"Because Qantas is based in faraway Australia, though, and because it recently has added so many long-haul routes around the world, it is feeling the pinch of rising fuel costs more than most airlines. In some ways, that makes it the canary in the air shaft."
And nobody picks him up on this. All Joyce and Wirthless (and for that matter on in house "expertGT) have been sprouting on about is how new aircraft "dont need to be fixed like old aircraft", the only thing is QANTAS DONT HAVE ANY NEW AIRCRAFT!!!!
When will some one in the media work this out!!!!!
Australian Financial Review, Page: 22 By Andrew Cleary Friday, 24 August 2012
Alan Joyce had a line yesterday and he was sticking to it: no matter the record loss, most airlines around the world would love to be in Qantas’ position.
The upbeat Qantas chief was referring to the company’s dual-brand strategy that has fostered a profitable low-cost carrier in Jetstar and helped reinforce the premium airline’s dominant position in the domestic market. But the position Qantas International is in buffeted by high fuel prices, suffering an uncompetitive cost base, and at war with its own employees is one shared by a host of legacy carriers around the world.
Regional rivals including Cathay Pacific and Singapore have taken a very different course of action.
The response of both has been to accelerate the retirement of older, fuel guzzling aircraft and usher in next generation models as fast as possible.
However, Qantas is extending the lifespan of its 747 jumbos and 767s with cosmetic makeovers that do nothing to change inferior operating economics. And now it has cancelled the delivery of $US8.5 billion worth of Dreamliners, the aircraft Joyce as recently as June argued was partly to blame for Qantas International’s dire state due to their delayed arrival.
What Qantas has gained is a shortterm reprieve from ratings agencies and investors worried about the prospect of a capital raising.
What it has lost is the chance to recapture momentum among Australian outbound flyers as a product and brand leader. Qantas is betting that its international arm can survive four more years as a capital light business even as its rivals throw more capacity and the latest aircraft types on the same routes out of Australia.
It is a dangerous assumption that when Qantas International has met its financial milestones, having ceded market share and customer loyalty along the way, it will suddenly be able to win back customers who have switched allegiance in the medium term.
Management is, in effect, asking investors to believe that while the longterm success of the domestic outfit depends on a rigid adherence to a 65 per cent market share, the international business will be able to shrink its way to profitability and then re-emerge as a growth engine. It’s a tough line to swallow.
I just watched the ABC interview and paid particular attention to the part about the strong AUD being a problem for Qantas. There were only a few words said in a blink, but I got the gist of what he was on about in relation to Qantas International.
His beef – Qantas home-base costs, expressed in US dollars, have increased a lot over the last few years. This puts Qantas International in a weak position against the Americans, and any other airlines that have home currencies pegged to the USA dollar...Emirates.
Using salaries as an example, as the AUD strengthened, the cost of the Australian based employees rose in terms of USD. Someone employed in early 2010 (when the AUD was weak) for AUD100,000 cost about USD60,000 – now they cost USD105,000 (a 75% increase in USD terms). For the USA dollar based carrier, that employee is still USD60,000.
Fuel is contracted in USD, so fuel paid for with revenue collected in Australia is a positive (they collect revenue in several currencies, but I imagine most of it is AUD). Of course, this didn't support the 'poor me' argument, so it wasn't mentioned.
So, again, it is all about cost - no talk of other methods of increasing profit. This is all that has been produced for the last nearly 20 years - cost reduction. The airline needs managers who will attempt to grow a business not concentrate on cost as the only method to profit.
If you keep on doing the same thing, then expect the same result.
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flarearmed, The low dollar was a problem years ago (ref Margaret J) , now its the high dollar () even though the majority of earnings are AUD denominated and biggest cost , fuel, is paid for in weak USD.
International has shrunk as the dollar has increased so its relative cost should be ameliorated. but no its costs have grown hugely despite having given away the loss making routes.Something is going wrong with that strategy!
Goodness knows what he'll say when fuel is 200 bucks and the dollar reverts to the mean of about 70 to 80 c per USD.
Then it will be the weak dollar killing Q, nobody in Aus can afford to fly overseas, cant afford expensive USD aircraft , fuel etc.
