Sunday, 30 October 2011

The Qantas Lockout, - Risks and rocks all round down under.

Qantas' bolt from the blue,- the unheralded immediate suspension of their services wordwide is spectacular even in the rough knockabout world of Australian politics, unions and industrial relations. The stunning immediacy of CEO Alan Joyce's action makes Willie Walsh look like a silver tongued diplomat.Clearly this was not a spur of the moment decision. Both it and its timing must have been carefully considered and agreed by the Qantas board whose Chairman Leigh Clifford had a robust record in handling disputes during his time with mining giant Rio Tinto.

A comprehensive lockout by an airline is probably unprecedented. Strikes are almost always visible a long way off , giving governments time to decide whether they can or want to intervene and customers and staff the chance to make their own arrangements to deal with the situation. Historically strikes have also been ex base so that aircraft competed their whole itineraries and passengers were not suddenly left stranded around the network. Halting checkin and departures systemwide within minutes is something entirely new and adds to the dramatic effect. It is also bound to elicit adverse customer reaction. It must have been considered worth the risk.

So what's going on here?

Qantas is faced with an ever less regulated world. The core historic long haul airline was overwhelmingly protected from overseas competition by extremely restrictive Air Service Agreements between Australia and foreign governments. These started to fall away from the 1970s with the emergence of the new high quality but lower cost Asian airlines and bit by bit the access wall was eroded until with the arrival of the new generation of Middle East carriers it has all but collapsed to the enormous benefit of Australia's tourism and other industries. It is not going to be rebuilt. Qantas' only viable future therefore is to go out and compete, focus more on Asia, and move some labour intensive activities such as engineering to lower cost locations. Old fashioned wage rates and low productivity are not an option.

Union reaction to the new necessities has not been positive. A fierce and sometimes bitter rearguard action has been developed into a running battle against almost any change to the status quo. Life could not go on like this and somehow a new deal has to be forced and accepted. Recent progress has been zero and animosity has increased.

The airline has clearly decided that it can no longer live with the ongoing targeted industrial action of the last few months and that drastic and indeed dramatic action is the only way through. The last straw has probably been cashflow sapping union warnings to the customers that they risk disruption if they book on Qantas over the Christmas/New Year period.

Desparate times, desparate-but considered,-measures.

The timing can not have been accidental. Qantas has certainly gained the attention of Prime Minister Julia Gillard by threatening the smooth return home of the high profile delegates, entourages and media from the Perth Commonwealth Heads of Government Meeting. As host she has probably swung between acute embarrassment and fury. Bearing in mind that many of her cabinet have trade union backgrounds her attention may or may not be helpful to Mr Joyce.Risky.

Next up this week is the Melbourne Cup. Disrupting tens of thousands of the airline's domestic passengers, including its most loyal and influential customers, is again high risk. They may not be inclined to support the airline's action,- or timing.

The third group with whom relations are at risk is the non involved staff who could move from supporting their management to at least questioning it. Stopping flying removes the rallying flag for supporters and demoralisation can follow.

The word which keeps recurring here is risk. The Chairman, CEO and Board must believe that they can force government support for an enduring industrial settlement whether they like it or not. Their gamble is that the government will accept that Qantas is just too important to Australia to be seen to fail and the case for it to mimic Asian costs and service quality is irrefutable. If it doesn't it will be replaced either by its own Jetstar subsidiary, a thing the unions fear greatly and are fighting against, or another operator entirely. That's why the Board has thrown the dice. It has landed rather decisively in the government's lap.

Friday, 14 October 2011

Ryan,- Taking the p---??

Maybe yesterday's story that Ryan Air is considering removing 2 of the 3 toilets on some of its 189 seat 737-800s , giving them them 6 more potentially saleable seats is just another headline grabbing exercise unlikely to actually see the light of day.

It is though an interesting and risky piece of customer psychology. Ryan have long made it clear that they don't seek to be loved, or even liked, by their customers and that they see price and range of destinations being all they need to continue on a roll.

Few accountants,- and airline ones in particular,-have ever been able to see much value in product improvements or even simple warmth or cuddliness of image. The stockmarket has taken a similar view with anything looking like additional cost often resulting in an immediate shareprice drop even if it is a real investment. The human reality is though that being liked and even better having stronger emotional bonds with the customers must have a value in achieving real loyalty and repeat business. This was recognised twenty plus years ago when the concept of stakeholders or a three cornered relationship between company,staff and customers was in vogue. Earlier than that, from the 1950s at least, being the link between being liked by the customers and thereby being their first choice was well understood by the airlines. Just look at the old ads. The first customer loyalty programmes were probably the very simple young frequent flyers' logbooks and badges introduced by Pan American with their Junior Clipper Club and BOAC with its Junior Jet Club. Both appeared in the mid 1950s, were extremely effective at a very low cost and sought to bind child travellers in for life. In doing so they achieved this emotional link, not just with the children but also with their parents. It was very clever. More recent loyalty programmes involving air miles and similar have been about financial rather than an emotional reward . They are therefore a different animal. There is a separate question as to whether they increase or just distort and even displace real competition.

