Nina Mistilis

Qantas is facing a further drawn-out battle with the unions, and that may cause yet more long-lasting damage to its brand. The Qantas dispute is settling in for the long haul, now that it has been taken into binding arbitration – a move that could take months to resolve.

This confrontation with the unions has been building for years and seem and has now culminated in arbitration. All of this has taken place in full view of the travelling public. Qantas – in going to arbitration – has won what it was seeking – which is a stay on industrial action – but in the long term it seems to have lost the war.

I believe it has alienated passengers, the industry and the government, and that’s not a good position to be in. The Qantas brand is tarnished.

Negotiations between the airline and the Transport Workers Union, the Australian and International Pilots Association and the Australian Licensed Aircraft Engineers’ Association collapsed just before a deadline set by Fair Work Australia (FWA).

I believe the longer this dispute rumbles on, the more the Qantas brand image will be badly impacted.

That’s a global perception, because passengers all over the world who want to get to Australia for a holiday, or back home for work, are wondering if it is safe to book a Qantas plane, or whether it will be cancelled again. Many are saying they will never trust Qantas again, particularly in business class, because business wants reliability above everything else. Certainly, in the immediate future, the brand is tainted and they’re really behind the eight ball.

I don’t see how they’re going to catch up easily. Even if the arbitration settles on the side of Qantas, it may still hurt Qantas in the medium to long term, although I think it’s really hard to say what the long term damage will be. It partly depends on how events unfold. If it is solved quickly, which seems very unlikely, then the brand will be restored. But if it continues, and if there’s a perception – as the unions are saying – that service will drop due to the “asianisation” of the airline, then the brand will be completely damaged. Will that mean that less passengers book on Qantas? I don’t know the answer to that. Time will tell.

Qantas chief executive Alan Joyce yesterday said while his preferred option had been to resolve the dispute through negotiation, it was now time to let FWA bring the matter to a close.

But it is reliability is an important factor in terms of the branding of an airline. When it comes to the crunch, we need to get to the destination on a certain date and we cannot afford to be stranded at home, or somewhere in Australia, or abroad. So when it comes to the choice, will we choose Qantas or will we choose another airline?

Nina Mistilis is a senior lecturer in Tourism at the Australian School of Business.

Dean Wilkie

I have been thinking about Qantas’s moves to start a new airline up in Asia.

Starting a new airline from scratch means that consumers will hold absolutely no information about the new brand. Nothing beats a fresh start right?

Wrong.

I really question Qantas’s approach from this perspective. Qantas as a brand has strong positive associations, which consumers will use in forming brand judgments and in comparing to alternatives. A quick search of the internet and you can see that in 2006 it was voted the 2nd best airline in the world. In 2011 it was voted the 8^th best. A dramatic drop but still, Qantas is seen as the eight best airline in the world and it currently has a 14% share of the Asian market.The point is that Qantas has equity where as a new brand has none.

 The next thing I want you to consider is something called the order of entry effect. Essentially, in many categories a brand’s market share has been shown to decrease with its entry position. The later a brand enters, the lower the brand’s share. There are several economic reasons but from a marketing perspective, consumers will learn more about earlier entrants than later entrants. The more you know about a brand, the more likely you are to purchase it. To illustrate, the market share of airlines in the domestic market is roughly Qantas (65%), Virgin Blue (20%), Jetstar (10%), Tiger (5%). It is no coincidence that it follows the order in which these brands entered the market.

 My rough calculations have it that this new brand into the Asian market will be at least the 20^th entrant. Using the average order of entry estimate, the 20^th entrant into a category will get about 2.4% share. This is based on having parity with all other entrants on every other variable. In the airline category, this would be advertising, number of planes, flights, price, service, lounges etc. If this new airlines was at a disadvantage in any of these (which it will be), the market share will be even lower. In addition, the connection we have to Qantas because it is an Australian airline is the same connection every consumer will have with its local airline carrier. (Another barrier to consider).

 So you have to ask the question, does it make sense to launch a new airline or should they try and improve the competitiveness of its existing brand which has 14% share.

Lecturer Dean Wilkie is an expert in branding at the Australian School of Business.