The end of Qantas as we know it?

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.

~

This is an extended version of a piece published in The Sydney Morning Herald and The Age.

~

And what happened when FlyLo was faced with their own industrial action.

This entry was posted in Branding, Consumer Behavior, Human Behavior, Marketing Strategy, Tribal and tagged , , , , , . Bookmark the permalink.

11 Responses to The end of Qantas as we know it?

  1. Good post. I agree with your point that this is more real and tangible for the average Australian than the waterfront dispute.

    I think a lot of commentators who side with Qantas on this issue might be underestimating the damage to Qantas’ brand nationally (and our entire tourism industry internationally). This news has already been fairly widely reported by the global press and it does not look good.

    This is a great blog by the way & I look forward to reading more from you.

  2. Ray says:

    The stronger the brand the more forgiving we are. Just how strong is Qantas brand hmmm time well tell. Consumers will be forced to trial Virgin but in the end they will never be their first love. Virgin won’t shift their brand position either so consumers will have the affair but I think in the end will return.

  3. Paul Harrison says:

    Not necessarily, Ray. The double-jeopardy effect does have some influence, but although the brand may have been strong, it has been losing its trusted position and equity for about ten years. The carrier has a domestic and international market, and the effect of this shut-down will have an impact mostly on business travellers, who have been paying a premium to fly with Qantas. Virgin has been working hard in the past six months to attract business travellers, and while they haven’t necessarily convinced large numbers to defect to them, the latest problems with Qantas will have an effect on their trust in brand, at least in the short to medium term.

  4. John Fraser says:

    As soon as the Chairman & CEO are dumped the sooner I will reconsider flying with Qantas ….. until that time Virgin Blue has me.

  5. billie says:

    Agree, the boards actions have inflicted long term if not terminal damage to the Qantas brand.
    In the waterfront dispute, the consumers had no alternative suppliers, you want to import or export from Australia, you have to use a port that can handle your product.
    The commodity buyers did not have interruptions to their supply of raw commodities when Leigh Clifford set about reorganising industrial relations in the mines
    Domestic passengers can chose to fly Virgin, Tiger or Rex, international passengers have many more alternatives.
    With this industrial dispute Qantas moves closer to its aim of selling off Qantas.

  6. james Robinson says:

    Paul l agree with your comments, however,

    l love flying Qantas because it’s a cut above the rest with good overall reliable performance. What has happened here is the performance and quality have suffered and you are correct we will/have trialed Virgin and are now saying well we might give Virgin another go… maybe.

    This issue here is that l don’t mind paying the $60-$100 more for a return trip to Melbourne on Qantas, as l get a drink and some nibbles and some dame fine service.

    If Joyce is to reduce the service to a Jet Star experience (which l hate!) then Virgin is likely to get my patronage as l feel that the brand Qantas which meant reliable, high quality service will be eroded to the Jet star experience which l avoid like the plague.

    Also, in my entire life l have never known so many incidences of plane mishaps with Qantas over the last couple of years. Is this because the maintenance has been shipped off shore??? Call me silly but Mr Joyce appears to be reducing quality, service just to get the bottom line looking better.

    On the international scene, well l have always flown Qantas and do so twice to three times a year, yes l pay a bit more but l feel safe with the quality of pilots and staff on board not to mention the great service.

    l don’t need planes coming in for low landing as Tiger airlines have done and putting passengers at risk!!, just to save a few bucks with cheap low paid pilots.

    Yes Qantas, but only if the quality and service stays.

  7. Anthony Robinson says:

    Oh please, Qantas has been going downhill for years. Read the travel blogs. Joyce did what he had to do to break an impasse with the unions exacerbated by Labor’s spiteful and biased IR law. The long term future for Qantas is bleak however you cut it. Australians now prefer service and comfort on Asian airlines at cheaper prices. The company will still be flying via Jetstar, Jetconnect and other airlines in Asia.

  8. Amo Amo says:

    The decision to ground flights with minimal warning to the public by Qantas was awful. In some public views, it is as if Qantas is holding the government to ransom, instead of coming to the negotiating table calmly as a corporation approaching the government for help, it has decided to stage a public and rather ugly counter attack which punished not just the employees, but also their customers and the Australian Government as well as the public at large. Before this decision, the ongoing disputes were still more or less neutral to the public eye.

    I find it disgusting frankly, how Tony Abbott continues to side with Qantas management, despite all that’s eventuated, so that he could have a dig at Julia’s government without offering any substantial arguments to what else the government could have done. This reflects a man who places his own political ambitions above the Australian public interest.

  9. lesposen says:

    I came here from The Age, with a long history of involvement in airlines (I have ASIC clearance issued by Qantas to whom I consult, but not employed by), having also consulted and been employed by Ansett Australia.

