An interview with Rob Gurney, Head of Sales and Distribution, Qantas Airlines Part 1

The Mole: Rob, thank you for your time today and a happy New Year to you. 2005 was a very busy time for Qantas. What were the major milestones from your perspective as Head of Sales and Distribution for the airline?

RG: We had a very successful 04/05 financial year and the challenges continue to come thick and fast, but obviously the biggest challenge facing Qantas is the cost of fuel. 

If you have a look at the way the industry has developed over the last 20 – 30 years there are a couple of things that are fairly certain.

One is that our yields continue to decline…. and if our average net revenues and capacity continue to decline, then obviously we need to do something to attack that cost base. 

I think one of the things that Qantas has been successful in doing over the years is re-inventing itself, addressing some of the serious cost issues, not just in sales and distribution, that’s one element of it, but across a whole range of areas. 

I think you are probably aware of a program we have called the “sustainable future program” which has some fairly significant cost reduction targets attached to it and it’s not just about slashing costs, or buying less paper clips or whatever – it’s about not buying any paper clips at all because you’ve found a better way of doing it, that sort of thing.  It’s about removal of unnecessary process, it’s about if things don’t add value to the customer than why do we do them?  That really has caused a top to bottom review of everything we do in Qantas. 

But to the highlights of 2005, we had a very big year – we had the Fleet announcement, we had the 85^th Birthday, we had the visit of the A380, we had the Socceroos successfully making the World Cup and we’ve continued to attack our costs.  

But to be honest though, in Qantas we don’t dwell on the past – this industry is faced with continuous change and challenges and we really have to focus on the future. 

The Mole: Sometimes do you think Qantas is unfairly maligned in the industry because the media coverage tends to be about commission cuts, shedding staff, cutting costs etc. Do you think the industry is fully aware of the extent of the change and re-inventing of this airline? 

RG: Look, we sit down with our partners and discuss whenever we are going to do something, but when things are reported, stakeholders will always view it from their perspective.  So, if we do things that have a direct effect of Travel Agents, that’s the way they’re going to view it, they’re not necessarily going to take a broader perspective. 

They may have an understanding, and quite often senior people in the industry say to me “look, off the record, I completely understand what you’re doing and in fact, I agree with you, I just can’t ever say that publicly”.  So, I think it is really at a personal level because we’ve made an effort to communicate with people.  However, people in the travel industry will make comments in a tone and a manner to communicate to their audience or their stakeholders. 

The Mole: Under Geoff Dixon, Qantas has made some very strong and tough decisions in recent years.  Where do you think Qantas would be now if that hadn’t happened? 

RG: I think anyone who looks at our profit report, our annual reports over the last three years and does a quick back of the envelope calculation will see what would have happened to our profits if we weren’t successful in removing some of the costs.  

I think one of the reasons we’ve been able to grow our business is that we have continued to do things differently, including everything from launching Jetstar, through to the sustainable future program, we’ve done things differently from most other carriers in our situation. 

The cost reduction program has helped us work through some of the volatility in the industry.  We call it “constant shock syndrome” here at Qantas.  If you go back to 2001, we had 9/11, the collapse of Ansett, the 2002 Bali bombing, the 2003 SARS outbreaks, war, the 2004 Tsunami and in 2005 more bombings in Bali …………. and we have survived them all. 

This is an industry that just has to ride shock after shock, so there is always going to be volatility around revenues, and the result is that it just puts greater emphasis on controlling the costs. 

The Mole: Where do you see Qantas and the industry in 2006? 

RG: Our philosophy is fairly simple.  We believe that there is a piece of work the travel agent does for the customer which the customer should pay for.  

We also believe that there is a piece of work the travel agent does for the airline that we should pay for.  

Overlaying that, obviously we enter into commercial agreements with travel agents be they individuals, operators chains etc. 

In terms of the services offered by travel agents to the Australian consumer, it’s amongst the very best in the world.

In other parts of the world, consumers are paying for those services and have been for a number of years now and we have been talking to the industry for a number of years now about the need to change to a more sustainable remuneration model.  

Some have agreed and they’ve been very public and very visible about it. Others haven’t. Our view would be that those that embrace the change will be the more successful ones and will survive into the future. 

Look, I’ll say this, we absolutely believe in the role of the Travel Agent going forward.  We think that agents are entrepreneurial organizations that will find ways of creating value for customers.  

While they continue to do that, they’ll play an incredibly important role and we’ll continue to want to have commercial relationships with them. 

The Mole: Where does the new Fleet acquisition position Qantas going forward and what changes can we expect? 

RG: Well what we’ve done over the past couple of years is continue to grow quite aggressively and are continuing to do so. We’ve added capacity and we’ve added new points to our network.  

The next phase of that expansion will be in 2007 when the A380’s come on line and it’s not far away now.  It’s not very long before the schedules for these aircraft will be in system range, so it’s coming up very, very fast.  They will represent a quantum change in terms of challenges and in terms of the products we offer.  

Now while I can’t talk about the specifics of those products, because they are still highly confidential, what I can say is that the products and services we will offer on board the 380 will be a very significant step forward from what we offer today, with new levels of comfort. 

What we are doing is leveraging off the things we have. We have a very strong brand and great reliability.  We’re a renowned long haul specialist and we’ve been product innovators and leaders for pretty much most of our existence. It’s all of those things, in addition to being an absolute quality carrier, having long haul expertise and expanding the network, where it’s profitable to do so. 

The Mole: What if the Government awards rights to other carriers on the Pacific Route?

RG: I’m not going to comment on that. 

End of Part one.

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