27/02/2014 - 09:38

Aussie icons get left behind

27/02/2014 - 09:38


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There's no point in an Australian government trying to save a business regarded as a national icon if Australians have stopped buying the services of that business.

Aussie icons get left behind

There's no point in an Australian government trying to save a business regarded as a national icon if Australians have stopped buying the services of that business.

Qantas is one example of the problem and Holden is another, with most Australians no longer buying cars made by a business once regarded as the national carmaker.

Sad as it is for employees at Qantas and Holden who are about to lose their jobs, the truth in both cases is that they forfeited a big portion of their market share by delivering an inferior product.

Qantas is the headline act today and while talk-back radio, letter writers and union leaders will lament the crisis into which the airline has fallen, the damage was done years ago and will not be fixed overnight, or by a government helping hand.

Passengers, or the lack of them, are the reason for the Qantas crisis. Quite simply, most Australians have stopped flying with the airline on international routes because they get a better deal, better service, or a cheaper price with other carriers.

It’s same with Holden. Once a car in almost every Australian garage, it is now an item of scarcity because it has also failed to deliver the quality, reliability or design that most Australians want.

There is a common thread linking Holden, Qantas and a number of other iconic Australian businesses, and that’s a failure of the business concerned to recognise the quality of rival products and adapt to compete.

In the case of Holden, the reaction of management to the arrival of the first Toyota cars some 50 years ago was to laugh at the tinny build quality and small engines.

It took time but Toyota persevered, focusing on a combination of quality construction at a reasonable price, to the point where a Toyota Hilux became a global hallmark of reliability.

Holden misjudged the entry of Toyota so badly that it eventually ceded market leadership to the Japanese carmaker.

The fact that Toyota is joining Holden in withdrawing from manufacturing cars in Australia does not detract from the point that a rival was allowed to steal market share by offering a better service at a cheaper price.

The Qantas crisis is a mirror image of the Holden crisis, and in both cases management ought to be asking why their once loyal customers abandoned them.

Unfortunately, neither Holden nor Qantas management did ask that question, preferring instead to blame everyone else and to then ask for a taxpayer-funded rescue package.

If management at either company had moved quickly to compete, and made early changes to product design, the crisis gripping both might have been avoided.

Airline travel has been an identical experience to car buying when it comes to product quality.

For much of the past 50 years, especially out of remote Perth, long-haul trips invariably started with Qantas. But this started to change as international rivals arrived, delivering in the early days an experience similar to the first Toyota Coronas.

Today, most international travellers passing through Perth airport fly with an airline other than Qantas.

Loyalty programs, such as Qantas Frequent Flyer, encourage some customers to stick with the airline once known as the Flying Kangaroo, but even those incentives to stick with a particular airline are really just business band-aids.

On a personal level, the eye-opener for me as to the depth of trouble into which Qantas has fallen came about this time last year when first experiencing the so-called ‘merger of equals’ between Qantas and Emirates.

As I wrote at the time, the ability to compare two airlines on the same trip thanks to a swap in Dubai exposed Qantas for what it had become – a second-rate carrier living on past glories and past customer loyalty.

Worse still, the marketing campaign that promised seamless travel was exposed as a myth, with Emirates and Qantas booking systems not working as promised.

Twelve months on and nothing has changed. There is still confusion in the booking process, and Qantas travellers are left with a feeling that Emirates is treating them as second-class customers despite the merger-of-equals promise.

Perhaps worst of all is that by not addressing issues quickly and not improving service quality, both Qantas and Holden are now effectively in a death spiral.

At Holden, whatever the optimistic comments from management, there will be a big fall in sales as car buyers worry about future services.

Qantas, whatever the optimistic comments from management, can expect a fall-off in ticket sales as potential customers worry about future services or, worse still, being abandoned overseas should management repeat its 2011 stunt and ground the airline.


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