The move by Qantas CEO, Alan Joyce, to ground the Qantas fleet around the world, will cause significant damage to the brand, regardless of Joyce’s motives for doing so.
Branding is all about perception, rather than some objective reality. And the key to branding is trust. This move has the potential to further erode trust in the “flying kangaroo” amongst its key publics, including business travellers and the government.
To some degree, you could argue that the Australian public were conscious of the ongoing negotiations with pilots, engineers and baggage handlers (although knowing this level of detail would still require reasonably serious engagement with the issue), and were willing to shift the blame for delays and cancellations to the broad concept of the “unions”. This worked in Qantas’ favour; by announcing delays were due to “industrial action”, they were able to handball any responsibility for the problems on to some other ambiguous and unidentified bunch of “workers”.
But what Joyce has done over the past 72 hours, with his acceptance of a substantial payrise (regardless of whether it did or did not constitute a payrise, the general public will perceive this as so), and then a day later, shutting down the airline due to pay disputes, is to “trash” any support for Qantas management in its negotiations.
Most people will perceive that when industrial action was being taken by the “unions”, Qantas was placed in a difficult situation, which was partly out of their control. The Qantas PR strategy of placing the blame squarely at the feet of the different negotiating unions, could have been seen to be mostly working. Passengers were angry, but mostly not with Qantas.
With this latest move, however, there is no doubt in the minds of the public that the lock-out (despite its legality), was initiated by Qantas, at a time when large numbers of passengers will be desperately trying to get around Australia and the world.
The unexpected nature of the announcement, to the public and the government, but the preconceived planning by the board, will do Joyce and the Qantas brand no favours at all.
Clearly, Joyce and his board, have been pushed to this by what they believe to be extreme circumstances, but many consumers, in a reasonably competitive marketplace, will no longer support the decisions of Qantas management.
Despite what many commentators have said, this action is not at all similar to the Australian Waterfront Dispute between unions and the Patrick Corporation of 1998, simply because this directly involves consumers who have experienced delays now or in the past with airlines.
People perceive that the waterfront is an abstract and relatively aggressive environment, and, certainly in the short-term most of us were not affected by the dispute. This time it’s different. The Qantas lock-out and shut-down is direct and concrete for anyone who has ever flown on a plane.
It is even more concrete for those stuck as airports. And the footage does not look good for Qantas.
By surprising the government, and embarrassing them while hosting a major international event in CHOGM, Qantas will have lost the support of another of their publics.
So, Qantas management and their board have made a strategic mistake (at least from a branding perspective).
Even if they do get a termination of industrial action from Fair Work Australia, the Qantas brand will have been seriously trashed by the action of the board and the CEO.
The business outcome is that Virgin will begin to take market share from Qantas, particularly with business travellers, who simply want the service. Through this action, Qantas have forced many of their loyal customers to “trial” Virgin. This is explained by the Ehrenberg ATR communications model (Awareness-Trial-Reinforcement), where a key component of any business strategy is to move consumer toward your brand by getting them to trial it (like all theories, the ATR model has its critics). If consumers trial the brand, and are satisfied, then it increases the likelihood of their use of it in the future. By trying the brand, you make the experience more concrete, and therefore, easier to make a decision about whether you do or don’t want to use it in the future.
As I have said previously, marketing is not about massive changes in behaviour, it is about small, incremental shifts. If Virgin are able to provide a level of service equal to Qantas, then it will be difficult for Qantas to get back all of those customers, at least in the short-term.
Desperate times call for desperate measures, and obviously Qantas see this move as one that needed to be done. But Joyce and the board have made an internal management decision, based on internal organisational needs, rather than a marketing decision. Many will argue that they had to do this, but losing sight of where your brand equity comes from is also a managerial imperative.
To think that their passengers will understand the complexities of negotiations with unions, take their side, and return to them when it is all over, is naïve in the extreme. Some will return, but Qantas’ market share, certainly in the medium-term, will be seriously damaged. Even if 10 per cent of Qantas’ current passengers think twice before booking, there will be a flow-on effect on the Qantas bottom line. When it is all over, they will have to do more than PR and a few full page advertisements to get their customers to forgive them.
One outcome of this approach, is that Joyce may well get what he wants – a reduced Australian workforce, willing to accept lower wages, and the capacity to put much of the international component of the business in Asia.
But the ramifications of Joyce’s approach is that he may also end up with a reduced customer base, which doesn’t help anyone… except maybe Qantas’ competitors.
And what happened when FlyLo was faced with their own industrial action.