Qantas’ giant brand punt

In the new autobiography of 13-time Melbourne Cup winning trainer Bart Cummings there is a lovely anecdote about David Hains, the billionaire investor who was one of the most prominent race horse owners in Australia during the 1970s and 1980s.

In the book called Bart: My Life, Cummings describes Hains as idiosyncratic.

“‘David’s strangest habit was to tape-record everything you said,” Cummings said.

“He would invite me down and we would be walking around his property or the stable or his office or even taking a stroll on his golf course, and he’d have a tape recorder going.”

“He would ask questions about how his horse was going or whether the right methods were being used and he put everything I said on tape. It wasn’t sinister; it was that he was obsessed with learning.”

I’ve often thought there are a few reasons why business people are attracted to horse racing. There’s the challenge of mastering something that, unlike business, isn’t easy to predict or tame. And there’s the gambling aspect – let’s face it, entrepreneurs are natural-born risk takers.

I wonder whether Qantas boss Alan Joyce is a fan of horse racing. He has certainly shown himself to be a punter in the last few days with a series of high-stakes gambles.

He’s gambled that grounding his entire fleet would provoke the Government into intervening in the dispute.

He’s gambled that Fair Work Australia would terminate and not suspend all industrial action.

And he’s gambled that the Fair Work Arbitration process will deliver the company the outcome it wants.

So far, he’s won two of those minor bets. The third, and biggest, is yet to play out.

But as Michel Hogan points out today in her great blog on the Qantas situation, perhaps Joyce’s biggest bet is that the Qantas brand can sustain the unquestionable damage it has suffered by grounding its fleet without warning.

I would disagree with Michel’s characterisation of Joyce’s actions as an “epic dummy spit”. Regardless of what you think of the Qantas strategy, this was not some sort of emotional tantrum. This was a decision that was coolly planned and executed.

But I think Michel has captured the essence of Joyce’s big brand gamble: “The actions of Joyce and his board of accomplices has clearly demonstrated they consider the Qantas that millions of Australians here and around the world have had long affection for is dead. The rest of us just have to catch up.”

Michel has cleverly pointed out the stark difference in the way that Joyce and his board see Qantas and the way that consumers see the brand.

The idea of Qantas being a national carrier with a truly iconic heritage would appear to mean nothing to Joyce and the board. Like Michel, I am not sure whether the idea of being an Australian company matters at all to Qantas any more.

My sense is that Joyce has reduced everything to numbers.

In the Middle East, being a “national carrier” means having your costs and your losses subsidised – real, tangible, bottom-line benefits.

For the modern Qantas, being a national carrier means little more than a peg on which to hang your marketing on and a whole lot more grief when problems arise. For Joyce, the bottom line effect of being a national carrier is low, particularly in such a competitive market.

Just like his calculated IR gambles, I wonder if Joyce has made some calculated brand gambles too.

I also wonder whether Joyce has punted that grounding the fleet for two days might have had less impact on the Qantas brand than the 12 months of industrial actions and disruptions unions, disruptions which were already starting to push customers away from the airline.

I wonder if he’s punted that domestically, any brand damage will be mitigated by the fact that the Australian market remains small, the Qantas frequent flyer program is very strong and Qantas is the main choice in the business market.

I wonder if he’s punted that internationally, any brand damage would be mitigated by the fact that Qantas would like to scale back its Qantas services as they struggle to make money.

I wonder if he’s punted that when it comes to the idea of Qantas as a national carrier, any brand damage would be mitigated by the savings he can generate from off-shoring.

It would appear that Joyce has decided that any brand damage to Qantas will be short-term, while the changes he wants to make to the business are crucial for the long-term.

But like Michel, I think Joyce may have got this gamble wrong. I think the breach of trust and the loss of confidence in Qantas could haunt the company and its workers for a long time to come.

The idea of Qantas being a national carrier is outdated when it comes to Qantas as a business. But the idea does seem crucial to Qantas as a brand.

As Michel says, Qantas is telling its customers that it is just another airline in a world full of competitive airlines.

That’s fine. But being just another airline in a small market like Australia might be a very tough proposition.