It seems rather old-fashioned to see airline travel as luxurious. Perhaps in the 1950s or 1960s, it was.

Airlines perform a much more important role in innovation.

Airline problems are now a every-man problem, and a business problem. Airlines have become like buses in the sky, and the availability of air travel is an operating assumption of business and families.

But with security probes, x-rays, long queues, lost baggage, re-routed planes and an unpleasant taxi journey airport — airline travel is anything but pleasant. (This poster above captures the lost glory of travel!) Partly this loss of glamour is due to the inevitable move from expensive elite experience to mass transit air-bus.

Now there is the Qantas lock-out. Whatever your views on who is to blame, from an innovation and development view it is troubling for Australia — or any other island nation. It’s also troubling for Qantas shareholders.

Why airlines and innovation?

Innovation is driven by exchange and connection.

In my Innovation Cities Index and City Benchmarking Data work for 2thinknow, I have worked with other analysts to examine the linkages.

Without giving away a professional detailed analysis, a general simple analysis would be as follows.

Primary airline with leading market share (Qantas) chooses not to participate in market. This has a limited direct economic impact. However, as Qantas is the default safe choice (monopoly), this creates tension and leads to reduction in pricing premium. This pushed Qantas air ticket prices down as demand falls at current price. This results in declining performance in Qantas.

There is a limited (approaching zero) probability of improved Qantas performance, as Qantas have significantly damaged the value of their brand to mid and upper-tier customers. If those customers have a choice (Emirates, Singapore, etc) they may choose that.

Most likely upshot is more Asian / Mid-East airlines enter, selling tickets at lower prices (if allowed by Australian government). There are a series of possible scenarios, including the growth of Virgin branded airlines. A possible BA/Qantas or U.S. airline / Qantas takeover may occur. Qantas may be broken up.

This has a variety of impacts on which cities Australian tourism should be targeting, and which operators will succeed (and which will fail), as likely there is a shift to different cities and differing economic connections (based on new airline hubs).

Simply put, this changes the winners and losers in tourism, and has impacts on business co-operation as well.

Innovation, Airlines and Island Nations.

The default airline into Australia also has various national roles. Australia is 23 hours from Europe, and 14+ hours from the USA.

It makes sense to ensure the primary national carrier of an island can (like British Airways for U.K.) deliver the services needed, and provide the capacity to move people and vital goods.

For an island, this exchange and movement matters. In a networked world, people and things still move. Mail may fall, but shipping of boxes and people increases. And tourism has a strange way of leading to business deals.

It is a pity to burn more advertising dollars on advertising without a national airline. In innovation terms, it’s all unfulfilled ideas and promise.

Nationalization of Qantas.

Now there have been some sneaky news stories op-ed pieces floated lately about nationalizing Qantas, and if we see any structural change in growth rates, then the economic basis of a full service airline becomes shaky.

And when the economics become shaky, nationalization sometimes occurs (see railways).

Airline innovation.

That is not to say that it is not possible to run Qantas the business at a profit. It is.

It’s just that without imagine and vision Qantas will be turned into a loss-making enterprise. And when we have loss making enterprises, markets cannot support them. So then you hear about nationalization.

In many cases there are people able to do something, it’s just that the system creates gridlock. Staff, Board Members, Managers, Unions, Politicians. All are responsible.

I believe that with innovation in services, seating, aircraft delivery, lounges — Qantas could revenue grow (not cost cut) the way to success. I believe there are some trends that allow Qantas to make a greater profit.

But it requires re-imagining airlines and the airline business.

Sovereign airlines.

It’s worth noting that most airlines have sovereign (national) ownership — so this means that there is an inbuilt pricing assumption that tourism benefits are part of the profit of an airline for the government. Private shareholders don’t see this investment return (so don’t care about tourism except in a warm and fuzzy way).

Bear in mind institutional investors (a majority) do not do warm and fuzzy. So sovereign airlines can lose money, because their shareholders (government) see returns from the tourism.

In some ways though, this is unimaginative (and anti-common sense). You must not turn a profit making enterprise into a less efficient hybrid political enterprise – if you have the choice. Which the leadership does.

However, they lack the ideas, and it seems unlikely that the old neolithic approaches will create better outcomes.

I still believe Qantas is a viable business — and doesn’t (yet) need nationalizing.

But will we get innovation? Not if this gridlock continues.

Keep innovating,

 

 

Christopher Hire

Christopher Hire is Executive Director of 2thinknow, innovation agency.