Asia and the digital revolution are two of the global forces that will have a longterm impact on aviation, according to CEO of Qantas group, Alan Joyce.
Alan Joyce: “Premium brands will be extremely important” in Asia.
Speaking at the CAPA Australia Aviation Summit in Brisbane last week, he said that although the US remains Qantas’ largest market, Asia “which amazes me” saw a A$300m EBIT improvement last year, its highest in the network.
“While US and Europe are important, Asia has bigger growth potential.”
Due to announce expected stellar results end of this month, a clearly-confident Joyce said Jetstar, its low cost subsidiary, was well-positioned to compete in the region, calling the newly-formed Value Alliance, a grouping comprising its competitors, Tigerair and Scoot, “playing catch-up with the scale of AirAsia and Jetstar”.
“We are way ahead in the markets the (member) airlines operate in and we can compete against them and in many markets, we outperform them.”
The impact of Asia, he said, would be huge on aviation, an industry which has to make longterm decisions especially in fleet orders.
He listed these statistics. By 2009, Asia had already become the largest aviation market in the world. By 2025, 20 of the world’s richest 50 cities will be in Asia. By 2030, 35% of all consumer spending will be from China and India combined. And by 2034, Asia’s aviation market will be bigger than Europe and America put together.
Qantas’ decision to restructure its network “so that it wasn’t on the way to Europe” and its decision to invest in premium products and services was paying off.
“Premium brands will be extremely important in this region,” he said, echoing Jetstar Group’s CEO Jayne Hrdlicka’s comment made the day before that the future would be owned by brands people know and trust.
“The number of new passengers coming in everyday, looking for their entry into the market, will be driven by fares and brands providing for the next generation of travelers in a way that works best for them,” she said.
Jetstar’s South-east Asia hub in Singapore was singled out as strategically important, giving Qantas customers that network and connectivity. Hrdlicka said Singapore was having its best year ever and “we play a unique role for Singapore and South-east Asians, as the only alternative to Star Alliance from Singapore.”
On data and the digital revolution, he said radio took 40 years to reach 50m listeners while Facebook took one year to reach 16 million and now it was 100 times that number. “The rollout and pervasiveness of digital technology is on a scale never seen before.”
Citing an Ernst Young report that said 80% of data available to companies was not being used, he said airlines at the forefront of using that information have a competitive edge. Using big data is at the heart of Qantas’ three-year transformation programme and it’s hired resources to segment its customer base to know requirements and use that to decide to invest in lounges and products. It’s also helped the group to operate the two brands together in a data-driven way.
Enhancing its loyalty programme, Qantas has become the first airline to house a health insurance programme “which has been profitable from day one”.
Other initiatives include new revenue management systems and it’s working on a project with the University of Sydney to use real-time weather information to optimize aircraft usage.
“There’s a huge opportunity for companies who can put systems in place to use this data,” the self-professed geek said.
The third force was the new generation of employees and customers. By 2020, Gen Y and Z will form 50% of the workforce and they think differently from baby boomers and the way they use social media is different. Brands must appeal to them on both fronts, as employees and customers.
The fourth, and final, force is climate change and resources and Joyce said the industry had to work hard to establish frameworks for carbon emissions and set standards for more efficient aircraft design. “We have set strong targets over the next few years to reduce our impact. We have 50 years of known fuel reserves available and by 2035, 35-50% of energy will come from renewable sources.”
“As an industry, we have a lot to do to meet obligations.”
He said with such global forces influencing the industry, airlines have to take a longterm view. At 95 years old, Qantas is the longest continuous operating airline in the world and has to take the appropriate commercial decision and calculated risks.
“People shouldn’t be worried and sit still and wait for disruption to happen to them. We must face the challenges head-on and Qantas is in the best position in history to do so.”