The high AUD surely does inflict pain on inbound tourism but methinks he complainith too much.
Would appear there is Something terribly wrong with the fuel Policy. Airline shrinks, retires older inefficient aircraft, withdraws from loss making routes(Qf words) and with a strong dollar still Can't maintain costs? There is not a word of truth in the reporting. ASIC should be charging all the board n senior management
The biggest ‘real’ cost that Qantas has is ‘Alan Joyce’. As long as he keeps delaying the aircraft upgrades the further Qantas will fall behind and will just disappear like many of the other iconic brands. How he manages to convince the Qantas board that he is worth his package defies logic, but maybe the whole board needs a refresh. Just goes to prove how well privatisation of government assets works for the citizens.
The biggest ‘real’ cost that Qantas has is ‘Alan Joyce’. As long as he keeps delaying the aircraft upgrades the further Qantas will fall behind and will just disappear like many of the other iconic brands. How he manages to convince the Qantas board that he is worth his package defies logic, but maybe the whole board needs a refresh. Just goes to prove how well privatisation of government assets works for the citizens.
What he is really saying is that finance for new and fuel efficient aircraft is not available due to the higher risk lenders face, and the cash reserves will be used to prolong the inevitable demise of the company if no solution to their woes is found. An agreement with Emirates including access to cheaper fuel may be the answer.
Here’s the Qantas Catch 22: it can’t afford to spend $8 billion upgrading with 35 Boeing 787s, but how will it be able to compete in a few years’ time without them?
The reason given for cancelling the much-delayed 787s was ‘‘lower growth requirements in this uncertain global context’’. Yet total Australian and regional aviation is growing very nicely – it’s just that Qantas apparently has given up expectations of getting much of it.
And here’s another mystery: chief executive Alan Joyce has been telling everyone that key ingredients in his bottom line loss were high jet fuel prices and the high Australian dollar – but the stronger Australian dollar is something of a natural hedge for high jet fuel prices.
If the Aussie had been weak, then Qantas really would have had a problem paying the fuel bill, as Tony Webber explains (Webber is being modest by not including himself as part of the risk management team that is no longer with the Flying Roo.)
Advertisement Something isn’t quite adding up in the Qantas story as it’s being officially told – unless the CEO and board are quietly pursuing a strategy of cleaning the business for potential sale with dismemberment either before or after the event.
Yes, there are major obstacles in the form of legislated ownership restrictions, but they can be circumvented, as demonstrated by the Allco/TPG/Macquarie bid in 2006. (Remember that that would-have-been disaster was only stopped by one hedge fund manager’s greedy miscalculation.)
There is no doubting the difficult position Qantas has found itself in - a position the board and CEOs past and present must take responsibility for, for their actions or lack of actions, over the past decade.
Having survived the rise of its old Asian rivals, Singapore and Cathay, by lifting its own game to meet the competition, Qantas now looks set to surrender all but a token presence in Europe in the face of attacking Middle Eastern carriers.
Meanwhile the promise of an explosion in Chinese travel is being met with the launch of another Jetstar brand, this time out of Hong Kong in partnership with one of China’s major airlines. A story about a gingerbread man comes to mind.
One thing’s for sure – Qantas’s institutional shareholders wouldn’t think twice about accepting an offer, any offer.
Michael Pascoe is a BusinessDay contributing editor.
I suspect Joyce and the board already have something in mind. Deride and degrade international to such a seemingly low point and then lead in a knight in shining armour and say "Look what I found!" Everyone thinks they are saved and rejoices.
If it manages to survive they will still get 787-9's from the 50 options but effectively just delayed 2 years - the options still have guaranteed build/delivery dates. They just got PAID 400M I think it was for this cancellation, ~100 of which they took to profit this FY(clever accounting).
By the time they arrive at Q, Long haul will look just like Virgin International. Flying to America and the middle east, using the 380, as long as Alan can afford the fuel bill.
We just sacked 600 plus maintenance staff. 
GT) have been sprouting on about is how new aircraft "dont need to be fixed like old aircraft", the only thing is QANTAS DONT HAVE ANY NEW AIRCRAFT!!!!
