Speech Australian Institute of Company Directors
Brisbane, 18 October 2012
It’s a pleasure to be here in Brisbane.
Qantas and Queensland have a rich history together, and I believe we have a bright future together.
A couple of weeks ago, at the Qantas Founders Museum in Longreach, we opened the first public exhibition of the First World War medals awarded to Paul McGinness.
McGinness was a true war hero and a remarkable Australian. Along with Fergus McMaster and Hudson Fysh, he was the driving force behind the establishment of Qantas.
After the war he threw his energies into creating a new means of transport that could overcome Australia’s tyranny of distance.
In doing so he combined vision, determination and ingenuity. He was a consummate lobbyist, establishing a partnership with Fergus McMaster to secure funding for the new air service and working tirelessly to win its first mail contract.
Hudson Fysh, who served with McGinness in the First World War, said he provided the ‘first spark’ for Qantas. It’s fitting that he is now getting the recognition that his historic achievements deserved.
It is 90 years since those early mail services between Charleville and Cloncurry, and I hope that Paul McGinness would be proud of what Qantas has become to Queensland and Australia today.
Between Qantas, QantasLink and Jetstar, we fly to 23 destinations in Queensland, operate more than 1,000 flights per week, and employ around 5,000 people across the state. We connect Queensland to more than 200 destinations around the world, through our own extensive services and the global network we have established in partnership with some of the world’s best airlines.
We are spending $70 million on a new state of the art catering facility at Brisbane Airport.
At the end of this month we will resume Qantas services to the Gold Coast, reflecting the city’s huge growth and potential.
We are investing heavily in regional Queensland, having expanded QantasLink capacity by almost 90 per cent over the past five years.
Jetstar, meanwhile, connects Queensland to a comprehensive low fares network across Australia, and is the leading airline operating between Queensland and Japan.
Make no mistake, the Qantas Group is committed to this state for the long haul. We recognise its special qualities and its huge potential, and we will be there to help realise that potential.
This morning I’d like to talk some more about the relationship between Qantas and Queensland, the Australian economy and the international aviation industry.
The global context
First, a few words on the economic environment.
Sustained high demand for our resources and our ‘safe haven’ reputation have made Australia a high currency economy, affecting all export sectors. I know Queensland’s iconic tourism industry has been doing it tough, in particular.
Governments and businesses are adjusting for these structural factors – targeting greater productivity while maintaining financial discipline.
While the pace of the mining boom may have slowed, the broad trends shaping our economy are likely to continue. We are in a vibrant but competitive neighbourhood, and we must work hard, be smart and make tough decisions to secure growth and prosperity.
Despite a volatile global outlook, Australia remains in a strong position – and in many ways, Queensland epitomises that.
It has abundant natural resources, a broad skills and knowledge base, some of the world’s most attractive tourism destinations and an increasingly global outlook.
Both geographically and economically, Queensland is well placed to capitalise on the potential of the Asian Century.
The Qantas Group’s position in the changing global economy reflects that of Australia as a whole.
We have excellent fundamentals, with highly profitable domestic and loyalty businesses.
Qantas Domestic, Jetstar and Qantas Frequent Flyer are all benefitting from Australians’ healthy demand for domestic, business and leisure travel.
We are making the investments necessary to support the domestic market – investments in new aircraft, lounges, check-in technology and better training for our people. I’ll be announcing an additional investment, here today.
Jetstar is now well established as the largest low cost carrier in the Asia Pacific. There are Jetstar brands based in Singapore, Vietnam and Japan, and Jetstar Hong Kong is awaiting regulatory approval.
Each of these airlines is based on a lean business model and close local partnerships. Indeed, the Qantas Group with its Jetstar brand is one of an elite group of Australian businesses that has successfully cut through in Asia.
So, our foundations are solid. But the profitable parts of the Qantas Group have been subsidising our one weak business, Qantas International, for too long.
In a structural sense, Qantas International is more exposed than any other part of the Qantas Group to the trends I have described in the Australian economy.
Australia offers one of the most liberal international aviation markets in the world. Over the past 10 years our competitors have added enormous amounts of capacity here – drawn increasingly by the prospect of earning revenue in Australian dollars and our trademark appetite to see the world.
Many of these carriers have advantages that Qantas lacks: a hub location, a low cost base, and direct government support.
That is simply a fact of life in the fiercely competitive aviation sector. We cannot deny it, we cannot ignore it, so we are moving rapidly to address it. Like Australia’s manufacturers, we must transform our business for the realities of the 21st century.
That does not for one second mean compromising Qantas’ values of national pride, community service and Australian excellence. In fact, Qantas has an extraordinary record of innovation and adaptation that over many decades has enriched, not diluted, one of Australia’s greatest brands.
