Monday, October 16, 2017

Alan Joyce, Best Practices and Qantas

Qantas airlines is about to receive its first 787-9. Alan Joyce has lead the Qantas survival in the highly competitive airline market. Back in 2009 Qantas canceled a boatload of 787's by moving some product to its subsidiary Jetstar and then promptly canceling its confirmed order book while maintaining 45 options. Qantas was in a dire position and being a Boeing star customer became a pipe dream at that time.

Great disappointment spread across Boeing's aspirations at the time. Since then, "countless" orders poured in for Boeing's 787 family of aircraft totaling about 1,300 large mid bodies ordered today.  Boeing got over Qantas stalling out over Everett, Wa.

Eight and a half years later, Qantas is about to receive its first 787-9 out of eight on order. In currently owns a fleet of 787-8's on its Jetstar fleet of eleven. Lucky for Qantas its 747's held together another eight years. The eight 787-9's it had ordered will now make Qantas a world player instead of looking like an old Pan Am travel folder. Somehow the lucky eight is in sight of China's lucky number.

There are two schools of strategy available from a Qantas position. The first is the industry norm, "Build it and they will come". The second is is "Best practices". Alan Joyce has taken the later. 

Back in the 1990's the term "best practices" was all the rage at business seminars. It could be defined, use the means that are proven to be the best for gaining success. Alan Joyce pulled Qantas up and over the mountain staying within its best practice. It took care of business first by never absorbing an enormous 787 Boeing order before it could fix its business model.

The best practice here was to keep old equipment like the 747, until squeezing out its last revenue dollar possible before an airplane failure could occur. Using paid for and depreciated equipment was cheaper than its fuel burn inefficiency. The cost of buying 787's in vast quantity would sink the Qantas financial ship. Alan Joyce had to make some hard decisions before becoming a Boeing star customer. It canceled its 787 order book, but held onto a significant number of options for future purchases. The future is now.

The first 787-9 arrives today out of eight booked. The future is also tomorrow as Qantas holds onto production slots with further 787-9 orders to be confirmed at its own pace. Alan Joyce choice by not building before they come is working out of a best business practices strategy. Making an idea work before scaling up is the theme. The only damage done to Qantas is some of its pride was bruised back in 2009. Now that its 747-400 are depreciated on the books sufficiently, the opportunity arises for the 787 fleet expansion. The only regret is Qantas had the position of being a world 787 leader when it would have started receiving its first 787-9's back in 2014 instead of 2017.

The best practice of growing an airline within its own available resources seams to have worked at the expense of some pride and a few routes lost. Late to the ball worked for Cinderella after all. The main thing is to make the main thing, the main thing! Alan Joyce best practices motto leads his charge. He is rebuilding Qantas into a world player one air frame at a time. 

The Qantas door has opened years late but is now able to learn from the 787 pioneers for what mistakes not to make. It kept its powder dry until seeing the green in the bank. The best practice was to wait until all the bugs were worked out of its fleet operations. Now Qantas can resume from 2009. It was not a lost opportunity but more of taking its turn after meticulous preparation. Building an airline empire when so few passengers may come was a recipe for disaster. Alan Joyce just wrote the book on business due diligence in the airline industry.