By dumping Tourism Australia deal, Qantas hands a golden opportunity to Virgin

The same day tourism professionals gathered to hear a glowing report from Tourism Australia, Qantas dumped its promotional sponsorship with the national body.

One week ago, two very different groups gathered in two different cities to talk about tourism.

In Sydney, more than 250 industry professionals were being briefed by Tourism Australia chief Andrew McEvoy, about the success of its “Nothing Like Australia” campaign.

McEvoy’s news was positive. In the year ending September 2012, Australia received more than six million international visitors. While the growth in overall numbers was relatively modest, strong growth was being reported from China, a focal point for TA’s marketing push.

Although Australia ranked a relatively modest 42 in the world in terms of international visitor numbers, by income generated - $19 billion - it was ranked eighth in the world. In terms of per capita expenditure, Australia ranked first in the world, with each visitor spending an average of $6,300.

According to McEvoy, the deliberate targeting of long staying backpacker/working holiday visa visitors and short staying upmarket tourists was bearing fruit. At the meeting, several speakers at the briefing praised the role of Qantas as an iconic factor of private sector support for TA’s destination marketing.

But at the National Press Club in Canberra that same afternoon, Qantas CEO Alan Joyce was announcing to journalists Qantas would withdraw its $44 million worth of support for TA.

As canvassed extensively in the media (including Colin Drake’s excellent article in The Conversation), Joyce was responding to moves by a group of influential shareholders, including his predecessor at Qantas and now Tourism Australia Chairman Geoff Dixon, that challenged his strategic direction and impending partnership with Emirates.

But the story now unfolding is one of what this means to the Qantas brand - and the opportunity it provides for Virgin Australia to fill the sponsorship vacuum.

The Qantas sponsorship deal has largely been based on the provision of travel to and within Australia for Tourism Australia’s visiting journalist program. Over the past year over 800 TV, radio, print and on-line media journalists from all over the world have been hosted by TA, the majority of whom have been flown by Qantas. These journalists have overwhelmingly posted positive reports on Australia and overwhelmingly have acknowledged or featured the carrier.

Consequently it was hardly surprising that in the immediate wake of Qantas’ decision to cease its sponsorship of TA, Virgin Australia, Air New Zealand and Singapore Airlines had all approached Tourism Australia to fill the sponsorship breach.

Virgin Australia would clearly be the front runner in filling the vacuum due to its extensive domestic airline network and through its ties with Air New Zealand and Etihad, a formidable international route network.

Sponsorship of Tourism Australia does have significant business dividends for the sponsor, especially as Destination Australia is a brand with a very positive image in the global tourism marketplace. Although Qantas remains committed to sponsoring Australia’s state tourism bodies, it is clear that sponsoring the national tourism body commands far greater international cachet.

Since his 2010 appointment as Virgin Australia head (after being edged out of Qantas by Joyce in 2008), John Borghetti has significantly altered the strategic direction and branding of Virgin Australia and has relished the competition with his former employer.

Borghetti has shifted Virgin’s position in the market from the low-cost Virgin Blue carrier he inherited to becoming a hybrid airline which includes many of the cost saving practices of a low cost carrier but with service options which appeal to business travellers. Virgin Australia’s financial performance and its growing market share is now a significant challenge to Qantas and its low cost carrier subsidiary Jetstar. More importantly from a business perspective, in 2012 Virgin Australia posted a small profit while Qantas posted a significant $244 million loss.

Industry insiders, including some who have long-standing connections with Qantas, are suggesting the dispute between Joyce and Dixon now threatens Qantas’ greatest strategic asset; its brand as the Flying Kangaroo and its market position as the unofficial national flag carrier.

If Virgin Australia is able to secure the TA sponsorship it will greatly enhance its own strategy to position itself in the market as the flagship airline of Australia.

There are some wags in the Australian travel industry who are already suggesting that Qantas’ new alliance with Emirates may result in Qantas being dubbed as the “Flying Camel”.

However, the more serious issue for Qantas is that by severing its sponsorship support of TA, it has handed Virgin Australia a golden opportunity to seriously erode the Australian image of the Qantas brand.

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