Change is part of this company’s DNA – it is one of the reasons Qantas has been so successful for so long.
In August 2011 we launched a five-year turnaround plan for Qantas International and since then we have made swift progress.
We have launched new routes and strengthened alliances, improved the economics of our international fleet, reduced costs and launched a business transformation program to maximise the benefits of new technology and new work processes.
The speed and scale of our transformation has come with substantial upfront costs – as seen in our full year results. But these will be far outweighed by the long term benefits of an airline better equipped for the requirements of aviation in the global era.
The partnership between Qantas and Emirates announced last month was another big step forward in restoring Qantas International to a competitive position.
It combines two iconic airlines in one of the most integrated non-equity relationships ever seen in aviation. While the arrangement is subject to regulatory approval, we believe we have made a compelling case about the benefits for consumers, for Qantas and Emirates, and for Australia.
I’ll return to the Emirates partnership in a moment, because it promises to be a rewarding one for Queensland.
Like everything we are doing, this new partnership is about building a stronger Qantas.
The Qantas Group in Queensland
Against this background of transformation, the Qantas Group’s role in Queensland can be described in regional, national and global terms.
The nature of our business may be evolving with the times, but our goal remains quite simple.
It is to support Queensland’s regional communities; to connect them to Australia’s major cities; and to link those major cities to the world.
In regional Queensland, QantasLink is carrying on the mantle of Paul McGinness.
Earlier this year it was named the best regional airline in the world by Air Transport World magazine, and this is a source of great pride for all of us.
But I was just as proud in early 2011 when QantasLink threw itself into the recovery effort after the devastating floods that swept the north of the state before encroaching on Brisbane.
We put on more than 350 additional services and carried emergency supplies as cargo, often providing the only way in-or-out for flood affected communities.
Emergency response is part of Qantas’ responsibility as the national carrier and we will always do everything we can to help Australians in times of need.
In this case it was possible because of the sheer scope of the QantasLink network.
From the resources hub of Gladstone to Weipa on the Gulf of Carpentaria, QantasLink serves every corner of Queensland.
In recent years it has added new services to Moranbah, Cloncurry and Mt Isa and earlier this year it increased capacity in Mackay, Rockhampton, Gladstone and Emerald, through the introduction of larger aircraft.
Together with Qantas’ mainline jet services, QantasLink provides vital air transport links for Queensland’s mining centres.
We recently announced a new direct Sydney-Gladstone service, complementing our intra-Queensland regional operations.
We recognise the value of the resources sector to the Queensland economy and to Australia’s terms of trade, and we talk regularly with our corporate customers and local stakeholders to ensure that we meet their needs.
However, we also understand that QantasLink’s customer base is broad, covering local businesspeople, tourists and families visiting relatives.
We believe it is important to get to know the communities we serve and work with them to generate economic activity, jobs and investment.
In national terms, the Qantas Group supports Queensland through our successful dual brand approach.
That means deploying Qantas and Jetstar to provide the best network and frequencies for both the business and tourism markets.
Qantas Domestic offers regular, full service flights on the east coast ‘triangle’ that connects Brisbane with Sydney and Melbourne, and on routes between Brisbane and other capital cities.
And of course, we were delighted to announce Qantas’ return to the Gold Coast from the end of October.
The response from the local community since the announcement has been sensational.
The Gold Coast is now Australia’s sixth largest city and the time was right to go back in, and go back in hard.
We will be operating three services per day using next generation Boeing 737 aircraft. We are re-opening the Qantas Club at Coolangatta Airport. We are restoring Qantas Frequent Flyers who live on the Gold Coast to the status level they were when we left. And we will be teaming up with Gold Coast Tourism on a joint marketing campaign to promote the region in key markets.
It’s an exciting development for the Group and a vote of confidence in the South East Queensland economy.
Jetstar is the other big part of the Qantas Group’s Queensland story, with more than 40 per cent of its network based in the state.
Jetstar’s brand promise of low fares is perfectly matched to Queensland’s world-class array of tourism destinations – from Coolangatta to the Sunshine Coast, Cairns to Hamilton Island.
Tropical North Queensland has had some difficult times over recent years, and we know that air access is vital to the region’s long term performance.
Jetstar will continue to monitor opportunities to expand its presence in Queensland as demand and economic conditions allow.
New investment – maintenance
I mentioned earlier our $70 million investment in upgrading our catering facilities at Brisbane Airport.
Today I am pleased to announce that Qantas will invest a further $30 million in our heavy maintenance base right here in Brisbane.
The works are starting this week and involve transforming an existing line maintenance hangar into a facility capable of supporting up to three lines of maintenance.
This includes new aircraft docking systems, safety equipment, new hangar doors and improvements to the hangar exterior.
