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

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And QF could avoid the cost with a change to their IT system allowing the passenger to book on-line. Unless you are suggesting they aren't fixing their systems with the intent to have people call and pay the $60. I doubt that is the case. It's the same with ticket payment... there must be fee free options.

I have no problem charging for services where value is added, or if the customer chooses to speak with an agent for whatever reason. But when something so simple can't be done on line, it should not be charged for.

I know it's a strange position for me to take (isn't that the point of a devils advocate) but why must there be fee free options? All that needs to happen is that any advertisements must be able to be taken advantage of for the price advertised, and if there is a booking fee that can't be waived then the booking fee must be included in the total price of the advertisement. But there is no rule which states that all flights must be bookable via their website and there is no law that says they can't add on phone booking fees provided at no point did they offer you the exact combination of flights without also including any booking fees in the price.

So for example (a real life one) they can't say HKG-SIN-BNE-SYD-CBR will cost $1000, and then ask for a card and say "right we will now be charging $1060". The initial price they offer it for must include any mandatory fees and charges.
 
An idea that is in my head - thoughts on it please:

¨An unhappy customer who buys a product at a price that creates a profit for the company is better than a happy customer who gets the product at a price that makes the company a loss¨.

Whilst this is true, it's better to have an unhappy but profitable customer, than a happy but unprofitable customer, competing solely on price alone to keep a customer is a dangerous game to play.
All it would take is some other company whom has access to something (staff / resources) slightly cheaper than you (or whom is willing to make a loss to push you out of business) or is able to charge the same price but give better service and all of a sudden that unhappy customer runs right into the arms of your new competitor. Half the time you don't even see it coming until it's too late and the next thing you know your once unlimited access to customers goes out the window.
 
Whilst this is true, it's better to have an unhappy but profitable customer, than a happy but unprofitable customer, competing solely on price alone to keep a customer is a dangerous game to play.
All it would take is some other company whom has access to something (staff / resources) slightly cheaper than you (or whom is willing to make a loss to push you out of business) or is able to charge the same price but give better service and all of a sudden that unhappy customer runs right into the arms of your new competitor. Half the time you don't even see it coming until it's too late and the next thing you know your once unlimited access to customers goes out the window.

Any company that competes on price would be naïve not to consider ensuring that they retain that advantage, whether it be through economies of scale, or continual operational efficiency reviews. I doubt anyone's going to displace Walmart anytime soon.
But I'm not sure that low prices are any easier to beat than any other type of advantage - companies come and go in all sorts of industries, with all sorts of value propositions...
 
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True Q needs to make money but why is it selectively heaping the costs onto Qi (for example) and favourably sparing JQ?

Why is it creating the total flight cost such that TAs earn a higher commission selling a JQ flight (to Hawaii for example) than the equivalent Q flight (as the commission gets paid on the 'fare' component not the 'fare & other fees + charges')?

What % of QF flights and Jetstar flights is this actually an issue? I guess, not very many, as there aren't many destinations where JQ and QF directly compete.
Secondly, do you seriously think that the overarching reason behind this is to move pax from QF to JQ? Is that what you're suggesting?

Why is it pushing redemptions to JQ over Q as the cash cost on top of JQ for the same destination as a Q flight is significantly less (same as above point but to a different revenue source)?

Again, what % of flights is this actually an issue?
 
I know it's a strange position for me to take (isn't that the point of a devils advocate) but why must there be fee free options? All that needs to happen is that any advertisements must be able to be taken advantage of for the price advertised, and if there is a booking fee that can't be waived then the booking fee must be included in the total price of the advertisement. But there is no rule which states that all flights must be bookable via their website and there is no law that says they can't add on phone booking fees provided at no point did they offer you the exact combination of flights without also including any booking fees in the price.

So for example (a real life one) they can't say HKG-SIN-BNE-SYD-CBR will cost $1000, and then ask for a card and say "right we will now be charging $1060". The initial price they offer it for must include any mandatory fees and charges.

And that was the point I was making... that airlines (and any other company) must have an option to purchase for the price advertised (ie free from any compulsory additional fees which bump up the advertised price).
 
True Q needs to make money but why is it selectively heaping the costs onto Qi (for example) and favourably sparing JQ?
Like QFi paying for the aircraft that JQ then flies?
 
Any company that competes on price would be naïve not to consider ensuring that they retain that advantage, whether it be through economies of scale, or continual operational efficiency reviews. I doubt anyone's going to displace Walmart anytime soon.
But I'm not sure that low prices are any easier to beat than any other type of advantage - companies come and go in all sorts of industries, with all sorts of value propositions...

