An interview with Rob Gurney, Head of Sales and Distribution, Qantas Airlines Part 2

The Mole: Qantas has made changes to the domestic scene with Jetstar taking over some routes and no longer offering business class products on some routes e.g.: the Gold Coast. What is the future for the domestic market in terms of product offerings? 

RG: In the Gold Coast example, we were averaging 3 or 4 people actually paying for a Business class product, so it made no commercial sense.

What we’ve now got is an Australian domestic model that helps us meet the demands and expectations far more effectively, because we have a lower cost business and it is very clear what that business is and what it represents – great value for money and Jetstar operations on routes that are price sensitive, more leisure orientated.

We have a full service airline that operates on routes that still have a degree of price sensitivity and are highly competitive.  

Because we operate in a two airline system, very little goes under the radar.  

If someone goes on sale, usually the other one responds very quickly. So we still have pressure on prices on the Qantas mainline routes, but basically they are routes where the characteristics of travel are different and where people are prepared to pay for different aspects of service that represent value to them. 

So it’s an evolving process and requires quite dynamic planning where Jetstar and Qantas will fly and we talk about it on a regular basis. 

The Mole: OzJet is a new product on the domestic front. How is Qantas going to respond to them targeting corporate accounts and the front end of the aircraft customer? 

RG: As you well know, price is just one element of the travelling experience.  

We present a complete end-to-end experience for the business customer, and soon that experience will be extended beyond just the airport experience.  At the moment though, it’s about frequent flyer programs, lounges, fantastic terminals, an extensive network.  

We’re not going to react to what other people do – what we have done and will continue to do is go and talk to our customers and do what’s right for them.

The Mole: People say that Qantas has a “take it or leave it attitude” to the industry. Is that fair? 

RG: Look, we have a reasonably strong position in our market, we have a good brand that’s attractive to consumers and we’ve got good coverage.  In terms of our approach, I think we’ve always been fairly balanced and reasonable in our commercial approach to travel agencies, but at the end of the day, it’s a business, and we’ve got to do business that’s profitable and commercially viable for us, and agents have got to do the same thing. 

That’s just a fact of life, and I think we’ve got some outstanding commercial partnerships with agencies.  We have relationships with everybody, probably better with some than others, but I think that is always going to be a fact of life. I wouldn’t describe it as take it or leave it, but there comes a point in any commercial negotiation where it’s not worth doing a deal. 

The Mole: Mike Hatton spoke about the value of the agency chains.  Do they make it easier for you to deal with travel agents and where does that leave the agent that’s not in a chain? 

RG: That’s a good question actually.  

First of all, we have a relationship with AFTA as a body, and with Mike who represents his Board and his constituents very well, and we have good, open dialogue with them.  

We don’t always agree, and we are often put in positions where we have conflicting views on things, but it’s always been a constructive relationship. 

Mike has always been very vehement and positive in the way he has represented his members and he’s always been a tough negotiator when we’re dealing with them, but at the end of the day he’s representing the industry on basic commercial principles, not on the details of any deals.  

With the chains themselves, it does make it easier because we are dealing with a relatively small number of people representing the larger group, but those commercial relations we have are quite independent of any relationship that with AFTA . 

The Mole: So the deals with the chains will cascade down to the agent and make it advantageous for them to be in a chain? 

RG: Yes, the commercial arrangements based on volume and loyalty and those sorts of things are more likely to be better in that environment than trying to negotiate as a small individual, but also I think there are other synergies that those groups bring such as consistency of branding and approach, reliability and confidence, trust in the brand and some of the cost efficiencies that come from belonging. 

However, having said that, I think there is still a role for the independent agent, and some of them have been very successful.  Some of the buying groups are more loosely affiliated than others and allow more flexibility in their arrangements.  There are also still a large number of independent retailers with which we have good direct relationships and will continue to do so.

The Mole: What about the internet and its role for Qantas? 

RG: We have a significant amount of business done on-line.  What we have seen though is a shift from our call centre to the internet.  Our internet business has grown and while inevitably some of that would have come from the agent community, most we believe has come from our call centre.

What is has allowed us to do is grow our business without increasing numbers in our call centre. 

I actually think that the retail travel agents in Australia have significantly benefited from the strength of the airlines proprietary sites here in Australia, because consumers are well conditioned to going on-line and shopping and comparing product and prices.  

The fact that those sites are so strong has made it very difficult for the global on-line players to gain a foothold here in this market.  

We’ve always behaved responsibly in the marketing of our sites and we haven’t marketed them to the exclusion of the agency community. 

We distribute the same product and the content is basically the same product the agent has access to, so we’ve been quite honest and equitable about it, and I don’t think that’s quite understood by people. 

The Mole: Changing tack, as the airline goes through all this change, what are you as an organisation doing to change the attitude of staff? 

RG: One of the things we do, as senior executives of the airline, is each quarterly result is released, we go out and see as many people face to face as we can to deliver the message.

Sometimes that message can be fairly blunt sometimes, but they’re honest messages, and designed to help people understand why decisions are made and to help them put them into context.

I can only comment on the division I’m responsible for, but I believe we still have a lot of work to do in that area, but there is a much better understanding today than there was three years ago, and that’s come about simply because of consistency of communication and, I suppose, a commitment to getting in front of people. 

We used to have massive business forums, but we now have lots of smaller groups, and more people doing those briefings. 

The Mole: Speaking of people, prior to Xmas there was a significant change in the senior sales group at Qantas with people moving from State to State. Why was that? 

RG: For us it was just about getting a re-alignment of people and skills into areas where we thought they could be best utilized.  

It’s three things really.  Firstly, as the market changes you need to get people with different skills to meet those challenges, secondly, to get people to grow and thirdly to freshen things up a bit.

The Mole: What’s your closing message to the industry looking forward to 2006?

RG: I think there are three things.  

The first is that we are generally working in an industry that continues to grow, despite the difficulties we face, so we’re in a positive place. 

Secondly, the message from Qantas is definitely to expect more change – not just from us, but from everybody.  The rate and the pace of change, I think, is just going to accelerate, so I think we all have to be prepared for that. 

And the third thing I’d say is that while we recognize the role and the value the travel industry community brings to Qantas, all those people that distribute our product, I think we just have to recognise that the way in which we work together is going to evolve and change going forward, and I think we’ll all work with the industry through those changes. 

The Mole: Thank you Rob.

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