Qantas needs to end its war on customers


Last year when I travelled back to Australia I had nothing but praise for Qantas and the Australian aviation system in general. I wrote about it at Harvard Business Review. This time around they lost much of that goodwill. This was not because things had changed with respect to quality that I wrote about. Instead, it was about their own foolish and self-destructive ways of dealing with customers.

The story was this. In planning our annual family trip back to Australia I was invited to the Annual Leadership Retreat hosted by the Australian Davos Foundation. This is held at Hayman Island and seemed like a great opportunity. Unfortunately, when I was planning our trip and purchasing airline tickets, it was still undecided how much attending the conference might cost. As it turned out, and as is common with many fares to Australia, you can add some legs to the trip at no additional cost. Given that, I agreed with the conference organisers to book the trip with a leg to and from Hamilton Island (as a gateway to Hayman) and, should it prove to costly, I would just abandon that leg of the trip. And as it turned out, it was too costly (this is an event for the 0.1%!) and so I had to do just that.

Now, in all this, I was using what I will term ‘naive rationality.’ I had figured that because it would save Qantas money I could freely dispose of that additional leg without issues. I would not get any money back, of course, but Qantas could sell the five seats to someone else. The rationality part was that this was a ‘win-win’ for both parties.

But it was the ‘naive’ bit that caught me. I rang Qantas to cancel the leg. The person on the phone informed me that it would cost $100 per person to change the booking right at the start. So we were already going to be charged $500 for not taking a flight! But they weren’t done yet. They informed me that because this was part of a package, we would have to look for a new fare for the whole trip from Canada at the same or a higher price. The cheapest alternative would cost us an additional $500 per person. So that was $3000 just to not take a flight.

Suffice it to say, I was outraged and let them know it. Yes, I knew that on a discounted fare, ticket changes would incur penalties but naively I thought that was for changes in the timing of flights not abandonment. After all, if we had just book a flight to and from Hamilton Island, we would not be charged more to cancel it. But because it was a part of an international fare Qantas wanted to take advantage of that and extract more from us.

Of course, I wasn’t going to pay that. So I suggested that I would simply not take the flight. We wouldn’t show. They then informed me that the rest of the trip would be cancelled and we would be stranded in Australia. This is a classic hold-up problem.

Now, had I been unethical, I could have just turned up to the flight with a child I claimed to have an infectious disease and seen what happened then. If they forced us on I guess I would have had to inform everyone else on the flight, right? But I wasn’t unethical.

Instead, I rang Qantas head office and shouted at someone until they put me through to some manager who could do something realistic. That happened but the best they could do was charge us $80 per person for the change. As it turned out, that would allow us to cancel the flight but also make other changes as well so we made a tweak elsewhere. That was more reasonable but they continued to insist the payment would have to be made just to cancel the leg regardless of other changes. Most consumers would not have known they could do that and would have just been forced to deal with the ‘standard operating policy.’

Now you may be thinking. Well, this is just price discrimination and airlines do that. It is true that they are clear on how discounted tickets translate into changes in your booking and that is fine as a way of charging people different amounts. But this particular charge was not like that. First, it was only a penalty because I was consuming a set of linked trips from Qantas. Had it just been that one trip they could not do it. So it was specifically designed to extract more rents from international visitors. Second, it is a penalty to punish those who engaged in errors. In that way it is like bill shock from mobile carriers to ISPs. It is a tax on the naive. That makes it all at a different level.

But there is more to it than that. When Qantas gets all legalistic with things that are zero cost to it, it is engaged in a war on customers. They are saying “you think you got a discount from us but we gotcha back.” Moreover, they force their employees to explain their exploitative behaviour. The souls of the phone operator and manager were being destroyed over the whole interaction. If you have a policy you cannot explain, you are harming your own workers and corporate culture.

Finally, as I already noted, this is a policy targeting international visitors. In the current environment, Australia needs visitors and Qantas is acting against those interests. This is unbecoming of an airline that purports to special treatment and protection from competition as it is the national carrier.

Politicians need to examine these behaviours closely. They are as destructive as complex mobile phone plans and bank charges that tax less sophisticated consumers. And they put employees in untenable positions trying to deal with customers in the frontline of the corporation’s war. This seems pretty unAustralian to me.

PS. I wrote my concerns to Qantas three weeks ago hoping for a reply and received none.

9 Responses to "Qantas needs to end its war on customers"
  1. Qantas has two other “attack the tourist” policies that they’ve recently implemented in Cairns.

    They now refuse to interline (transfer) bags to non-Qantas carriers. So if you’re going Cairns to Sydney, and onward to the USA on United, or Delta, you’ve got to collect your bags in the domestic terminal, haul them onto the poorly designed shuttle bus, off-load them at the international terminal, and stand in line EVEN IF YOU’VE ALREADY DONE ON-LINE CHECKIN FOR THE FLIGHT! Qantas used to interline, like all “full service” carriers, but now they’ve just decided to punish the tourists for not traveling on Qantas. I note that UA and DL both interline to Qantas on flights TO Australia.

    The second is they’ve now removed a Qantas flight (QF 921) from Cairns to Sydney that has always been used to connect to North American flights by US and Canadian travellers. You now can only book on Jetstar, and of course Jetstar will not co-book a ticket with other airlines.

    Qantas is now run by criminals, who don’t give a whit about the Australian tourist business.

  2. QANTAS has been going steadily downhill for many years. I have watched the sad and rather pathetic decline as jetstar took over more and more QANTAS routes. From the day Jetstar started, it was my view that QANTAS would simply move ore of its business until the mother airline was no more leaving only the bastard offspring. You only have to look at their $7 per ticket fee for credit cards and $30 per booking per person to use the call centre to book to see they hate their customers and will find any way they can to gouge extra profit from a booking.

  3. -> Jim: I would not say that Qantas is run by criminals, but surely by idiots who seem to have trouble understanding that there are choices for customers even in the fairly thin air transportation market. These guys also do not seem to understand that umbrella branding can fire back. And these guys (Joyce) also do not seem to understand that confrontational industrial relations policies rarely work. There is just too many ways how front-line workers (e.g., those guys that Josh called up and that worked according to the book) can get back to you. My one and only experience with Jetstar was a couple of years ago and ended with me having some heated discussion with Jetstar reps (who finally put me, and a colleague, on a Qantas flight which took us in time to where we had to go). Ever since I have flown — and have flown plenty — Virgin on Australian routes and it is has been, by and far, fine.

  4. Jim, did you also know that Qantas is also increasingly making Cairns a Jetstar only destination? From later this year a number of SYD-CNS services are being axed for Jetstar. Rumour has it Virgin are set to capitalise on the Qantas ‘enhancements’ to its Cairns service by launching one of its lounges.

  5. I can understand you feel aggrieved, but if you take a step back and cool down, you might allow the economist in you to see that this is just price discrimination. And that is efficient (but maybe not equitable). They can’t have business travellers (prepared to pay high prices) booking flights that have Hamilton Island extensions, which they don’t use, just so they can get the cheaper fare.

  6. My friend had the same struggle with Air France, over a two-legged discount fare between European cities.
    Initially, she tried to cancel the travel from cities A->B, and keep B->C (i.e. consume less); the airline told her that discounted fare allowed no changes. Then she asked, what if she doesn’t show up to the first leg? Answer: the rest of the trip will be cancelled.
    How the story ended? She forfeited her $19x Air France ticket and spent another $300 on a new ticket taking her from B to C (i.e. Total cost $500).

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