We think you will find that the JQ fleet is bigger. Even bigger than when we last checked.
JQ by all reports has lower staff costs and a much newer (fuel efficient) fleet. These two factors being biggest costs to companies.
- JQ most certainly have a more fuel efficient fleet.
Fuel costs and labour costs count for 65% of an airline's operating cost.
So in some cases it is good to only get 25% of revenue - just depends how much marble you like in your cut of beef.
That is an interesting position. JQ fly 48% of the ASK of Qantas aircraft yet can only generate 22% of the Operating Revenue. This is indicative that JQ is scale inefficient.
Given the Qantas refuse to dis-aggregate the JQ segment it is impossible to actually discern whether either segment is profitable. Further the use of associate entities, equity accounted is one thing, the capital structures of the offshore entities are opaque. Their actual 'value' is at best neutral.
It is highly likely that their (JQ) 'international' segment is not profitable. Mr Buchanan argued against any further international expansion at JQ, he was sent on gardening leave.
The preparation of the aggregate (Consolidated) accounts make it impossible to actually see how many staff JQ have. It is entirely 'legal' for Qantas to lend staff (paid for by Qantas)/Services to JQ/ Headcount to JQ (Mr Joyce admitted this in a Senate inquiry, without detailing the frequency of this)
that alters/reduces the unit labour cost. If an 'invoice' is ever generated its payment may or may not be reflected in intersegment accounts. They will be shown in the internal management accounts, but are lost when accounts are aggregated as it makes the presentation far simpler.
Therefore labour cost to JQ is likely to be lower than the parent
as services and headcount are assigned to the Qantas cost centres but actually provide labour and service to JQ. We stress this is not illegal but is disingenuous.
What is surprising is that Mr Joyce wants to re-equip JQ which, as you correctly stated has the much newer fleet. It would be strategically sensible to ensure that management
lower the fuel included CASK and improve the
Operating Profit margin whilst the cost of capital is cheap and there remains a cash flow surplus. The Qantas RASK/CASK margin is far better than JQ, even allowing for lower labour unit cost over a given stage length. The A380 decision was not Mr Joyce's, every aircraft decision since then is. (Point: Not a single Qantas aircraft order)
Qantas need a new fleet.