Ryan, like any airline or business depends on keeping the incoming cash flow running ahead of the following tsunami of bills demanding payment. Being sure of continuing to attract large numbers of customers crucial in the current economic situation. BA's £ 20 million "To Fly to Serve " campaign is about reaching out to be liked as well as to be respected as innovative, safe and customer orientated. Easyjet is in full persuit of the higher yielding business market. Others are putting a lot into making themselves as attractive as possible. It is a strange moment therefore to be offering customers the prospect of serious physical discomfort should an incumbent of the sole remaining toilet not be a short stay customer. The visual, materiel and aromatic impact on those sitting nearby should the desparate decide to relieve themselves in the nearby door or other areas would be dire. It has happened on other airlines who have pushed up queuing times by reducing the number of loos.

Maybe this latest "initiative" is a step too far for Ryan and they would do well to stop and think about it. There comes a point where people say "Enough is enough". Then the flow of bodily waste can reverse direction.

Tuesday, 11 October 2011

London's Airports: Heathwick-the daftest idea yet.

Airnthere is very much up for new ideas and things which move the transport industry and business in general forward. We are seldom swift to condemn and only do so after much thought.

The latest UK Government idea to try to mitigate some of the effects of its David Cameron ordained pre election promise to cancel the third Heathrow runway project by building a £5bn high speed train link between it and Gatwick is in the 1st April catageory though. The response to it does not require more than a moment's thought, so condemnation comes easily.

Quite simply who would transit through a hub whose runways are 30+ miles apart and connected by a train trip when at Amsterdam, Frankfurt, Copenhagen, Helsinki,the Gulf airports and others they can simply walk from gate to gate or at worst take a brief trip on a people mover/mini train?

That's before one even begins to contemplate the real logistics and costs. Unlike Hong Kong, the UK hasn't grasped the idea that the train has to be brought to the customers not the customers,-via a lengthy hike,-to the train. A Heathrow-Gatwick rail link would probably have to be either customs and immigration bonded, not to mention escape-proof. It would therefore be inaccessible to purely domestic passengers. Alternatively it could be landside and available to all. Its airline transfer users would then have to have to have visas (price £45 a head),and, via queues, go through arrivals controls at one airport and departure controls at the other. Either option would make the volumes of passengers so low that huge subsidies would be required for the train which would have to be free to users to even be considered. For many of the same reasons plus conflicting runway alignment, Northolt does't cut it either.

The other options of a Hong Kong, Osaka or Seoul type new airport built on "Boris" or any other Thames Estuary new or existing island also don't look likely flyers. This is UK, not Asia. The single minded dynamic focus on projects of national importance simply isn't British. Whatever is proposed will be fought by armies of environmentalists, planet savers, lovers of rare species of butterflies only to be found in Boris' left ear and countless others. The planning battle alone would take years.

At the time of the General Election in 2000, Heathrow's third runway was nearly ready to proceed. With Transport Minister, Philip Hammond now saying clearly "never", it now looks lost and will very soon become impractical or vastly more expensive unless the Conservatives are prepared to say those unimaginable words "Sorry, we got it wrong. We have to do it after all".

Trains might fly.

The whole saga is a man made national disaster for London and UK's role in air transport and for its long term position in worldwide business and tourism. It is extremely bad news for the struggling UK economy and employment. There will be many beneficiaries, but they won't be Britain or the British.

Sunday, 2 October 2011

To Fly to Serve,- But be careful what you say.

IAG/BA's new £20 million "To Fly to Serve" campaign, probably aimed as much at some of its staff as its customers, is now under way. Presumably warm and fuzzy feelings are the objective along with a new confidence in a warm, friendly service ethic.

Naturally, to measure progress, post flight customer comments are sought. Passengers may receive a questionnaire via email. Excellent idea. All goes well until the end where there are two boxes,-one for favourable comments with no upper limits on adulation. The other,-for less favourable comments ,- comes with a severe warning that any containing material that is unlawful,obscene,threatening or offensive will not be accepted.