What Businesses Can Learn From Qantas' Spectacular Turnaround

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Australian airline Qantas has just released its results for the last financial year. Its profits hit $1.53 billion, up 57 per cent. That's the best result the company has had in nearly a century. (Yes, Qantas is that old.) It's a monumental turnaround for an airline that was in dire straits just two years ago. We take a look at Qantas' impressive comeback and what businesses can learn from it.

In 2013, Qantas reported a $235 million loss; and that was just in the last six months of the year. Unlike its rivals, the Qantas Sale Act limited the airline's ability to receive foreign investments although those restrictions have since been eased to allow a maximum of 49 per cent foreign ownership in Qantas.

But a year later, things were still looking grim for our national airline which has existed for nearly 95 years. It was in 2014 that the company announced the Qantas Transformation Program, another name for plans to restructure the business, cut 5000 jobs, sell more than 50 airplanes and reduce overall spending.

It was a desperate move for Qantas and there was a lot of attention focused on the cost cutting (it had a goal to hit $2 billion in cost savings by 2017) and job culling. There was a lot of negative press coverage thanks to criticism from worker unions and speculation that staff cuts would result in flight delays and a dip in the quality of service.

People were angry that Qantas, a brand that is such a core part of Australia, was tanking. A lot of the resentment was targeted at Qantas CEO Alan Joyce, who recalled a time when most of the nation wanted him to resign and somebody even set their dogs on him (yes, really.)

Qantas' reputation had taken quite a beating but the company persevered with its transformation program, unfazed by the negativity and naysayers that predicted the company's demise.

But Qantas defied expectations. Not only is it on-track to deliver a cost saving of over $2 billion by 2017, it also reported record-breaking profits in the last financial year. $1.53 billion, to be exact. Up by 57 per cent compared to the previous financial year. It's doing so well, staff and shareholders are getting generous bonuses.

So how did it happen? There are many factors that affected how the business performed. Besides streamlining its operations and improving on efficiencies, Qantas invested in technology, airplanes and elevating the customer experience through the transformation program.

On the technology front, it has enhanced Qantas.com and Jetstar.com (belonging to its budget airline subsidiary) to personalise the websites based on customer preferences as well as improved booking flow to make it easier to use. The company has also made improvements to its mobile app.

In the back-end, Qantas has leveraged the data from its Qantas Frequent Flyer loyalty customers to shape its offerings to suit consumers. It does share customer data with organisations through its Data Republic platform, but at least the company is taking data security seriously by investing in cybersecurity solutions. It has also made investments in IT to reduce the likelihood of online service outages.

This focus on customers has been reflected in a jump in its net promoter score (NPS) across its domestic and international operations.

Another element that has contributed to Qantas' success is its Frequent Flyers loyalty program. Qantas added 580,000 members to the program. There is now a total of 11.4 million members. Acquiring a large pool of loyalty program members isn't particularly impressive. But Qantas has managed to raise the level of engagement with members, recording high levels of customer advocacy after it made enhancements to the program, the most recent one coming from its partnership with Woolworths so that shoppers at the supermarket giant can earn Frequent Flyer points.

The outlook for Qantas remains positive as it forges on with its business transformation program while remaining agile to meet the changing needs of global markets and its customers. Strategic cuts and investments has worked well for Qantas and a renewed focus on improving its brand image with customers is also a noteworthy achievement for the airline. If this Qantas turnaround story has taught us anything, it's that there's still hope for large established companies that are struggling with plunging profits, staff cuts and grim prospects in their respective industries; that is, if they're willing to rapidly change the way they do business.


Comments

    I wonder what the reduction in the price of jet fuel has been worth to their bottom line?

      Or the removal of the excess credit card charges.

    Erm ... QANTAS FF isn't free. It costs $90 to join.

      Hi rickinoz,

      Thanks for flagging that. Sorry about the mistake - I joined for free so that's why there was some confusion. I've fixed it in the article.

      Cheers,

      Spandas

    Most of the benefit is from a massive reduction in the cost of fuel. Had fuel been holding at 2013/14 levels, the airline would still be struggling to turn a profit.

    I am sort of surprised that you didn't mention the savings in fuel as the major part of the turn around. Luck turned a profit.

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