Friday, November 26, 2010

What are we discounting?

Have you flown recently?  Who did you fly with?  How did you choose your flights?

Jetstar are currently in the news for all the wrong reasons - they dismissed a pilot for speaking out about what he describes as the airline's cost cutting activities.

Whilst you can argue about whether the sacking was justified, and whether the way Joseph Eakins raised his concerns was constructive, something you can't argue with is the market's appetite for cost cutting.  It doesn't matter whether its airline tickets or underwear, people continue to decide which product to purchase based primarily on price.

Do you remember the Pacific Brands story?  How surprising is it that after suffering losses in the hundreds of millions the company was forced to cut costs.  Sue Morphett said that the cost of making underwear in Australia was approximately $15 more than the cost of making it in China.  So ask yourself - when the Pacific Brands story was breaking, were you complaining that this Australian brand was to be manufactured overseas?  Next ask yourself if you look at where something is made when purchasing it.  You can buy Australian made underwear.

Back in the old days of Ansett and Qantas all was good in the airline industry.  Sure, it would cost you and me an arm and a leg to fly anywhere, but all airline employees were on a similar (and pretty good) wicket.  Then Ansett went bust, opening the way for new airlines to enter the market on different cost structures.  Qantas couldn't compete on price so created Jetstar in order to have a fighting chance.  As airfare prices continue to decline, Jetstar (and Virgin Blue, and Tiger) will continue to be forced to find ways to cut their costs.  Why?  Because when you are shopping for air travel, you buy the cheapest flight available - not the one with the most responsible employment policies.

So next time you're shopping for something, think about what it is you want to buy.  Remember the "buy your kids a job" campaign back run by Australian Made a while back (80s?  90s?).  If you genuinely want jobs to stay in Australia, then pay little bit extra to get an Australian made product.  If you can't find it, can help.