When I first got into business one of the first little pearls of wisdom I was offered was never complete on price and there will always be some other cough who will beat you. Sure enough along came a couple of former uni students who where offering "any sized website for only $2,000". Now since they where still living at home they did not need to cover things like mortgage payments, and when their business ultimately failed (since at $2,000 a site it didn't exactly cover their costs for the sized sites they where doing) they simply packed up shop and walked away.

Now despite the fact that they where attempting to run an unsustainable business model, the fact still remained that had I been price and price alone I'd would have been forced to either drop my price significantly and wonder what I would be doing about mortgage payments (since I would have also been forced into an unsustainable business model) or just closing up shop and becoming a public servant (like most other CBRens), but because I was adding massive value to what I was doing I survived quite nicely (and only closed up shop because I was given an offer I couldn't refuse).

So whilst a company which competes on price can do quite well, they are only ever one step away from been completely screwed over by another company who comes in, misjudges their actual expense, bleeds the accounts / investors dry and then closes up shop, and this includes the big ones (such as the Big W's and the Kmarts).


And that was the point I was making... that airlines (and any other company) must have an option to purchase for the price advertised (ie free from any compulsory additional fees which bump up the advertised price).

The advertised price is allowed to include compulsory additional fees, provided the price shown is the price with the fees already calculated in there. Where QF might have problems is if they let you select flights, go all the way through to a final confirmation page which has the final price on it (since that now becomes the advertised / offered price, but that final price with a purchase me now button is the critical thing) and then fails and asks you to call sales to actually finalize the booking and sales add the phone fee.
 
So whilst a company which competes on price can do quite well, they are only ever one step away from been completely screwed over by another company who comes in, misjudges their actual expense, bleeds the accounts / investors dry and then closes up shop, and this includes the big ones (such as the Big W's and the Kmarts).

I think this applies to almost any business, where a competitor comes in with a faulty business model. Someone could start making high-end products, but if they have their profitability model wrong, they're still going to cause significant hurt to existing players.

Competing solely on price, when you are small player, is a recipe for disaster. Typically you can compete on price when you have economies of scale (or some other cost-advantage - e.g. low cost raw materials).
 
Sure. But remember, the purpose of the company is to make a return for its owners [1]. The means is via selling a product or service.

Now, if you have no means, then obviously your company won't be successful. But even if you have the means, if you are unable to do this profitably, then you are still no successful.

Basically having "means" is a "necessary, but not sufficient" precondition for having a successful company.



No one's saying "customers don't matter" - you're the one that's created that strawman. Certainly customers do matter. As do suppliers. And partners. And regulators. And competitors and many, many other things (though customers are very important)

What's been stated is that "return to the owner" is more important than the happiness of a subset of customers. Because the return to the owner is the purpose of the company - it's the whole point of setting up the company in the first place.

[1] Let's leave aside non-profits, and similar companies, that have other stated aims
I think the argument is getting to the "how many angels can fit on the head of a pin" state, so I will bow out.. as I said before agree with most of the OP's points but not the intent of the first one.
 
I think this applies to almost any business, where a competitor comes in with a faulty business model. Someone could start making high-end products, but if they have their profitability model wrong, they're still going to cause significant hurt to existing players.

Competing solely on price, when you are small player, is a recipe for disaster. Typically you can compete on price when you have economies of scale (or some other cost-advantage - e.g. low cost raw materials).

Even if you are large, competing on price alone is risky, you could loose that cost advantage at any time, a competitor could come in who has access to cheaper resources, you could completely soil your reputation and someone else comes in at a price just above you, but offers 10x better service for that extra $5.

Of course, a bad business model is a bad business model and no matter what you do, you will fail, but in a price only market you certainly have the potential to take others with you.
 
What % of QF flights and Jetstar flights is this actually an issue? I guess, not very many, as there aren't many destinations where JQ and QF directly compete.

When I checked it was every location they both flew to and for many of them the timing of the flights was +/-55 minutes - so more or less directly comparable. I even grabbed the plane fuel use per passenger information for some flight/destinations and JQ actually used more avgas per passenger km yet the fuel surcharge was anywhere from 1/3 to 1/6th the Q fuel surcharge - that is clearly penalising Qi and providing a booking incentive for passengers (not premium admittedly) to fly JQ instead. There is no hiding that deliberate outcome. Took it to several Fed pollies, authorities - no interest despite their media posturing at the time over Q.


Secondly, do you seriously think that the overarching reason behind this is to move pax from QF to JQ?

YES!!!!
Now the totally made up and resembles no person/s living or dead imaginary discourse that is about to follow has no basis in reality but from a Devil's Advocate position, put your seat into the recline position, ensure your glass has been recently topped up and .....

I
magine for a minute I have recently got the job as Q CEO and I really have no idea how to run a full service airline and only truly have half an idea how to run an LCC.

