Sunday, October 30, 2011

Analysis - Qantas reputation grounded as PM signals implications for national economy

By Business editor Peter Ryan – analysis
Alan Joyce’s decision to ground the entire Qantas fleet is already costing the airline tens of millions of dollars but the reputational and brand damage is much greater.
Trust, certainty and confidence in Qantas has been eroded on all levels and the only unified support appears to be from the Qantas board which signed off on the extraordinary action yesterday morning.
The dramatic escalation prompted anger from the Transport Minister Anthony Albanese about a lack of consultation before the grounding was announced fuelling the perception that the decision was premeditated.

The Assistant Treasurer Bill Shorten summed up the government's view on what might be a shakey government relations strategy from Qantas when he spoke to Barrie Cassidy on Insiders.
But the depth of the crisis was summed up by the Prime Minister Julia Gillard who said the new flashpoint had “implications for the national economy”.
“Implications” could well be an understatement by a Prime Minister remaining calm under immense pressure.
On its own, the prospect of Qantas in accelerating revenue decline has the potential to slice into economic growth at a time when state and territory economies are operating at multiple speeds.
But consider the potential impact on tourism (already struggling from a high Australian dollar), and the reluctance of visitors and travelling Australians to consider Qantas as a reliable carrier.
Qantas says domestic travellers are switching to competitors like Virgin Australia, accounting for a 20 percent decline in revenue. Virgin has jumped on the escalation, ensuring it doesn’t waste a crisis.
The impact, however, could go much deeper.
Consider the hotel bookings being cancelled or rescheduled. Will this add uncertainty for casual or part time staff who rely on hospitality for their livelihoods?
Retailers and cafes based at major Qantas terminals had plenty of bumped customers late yesterday.
But the demand for lattes, muffins and toasted sandwiches is about to disappear with flights grounded and booked passengers told not to turn up.
Taxis, car hire, buses – even the supervisor at the taxi rank – will see the reason for operating at Qantas terminals disappearing.
The list goes on.
Then there’s increasing scrutiny of Alan Joyce’s $5 million pay delayed approved by shareholders on Friday.
Even with a 71 percent increase, Mr Joyce is a discount chief executive compared the $10 million his successor Geoff Dixon received in his final year.
But taking a significant pay increase while asking unions to compromise and to trade in traditional terms and conditions is raising the cynicism stakes with the government and general community.
Qantas, until now, was an iconic global brand known for safety, reliability, and above all trust.
But as the saying goes, a reputation is built up over decades and lost in a day.
That day has arrived and regardless of any breakthrough, Qantas for many is now just another airline trying to survive in a globalised world.

Listen to the full interview with Alan Joyce here.