Exclusive Internal documents reveal collapse in Qantas brand, trust
Qantas has slumped behind arch-rival Virgin on all measures of brand trust, pride, “love”, value and transparency, damning confidential figures presented to senior managers show, revealing the extent of damage to the airline’s reputation this year.
The material, marked “prepared for internal discussion”, shows the proportion of consumers who would consider flying Qantas domestically has fallen so low that it is only two percentage points above that of its low-cost Jetstar subsidiary, and 19 points below that of Virgin.
The documents, dated October 12 and obtained by The Australian Financial Review, show the percentage of consumers who said they trusted Qantas had fallen from 70 per cent in August to just 49 per cent. In that time, consumers who trusted Virgin rose from 53 per cent to 59 per cent.
Qantas will hold its annual meeting of shareholders on Friday, and major investors, including the Future Fund, indicate they intend to vote against not only the company’s remuneration report but also the re-election of marketing executive Todd Sampson to the airline’s board.
Qantas has been the focus of customer animosity after a sharp increase in fares and a deterioration in on-time services since the end of the COVID-19 pandemic. Alan Joyce resigned as the airline’s chief executive in September, two months early, after Qantas was accusedby the competition regulator of misleading customers by cancelling flights and not telling them,
Mr Joyce’s successor, Vanessa Hudson, has repeatedly said she intends to repair the airline’s reputation. Qantas has abandoned plans to cancel flight credits accrued by customers during the pandemic, and will have to spend hundreds of millions of dollars shoring up services.
Ben McGarry, a fund manager at Totus Capital, said Qantas had been “over-earning”. He said improving customer service and replacing an ageing fleet was “going to be expensive and going to impact margins and the capital position and the ability to pay for dividends and buybacks”.
“I don’t think Qantas is a buy by any means at this level,” Mr McGarry said. “We still have a short position. Some of it is in the [share] price, but not all of it. It could be a struggle for a little bit longer.”
‘The crisis is ongoing’
Separate internal documents obtained by the Financial Review show Qantas management was warned that its “reputation, levels of trust, admiration and respect [were] substantially below levels recorded one year ago” in June.
By March 2023, Qantas’ rating for “strong and appealing leader” fell to 58.3 per cent. Dion Georgopoulos
In a presentation dated June 8, RepTrak outlined “pathways to recovery” including “improving perceptions of conduct, offering value for money, meeting customer needs, having a positive influence on society, as well as being seen to have an appealing leader”.
At the time, RepTrak, which monitors Qantas’ reputation and provides advice to management, said its surveys showed a significant decline in ratings for “meets customer needs” and “good value products and services”.
The rating for “strong and appealing leader” fell 8.6 percentage points to 58.3 per cent in the 12 months to the end of March.
“The crisis is ongoing with RepTrak’s ‘signal’ of a reputation crisis remaining and customer perceptions on key drivers more than 10 points lower than a year ago,” the presentation, also marked confidential, reads.
The more recent figures, described as the Brand Health AU Domestic Study, were circulated to senior managers including several who have since left the business. It shows only 43 per cent of consumers – who had flown domestically in the past 12 months or intended to in the next 12 months – said they were proud of Qantas. That was down from 59 per cent in August.
Forty-nine per cent of consumers said they were proud of Virgin.
Chris Newtown, a former executive director of responsible investments at IFM Investors who now advises industry funds, said the Qantas board should be prepared for Virgin to snare disgruntled customers. “The board will need to be watching what happens if Virgin really do go full throttle to attract both corporate clients and frequent flyers,” Mr Newton said.
The internal data shows only 39 per cent of consumers said Qantas was “transparent with its customers”, the lowest level since the measure began in March last year, when it was at 57 per cent. During that time, Virgin’s rating has increased from 46 per cent to 52 per cent, the document shows.
A Qantas spokesman said that it “shouldn’t come as a surprise that our brand has taken a hit in recent months”. “A significant amount of work is already underway to fix pain points and earn back their trust, and we’re seeing that reflected in the most recent brand research,” he added.
The airline said that the internal measures had improved since mid-October and the company was now ahead of Virgin on pride and value scores.
The collapse of Qantas’ reputation has created significant pressure on Mr Sampson’s re-election to the board. Already, Qantas chairman Richard Goyder has flagged that he intends to leave next year, as have Jacqueline Hey and Maxine Brenner. The latter two are scheduled to leave in February.
Ownership Matters, an influential proxy adviser, and the Australian Council of Superannuation Investors have both recommended a vote against Mr Sampson. The former Leo Burnett chairman joined the board in 2015.
Angus Hewitt, an analyst at Morningstar, said it would be difficult to model the damage to Qantas’ brand. “When we look at a company’s sustainable competitive advantage or its [economic] moat, we don’t think Qantas or any airline has a moat. I don’t think any customer is rusted on,” he said.
“Travellers aren’t dumb, by and large they know air travel is a commodity and when there is a mismatch between what they’re paying for and what they receive, they’ll switch,” he added. “Customers don’t care who the CEO is, they care about whether their flight arrives on time, if their luggage arrives with it, and they care about the price they’re paying.”
Kylar Loussikian is the Financial Review's Deputy editor - Business Email Kylar at kloussikian@afr.com
Ayesha de Kretser is a senior reporter with The Australian Financial Review covering the aviation and tourism sectors. She has previously reported on banking, mining and commodity markets. Connect with Ayesha on Twitter. Email Ayesha at ayesha.dekretser@afr.com.au