Remember Q was ridiculously profitable after float as Govt gave it a virtually new fleet to float with (notice the early 90s dates for many of the remaining 747s and 767s. New aircraft & latest seating low maintenance and competitor goes belly up and you have 100% of full price-purchasing Fed Govt all flights = how to look like a world class airline operator without really trying
.

Back to the imaginary new Q CEO - and the Board (with no flying experience other than as the invitation-only club membership) believes all that I tell them about how LCC is the way of the future so why continue to pretend otherwise. They believe me -oh what luck! Now I'm in a potential hole as other than having brand-new planes and no staff legacy issues I do not know what to do.

Maybe I can continue to be the golden girl by cost shifting, so I'll lump lots of extra charges onto Q fares but not JQ. In fact that'll work so well as the bulk of flyers on my baby are cost conscious so when they redeem their FF points they will see they have to pony up with 2 or 3 or 4 times the cash on top of points to fly Q vs my baby. I am just sooooo smart (at least smarter than those derelicts on the board who are lapping all this up).

Also since we'll make sure that commissions are now only paid to TAs based on the fare component I can also get them to load up my baby - I need a pay rise I am just so smart. In fact I think I'll ask the board for one, and a bigger bonus.

Gee the yields are going up as I thought and the FF redemptions are favouring my baby 4 to 1 for economy redemptions - why didn't I think of this earlier. Shame the yields on Q are falling at the same time, I'll just tell the board that is because we are not operating on a level playing field - that always seems to work for others. I bet none on the board every look at the details on a flight cost breakdown, they'll never tumble what I'm up to.

Gee I think I need another pay rise and a long term incentive plan. I better make sure the remuneration consultants I suggest to the Board know that I suggested their engagement. With a bit of luck they'll send out a couple of recent Uni graduates at $175/hour to do some checking before they make the recommendation. Of course to get an idea of what a great job I'm doing they'll need to have a couple of flights - oh the Tennis is on this weekend, maybe they should see how successful our relationship enhancement program is - perhaps seats for each of them and a friend to the Open Final after a flight in 1st with valet parking and overnight accommodation.

This should work. Memo to self - I'm doing such a great job. Another brainwave - why don't I cut the in-flight food and drinks on Q but still charge the premium prices. If that doesn't pry another few % from Q economy bookings to my baby I'd be surprised. Why don't I increase the scrambled egg use in the meals as well, the feedback is so positive on that meal and I'll cut the omelets.....


Is that what you're suggesting?

Yes.

Again, what % of flights is this actually an issue?

Every FF redemption, every TA sale for both domestic and international where they share location.
I must stop smoking those teabags....
 
Every FF redemption, every TA sale for both domestic and international where they share location

And how many locations (as a %) is this, or available passenger seats?
If it's 5%, then most of your point is irrelevant. If it's 90%, then you may have a point we need to drill down further into.

Last time I checked, you couldn't fly any QF flagship route (SYD/MEL-LHR, SYD/MEL-LAX, SYD-DFW, SYD-HKG) on JQ
 
And how many locations (as a %) is this, or available passenger seats?
If it's 5%, then most of your point is irrelevant. If it's 90%, then you may have a point we need to drill down further into.

Last time I checked, you couldn't fly any QF flagship route (SYD/MEL-LHR, SYD/MEL-LAX, SYD-DFW, SYD-HKG) on JQ
butr you can fly a hell of a lot of others, eg HNL, all NZ destinations, most Aust domestic, it all adds up.

cheers
 
I haven't commented here but will do so now as someone with a lot of aviation knowledge and experience. From where I'm sitting Qantas is currently all about negativity and that does not actually help a lot with problem solving.

I see that Qantas has many managers (some capable and some not) but they have not got any leadership.
 
butr you can fly a hell of a lot of others, eg HNL, all NZ destinations, most Aust domestic, it all adds up.

cheers

The issues raised by previous poster where:
a) TAs given incentive to book JQ over QF (I assume this means fare parity between QF and JQ, as commission would be based on % of price)
b) Pax being directed to JQ for award seats over QF due to the cash component of the award.

For Australian domestic routes, I doubt TAs make much money either way booking QF vs. JQ due to low costs. So it's really only the few flights to HNL etc. that matter. I'm guessing that's a small % of available passenger seats. In the grand scheme of millions of flyers the QF/JQ moves each year, this isn't that big of an issue.

For award seats, whilst QF awards seats might cost more, so does the cost of providing those seats (higher cost base of QF vs. JQ etc.), so we don't know anything about the actual profitability (or relatively loss) of a JQ award seat vs. a QF award seat.
 
The issues raised by previous poster where:
a) TAs given incentive to book JQ over QF (I assume this means fare parity between QF and JQ, as commission would be based on % of price)
b) Pax being directed to JQ for award seats over QF due to the cash component of the award.

For Australian domestic routes, I doubt TAs make much money either way booking QF vs. JQ due to low costs.

