Australia's national carrier Qantas is in the middle of a painful period of financial recovery.
Australia's national carrier Qantas is in the middle of a painful period of financial recovery.
Aussie carrier pushing the pace as it remodels itself to fight back against tough competition and old ideas.
As Qantas prepares to put more flights into New Zealand over summer, international sales boss Stephen Thompson is clear about what needs to be done at the airline as it battles through a painful period of financial recovery - it must be lighter on its feet.
The Australian national carrier reported a statutory loss of around $3 billion in the past financial year, under siege from international competitors who had flooded into its home base during the past five years and locked in a no-win capacity battle with Virgin Australia on domestic routes.
Its transtasman operations were an example of where the high cost-base legacy carrier had got it wrong in the past - flying its own planes when the demand wasn't there.
"Qantas has always had a standard stable network that we've tended but under the transformation that we're working through as an organisation we're becoming a lot more dynamic, more flexible," said Thompson, the airline's executive manager of international sales.
"That's the key and that's something we haven't done enough of in the past where we had trough periods and we continued to try and battle through," he said.
"It's around being a lot quicker and a lot smarter and trying to make those changes that we haven't done before."
The airline recently announced flights from Australia to Vancouver in January next year to cash in on the peak ski season. Competitors were charging exorbitant fares and Qantas had aircraft to spare.
"In the space of two weeks an idea was floated and ... it came out to be announced. Normally with Qantas it takes two weeks to organise a meeting. That's the speed of change we're driving through the business," said Thompson who has had several executive roles during a 20-year career at Qantas.
As part of the transtasman shake-up the airline will add 28 supplementary return services across the Tasman during the summer peak.
Thompson said that will add about 12,500 extra seats to the route travelled by close to 2.3 million Australians and New Zealanders a year and one of the most competitive in the world.
Stephen Thompson, Qantas executive manager of international sales.
Five Sydney-Auckland services had been upgraded to Airbus A330s and the airline would again fly direct services from Perth to Auckland, following its introduction last summer.
Twice-weekly return Perth-Auckland services will run from December 5 to April 26 next year.
This would add up to 70 additional services and 29,148 seats.
Qantas was also picking up more Kiwi travellers heading for one of their favourite destinations, the United States.
There had been double digit growth of Kiwis looking for a range of US destinations, although most flew to Australia and then on to Los Angeles.
Price was not the main determinant.
"We're never going to be the cheapest game in town."
On the Tasman, Qantas has a partnership with Emirates that has been in operation for a year and along with Qantas budget offshoot Jetstar the airlines had about a 40 per cent share of the market in 2013.
Thompson said the three airlines were holding about steady against the dominant Air New Zealand-Virgin Australia alliance.
He said he couldn't identify which airline was doing best out of the year-old Qantas-Emirates partnership across the Tasman.
"I don't think it's a case of one doing better than the other - I think it's a case in that working together you're providing a better customer proposition."
The global tie-up with the Dubai-based airline was part of Qantas' attempt to rationalise its long-haul flying, where it was bleeding money. Qantas International lost almost A$500 million in the last financial year.
The lure of Australia's open aviation market and strong economy resulted in competitor capacity growth in the Australian market of 44 per cent between 2009 and 2014, according to airline figures. Global capacity growth was 29 per cent in the same period.
Thompson said international capacity growth was expected to be about 2.5 per cent this year as the Australian economy slowed.
As part of a five-year A$2 billion cost-cutting drive 5000 staff will be laid off (it had made half those redundant by the end of August), and its fleet restructured.
As part of its fleet shakeup, the airline founded in the Outback in 1920 announced this year that 50 aircraft on order would be deferred and sold.
One of the Boeing 737-800 used across the Tasman will be sold in the current financial year and as part of a fleet simplification programme, the number of aircraft types will fall from 11 different models two years ago to seven in 2016.
Thompson said the transformation project was "absolutely" on track but the airline faced a balancing act, saving money while still sticking to its full service, a model it had emphasised in a marketing campaign during the past month.
He said the airline was prioritising customer "touchpoints" - the services that matter to passengers and those they are prepared to pay for.
"We're continuing to invest very heavily in product because we know it's a very competitive market.
"One of those challenges that we're faced with is about being more agile and nimble and delivering the cost savings and quality of product."
The Qantas approach has echoes of the recovery path Air NZ took after its near-collapse in 2001.
But Thompson said his airline faced its own unique challenges and had devised its own response.
"Are we looking at how other airlines are doing it? Absolutely not, but [we're looking] at how we do it in the competitive landscape we face in this country [Australia]."
After several years' decline the airline reported a A$2.84 billion ($3.16 billion) loss in the year to June 30.
What are some reasons for this?
The airline stuck with unprofitable long-haul routes when it should have ditched them, the composition of its fleet became complicated and it had the wrong planes for parts of its network.
It also faced a wave of well-capitalised Middle East and Asian carriers, offering similar products but with lower costs, coming into Australia.
Qantas retains about 25 per cent of international traffic, well down on about a third of that market early last decade.
Dominance of Australia's domestic market has been challenged by Virgin Australia, especially for high-yield corporate passengers.
Like all airlines Qantas has been hit by high oil prices since 2008.
What's it doing to dig itself out of a financial hole?
It has a three-year transformation programme to save A$2 billion permanently.
This means making 5000 staff redundant, retiring older inefficient planes, simplifying the fleet, cutting routes (Auckland to Los Angeles was an early casualty) and shaking up the services it's sticking with.
For example it cut some winter transtasman flights when there is less demand but added flights in the high-demand summer period.
It's retained its loyalty programme, a market leader and previously a candidate for being partly sold off.
Cost-cutting will help, as will getting the fleet right, but Qantas needs external factors to work in its favour too.
The softening Australian economy won't help, although it does deter well-funded competitors from swooping in. And demand shocks such as fallout from wars, Ebola and economic decline in key markets are ever-present for airlines.
Qantas chief executive Alan Joyce said in August the airline had made it through the worst and had "clear evidence of a brighter future".