    Not being a social but a clinical psychologist, I’m not aware of the branding model of Ehrenberg (although I did look at the reference abstract). But I am interested in branding from an emotional viewpoint, being that I am also a president of an Apple user group in Melbourne, and count as friends senior staff at Apple in California.

    That said, switching brands is an interesting area for fruitful discussion (pardon the pun). I have club memberships for Qantas, Virgin and United, which probably would give me access to 90% of the world’s clubs on a flying day. This plays to some extent which airline I choose for domestic travel at least, all things like price being equal.

    But in clinical psychology and social too, there are two concepts that better explain brand switching I believe, or at least can become part of the mixture. That is Solomon Asch’s “Halo” effect, and Herman and Polivy’s Restraint theory.

    The former goes back 50 years and has been utilised by Apple in getting more people to get into their Apple stores and switch their platforms to Mac, having sampled best of breed mp3 players originally (the iPod), then the disruptive newcomer, the iPhone, and the super disruptive (or netbook destroyer) iPad which will be a game changer from education through to medicine, and now – dare I say it – aviation, both within the flight deck as well as Inflight Entertainment. The idea (which you can read about in the recent Steve Jobs’ biography) behind the Halo effect is for the consumer to “carry over” emotional connection and satisfaction from one product to an untested, untried product from the same manufacturer, perhaps sold or demonstrated just a few metres away in the same store by the same salesperson. Asch started his experiments looking at whether beautiful people are assumed to have other characteristics (they are), and Apple raised the principles to an art form to its considerable profit.

    Restraint theory on the other hand, looks at people who have attempted to stay on a restrictive diet, gone off it (as most do) and rather than say, “Hmm, I wonder where it went wrong and how I can best plan for it not to happen again,” usually say, “F$#k it, let’s have the “death-by-chocolate” cake. That is, the more resistant you’ve had to behave, the more you’ve wound yourself up, and when the metaphoric rubber band breaks (your resolve not to eat junk is kaput), bang, you go for broke 180 degrees the other way. This I suspect is part of the events we will see unfold for Qantas: anger at being misled after all the restraint needed not to buy cheaper airfares, as well as the halo effect of trying another brand out of necessity rather than choice.

    Whatever, Qantas needs to dig deep into its understanding of human and consumer psychology to restore its brand to popularity.

    To some extent, I equate Qantas with Telstra. So many older Australians stay with the latter because it started off as the PMG as the only game in town, and better to be safe than sorry by not trying out those “foreign owned” new brands like Optus. I think the same folk also fly with Qantas no matter what, and now will be stirred into a rethink of their loyalty.

    Les Posen FAPS

  10. John Turner says:

    Apart from the strategic error that Joyce has made which will lead to a loss of market share, Quantas’ strategy to take more of it’s workforce offshore erodes the entire basis of the brand. Quantas appear to have made a decision to reposition their brand away from being an “Australian” airline with an impeccable safety record to one of the pack. It is seemingly prepared to give up it’s present brand advantage and compete on the same basis as everyone else. We have already seen a number of safety issues arise in the last year and the offshore moves further erode the brand. The problem for Quantas is that the public almost certainly ranks Quantas behind other airlines once these brand advantages are removed. I predict that as a result in future Quantas will not be able to enjoy the price positioning it enjoys today.

  11. It was ethically wrong not to give the public several hours warning, as leaving people stranded at airports is unacceptable. And to off-load people from planes that had not yet finished boarding, is unforgiving. So I understand people’s anger, frustration and disappointment.

    I agree with their balsie decision to ground the planes, but only after several hours of warning. Aside from that, the only wrong doing by Alan Joyce was accepting the recent payrise, as it took focus away from the issues and gave people a reason to turn against him and Qantas, whether he deserved it or not. They could have simply deferred that action at the shareholder meeting. Whilst Alan Joyce is the CEO and the face of the company, it was a board decision to ground the airline, not his alone. Sure, as CEO he becomes the fall guy and the person that gets the blame, but you would like to think that most Australian’s are not that shallow and naive.

    I agree that the Qantas brand has been damaged, but think it can recover over time. I like Ray’s comment “The stronger the brand the more forgiving we are”. Qantas may indeed morph into a different sort of airline too. Who knows.

    I think it’s sad that Unions are allowed to take action in a way that forces, for whatever reason, a company board to make a decision like this. Strike action essentially holds a company to ransom. And it’s the Union’s stance and advice to its members that will eventually drive the jobs offshore. So one might ask if the Union is really doing the right thing for its members in the long term?

    I don’t hear too many people complaining about the poor leadership and management from the Government, who should have been on top of this long before they had to react with urgency. But of course we have a Government in power that’s run by unionists.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s