You do know that Syd-Mel is one of the world's busiest corridors don't you? Making a small amount per ticket multiplied by thousands becomes a good amount each day. If I make 5, 10 or 25% more by selling a lower cost ticket to my customer AND make more for myself out if it. So across the industry as a TA looking to make customers happy which would you book for the 55 minutes flying time in an economy seat?
Or SYD-OOL $47.50 or $95 and I make more from the $47.50 fare and have a happy customer?

So it's really only the few flights to HNL etc. that matter. I'm guessing that's a small % of available passenger seats. In the grand scheme of millions of flyers the QF/JQ moves each year, this isn't that big of an issue.

Do you mean the millions of flyers on SYD-MEL, MEL-ADL, SYD-BNE, MEL-BNE that don't make much of a difference either way (as you said above). You've fallen into a circular argument here.

For award seats, whilst QF awards seats might cost more, so does the cost of providing those seats (higher cost base of QF vs. JQ etc.),

Believing what you're told without question (or actual physical & verifiable proof) led many of us to believe in the Easter Bunny and Tooth Fairy. With many of Q's spin releases I actually give more credence to the Tooth Fairy personally.

When did you ever hear a high profile person admit they had done something wrong before say the ICAC played the video tape, audio tape or produced the thank-you note? back to the main game...

HOWEVER a large part of that cost base has been deliberately created. Staff costs are 20%-30% or so in the equation or thereabouts - the difference in salary et al between JQ and Q works out at less than the fare for ONE SEAT per flight on average. (Just do some simple mental arithmetic - eg Syd-Mel air crew cost per day difference (Q-JQ) divided flights per day for that air crew, just google the data it is there).

Fuel costs on the other hand are running around the 40% of all-in operating cost - now given I have the proof (media release, IATA data) that Q IS NOT allocating the fuel surcharge on a true cost or actual cost incurred basis then charging up to 6x the fuel surcharge vs JQ for a flight yet JQ maintains the profitability gap over Q suggests some very interesting accounting is at play. Seemingly a magic pudding.

Such unanswered questions could well be the reason that you'll look long and hard for any active Australian Fund Managers holding a single share in Qantas. There are several who have owned other overseas airlines over the last 20 years. For example, one used a business cycle approach, whenever the world economy was improving they'd purchase certain carriers who flew the LHR/NY corridor and Goldman Sachs. Historically (pre-2007) the share charts of certain airlines that flew many premium business travelers to/from NY could be overlaid on GS.


Another big chunk of all-in-operational cost is the maintenance/reliability cost. The older the plane the LONGER it is out of service for scheduled maintenance, the more frequent unscheduled maintenance issues, and the higher cost per maintenance service both in relation to time out of service as well as cost of labour & parts. The apprentices in heavy maintenance (when there was such creatures in Australia) were younger than many of the Qi planes they were working on.

So if you take 2 or 3 or 4 economy fares from a Q flight and move them to a J flight it makes a much bigger difference, in fact many time greater a difference than the different labour costs.

On commissions - there are different levels in the industry and types of commissions paid at those levels - but simply think of it as wholesale and retail. A TA company receives volume related 'benefits' for selling $$$ of fares by airline WK say but does not reward its staff at the retail level (looking the customers in the eyes, or hearing their breathing over the phone). Other TA companies do.

Now for example imagine a large franchise TA that issues JQ fares but not Tiger for example, its staff do not get paid a commission for J sales but are expected to achieve a certain level none-the-less. Yes it does make a difference on what figure the commission is paid on.




so we don't know anything about the actual profitability (or relatively loss) of a JQ award seat vs. a QF award seat.

Perhaps it is worthwhile you spending a little time answering your own questions.

It is also worthwhile considering the facts.

FACT #1 - Q has admitted (in writing) that it's fuel surcharges are and have been arbitrarily allocated
FACT #2 - Q has structured total cost to passenger for purchasing a flight such that the fare component is HIGHER for the cheaper total cost JQ flight than the more expensive Q flight.
FACT #3 - Q (using IATA database info) has charged fuel surcharge 3-6 times higher on the Q flight to the same destination as also served by a J flight EVEN WHEN the J plane used used more fuel per RPK.
FACT #4 - Q has structured the FF points redemption for the high volume low value redeemers (90+% of value redeemed from results briefing a couple of years back) that had shifted redemptions from Q to JQ (and made JQ yield figures look so much better).

NEWS FLASH - Emirates pays commissions to a number of TA groups on the FarePLUS Fuel surcharges (even if it is a rebadged Q flight - not that there are many of them in the scheme of total Emirates flight bookings).

There are a few other airlines that do the same but for the sake of the Q thread...

I suspect this will come as news to many on this forum. Some do know this but not many.
 
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