointed at the Middle Eastern airlines supposed to be getting cheap oil, wages etc. The facts say differently. A number of the usual suspects have had financial collapses themselves (just run through the list of Middle Eastern countries that our Australian Construction groups have lost huge sums in).

The major cost difference for most of them comes down to the fleet age and choosing the appropriate plane. An 8 to 10 year younger fleet can cut operating costs (fuel & maintenance etc) anywhere from 10 to 25%.

So to be talking about a margin of 1% profit is meaningless in this context. Equally the other excuse trotted out by Qantas as being an end-of-line vs hub airline is severely over-used. Japan, for example, has a much larger domestic base to serve for international travel. Is in close proximity to Asia's densest markets yet the major Japanese carriers fleets also followed an aging profile and the equivalent rising cost structure and have either been bailed out or are just scraping through.

But curiously enough Jetstar can offer $199, $299 etc flights to Japan and be profitable but Qantas is losing money on $599+. Just look at the difference in aircraft type and age being used respectively.

Before Qantas was floated it went through an aircraft upgrade at the tax payer's expense and ended up with one of the youngest fleets in the airline business.

Then through a number of "efficient" tax structures (many organised pre-float) set up many leveraged leases etc to transfer tax benefits out for receiving payment. So Qantas was ridiculously profitable but not through good operational management but brilliant tax minimisation. A search of several very large Australian financial companies' annual reports will show them as proud owners of may 747-400s in the 1990s.

However you can only arbitrage the change from public to private once (milk the tax payer). The emperor's new clothes comes to mind.

A great airline analysis in the early 2000s looked at the ratio of senior management, middle management to operational staff across many airlines over time (early 90s vs early 2000s). Guess which airline had started to become bloated and increasing cost structures?

The age of the Qantas fleet moved it from a low maintenance cost operation to a much higher cost operation and due to weak senior management giving in to ever increasing demands the cost structure did blow out to a certain extent but that is only part of the story.

At the same time Qantas had followed a fuel hedging program where they locked in a very large amount of their fuel costs through either a quasi-futures or option combination to lock in a fuel price they were happy to operate with. When the price would drop significantly they would extend the hedging out into multi-financial years to lock in an acceptable operating margin.

Once China turned into a net importer of oil the Asian oil, petrol, avgas prices began to soar relative to West Texas or Brent and their related derivatives. Qantas no longer could lock in acceptable prices that would guarantee operating profits so the hedging levels dropped significantly. Qantas chose to change their operational strategy.

Qantas' explanation that their fuel bill went from $3.8bn to $4.4bn (from memory) so that's why they have not cut the fuel levies despite the Asian fuel prices falling 15-23% could be another example of the smoke and mirrors. The details are not out yet to allow a full calculation to see whether they match. If the banks repeatedly did not cut mortgage rates etc at all imagine the outcry from the usual suspects.

Yet Qantas did not cut the fuel surcharges (and relatively recently increased them announced Jan 14 and June 14) and there was not a word from Wayne Swan, Bill Shorten or the normal posturing from the Independents previously nor Joe Hockey and Tony Abbott since. WHY NOT?

But since current fuel levies are prospective (for future flights) and the fuel bills quoted are for historical (past) flights the explanation given recently does not hold up to much scrutiny.

Qantas COULD lock in current fuel prices (just like they used to) but they appear to have chosen not to do so to any noticeable extent. Why this is the case has not been mentioned but that means that they could (and should) drop the fuel levies when their costs have fallen and if that is what the fuel surcharge is really for. As it must be as that is what Qantas said it was to cover.

Compare this with the recent debacle in Victoria with Melbourne Water charging for desalination costs that it has not had to pay. The parallel with Qantas charging outsized fuel surcharges are obvious.

If Qantas did choose to pad its airfares then it should not mislead (unwittingly of course) by calling them fuel levies that supposedly match the "high" fuel cost. Equally the additional amount should be added to the base fare and not described as a fuel surcharge/levy. Otherwise an ACCC complaint about misleading and deceptive practice could be made, or an enterprising class action law firm may launch a legal action in a similar vein to that discussed about Melbourne Water.

Coincidentally as most FFers are well aware the fuel surcharges are added onto any FF point booking. So how does Qantas account for a FF booking I wonder? Where does the fuel surcharge cash for a reward booking get passed through the accounts - Qantas International or Qantas Frequent Flyer? Makes you wonder doesn't it? QFF is a very profitable operation for many reasons if you look through the Annual Report.

So many questions to ponder.
 
So to be talking about a margin of 1% profit is meaningless in this context. Equally the other excuse trotted out by Qantas as being an end-of-line vs hub airline is severely over-used. Japan, for example, has a much larger domestic base to serve for international travel. Is in close proximity to Asia's densest markets yet the major Japanese carriers fleets also followed an aging profile and the equivalent rising cost structure and have either been bailed out or are just scraping through.
They also keep complaining about being "end-of-line" when they are missing something staring them in the face. Australia is very well located geographically to serve as a hub for Asia > South America flights.
 
Qantas is taking decisions to deliver value to its shareholders. And I (and many others here) will make decisions to deliver value to their "shareholder" - i.e themselves.

Nothing personal, just pure business.
 
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There are numerous inaccuracies with what you've written but it comes down to one simple fact.

There would be no negative comments if Qantas was doing the right thing.
[/COLOR][/SIZE]

There will always be negative comments regardless. Some one will always think they're doing the wrong thing.

Well done to the OP for raising a polemic that raises a different point of view. If you see and appreciate different sides of the problem then you can discover and implement innovative solutions.
 
One thing for sure is Qantas management knows how to polarise customers along with staff.
 
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