A bit like your car, modern aircraft are getting smarter and need less and less servicing. With that in mind we’ve already started on a process to consolidate our heavy maintenance facilities from three sites, to now two sites, to ultimately one site in Australia.
We have no set time frame but it’s something that needs to happen.
Even with the consolidation down to one site, Qantas will remain the only airline that does its own heavy maintenance in this country.
Brisbane is the obvious candidate to become our one heavy maintenance site, given the purpose built hangars and modern equipment.
These facilities were built in 2004 with assistance from Queenslanders under the previous State Government. And we are delighted with the continued support that Qantas has continued to receive through Premier Campbell Newman.
I can also announce that Qantas has just started recruiting 30 apprentices in maintenance and engineering.
These apprentices will be employed in Brisbane, the major growth area for our business.
We actively invest in the long-term future of maintenance and engineering in Australia and will continue to do so.
As we strengthen our operations at home, we also look at our international network.
At a global level, we have our proposed partnership with Emirates.
This partnership has the potential to deliver huge dividends for Queensland – particularly in terms of inbound tourism.
For instance, Emirates – the biggest international airline in the world – will be marketing the Qantas domestic network to its global customer base.
That means people in the Middle East, in Europe, in the UK, in Asia will see Emirates adverts encouraging them to visit places like Cairns and the Gold Coast – destinations that will become a defacto part of the Emirates network because of the Qantas partnership.
For customers in Australia, the proposed partnership will supercharge the international network that Qantas offers out of Queensland.
From April next year, Qantas customers in Queensland will be able to access Emirates’ daily services from Brisbane to Dubai, and an onward network of more than 70 destinations in Europe, the Middle East and Africa.
Regional Australians – especially in Queensland – are used to multi-stop journeys to Europe. If our partnership is approved, these travellers will be just two stops to the heart of Europe.
Check in at Rockhampton and collect your bags in Rome. Board QantasLink in Emerald and arrive in Glasgow on Emirates. Even Longreach to Lisbon, in just two stops.
The partnership is also great news for our 8.6 million frequent flyers.
Qantas and Emirates will provide reciprocal access to tier status benefits which includes end-to-end recognition of customers, lounge access, priority check-in and boarding and more.
If you are a Gold or Platinum Frequent Flyer with Qantas, expect the same treatment when you fly Emirates.
You will also have a lot more opportunities to ‘earn and burn’ points on both the Qantas and Emirates network. The Qantas flight you take from Brisbane to Sydney today can earn you points to fly from Dubai to Barcelona on Emirates from April next year.
All of this remains subject to regularly approval, and while we take nothing for granted, we think the benefits to consumers and to tourism from this deal are very compelling.
By making Dubai our gateway to Europe, we are able to refocus on Asia as a destination in its own right.
This means retimed services to Singapore and Hong Kong are based around onward connections within Asia, rather than onward connections to Europe.
At the same time as Qantas International is transforming its global presence, Jetstar’s pan-Asian network keeps expanding.
There’s a low cost carrier revolution happening in Japan, as the world’s third largest economy discovers cheaper domestic travel. Jetstar is at the forefront of this expansion, with the domestic airline Jetstar Japan having launched in July this year and now serving five Japanese cities.
We expect Queensland to benefit from what’s happening domestically in Japan. It is already more affordable for would-be Japanese tourists to connect from their home town of Sapporo or Okinawa and onto a Jetstar international flight to from Tokyo and Osaka to Cairns and the Gold Coast.
Jetstar first flew from Queensland to Japan in 2007 has now carried more than two million passengers on those routes, making a vital contribution to one of Australia’s most important tourism relationships.
As I said at the outset, the international environment is dynamic and competitive, but the Qantas Group is moving rapidly to extend its reach, tap new markets and forge new partnerships.
Jetstar-branded airlines currently fly to nine destinations in Greater China, including to Beijing from Melbourne. This will grow significantly when Jetstar Hong Kong starts flying in mid-2013.
Jetstar Hong Kong is a joint venture between the Qantas Group and China Eastern, and it’s worth noting that this is the first deal of its kind that a major airline in China has done with an overseas carrier.
In conclusion, Qantas’ presence in Queensland is stronger than it has ever been in our 92 years of operations.
We remain immersed in regional Queensland, and we continue to deliver the aviation access that supports Queensland’s links with the rest of Australia, and with global markets.
As those markets evolve, and Australia itself goes through generational changes, there will be difficult adjustments for Queensland – just as there will be for Qantas. But there are also many opportunities ahead, if we can act decisively at national, state and enterprise level.
The Qantas Group is taking the steps needed to address the challenges we face and realise the opportunities. I know that many of you are going through the same process, and I can assure you that we will be with you on the journey.
We look forward to another 92 years of Qantas and Queensland working together.
Thank you for your time.
Issued by Qantas Corporate Communication (00000)