Originally Posted by
dragon man
I had been wondering why there was such haste in getting rid of the 747s from Qantas and now some light has been thrown on the subject for me. Firstly, this was done in haste and everyone at the coal face was shocked. The reason I am told is Napoleon made this decision on his own to have them gone by the 100th anniversary of the airline in November 2020 which he has publicly said he will preside over. Makes sense to me another lousy decision similar to getting rid of the 767s so quickly.
To be fair to little Napoleon, he didn't order the 747, nor the A380. In fact he hasn't ordered, other than the six 789 any aircraft for Qantas. His entire focus was JQ where aircraft orders flowed thick and fast.
The key insight for observers is strategic planning. Qantas has lost its way. For a decade big twin engined aircraft have lowered fuel included CASK from an operational cost perspective and as fuel price whipsaws would significantly protect profit margin.
From the appointment of little Napoleon the JQ 'myth' resulted in a huge number of airframes, increased expansion and volume growth, however JQ generates little operating profit margin. The advent of IFRS16 changes JQ optics somewhat. Fortunately AASB 8 does not require 'materiality threshold' consideration meaning the degree to which parent pays for the child's expenses never sees the light of day.
The reason Qantas can do this as a
company is largely a result of a dominant position domestically and the excess cashflow that segment generates. A significant component of this feed is driven from QF International and also the FF business. Modern 'airline mis-management' does not think of an airline like that (as the sum is greater than the parts), preferring the 'segment' approach as this is taught in business MBA.
The business as a WHOLE generates the segment value. It is and always has been an integrated and dynamic business.
Thus this board and little Napoleon's error is to believe their own brilliance. Over investing in the JQ product, creating a well over scale business is not clever; anyone can spend other people's money.
Airline work is a grind (pun intended) and little Napoleon is not interested.
That Qantas need a new fleet is axiomatic.
Mr Dixon despite his clearly obvious failings, did order the 788 for Qantas mainline. The 14 of them were diverted to JQ International as Boston Bruce Buchanan desperately sought to stem losses from JQ International. His honesty to the board, admitting LH low fare airlines do not work saw him sent to the woodshed.
It was not long ago, Little Napoleon ran to the Abbott government (December 2013) wanting a $3 billion bailout, only to rescind the need six weeks later, before going on to post a big loss and
amazing turnaround in only 15 months...
As it was in FY2015, they got lucky with a falling fuel price and a well timed (management choice) depreciation change.
It is plausible that little Napoleon lurches from crisis to crisis, with probably less than ten direct reports (all from pole climbers) information is scant, at least information necessary for actually driving a dynamic business.
That he now wanders around, claiming some intellectual leadership for airline management brilliance ordering a few aircraft to replace an aging fleet is testament to a flawed character, but robust ego.
Little Napoleon could have taken Qantas in an entirely new direction,broken away from the failed APA disaster, instead he did something entirely different.
He presides over the oldest fleet in Qantas' privatised history. He and the board rewarded themselves with over $1.75 billion of share buy backs, which is pretty close to the Cap ex they need to fund a fleet renewal.
Whilst little napoleon has fixed those horrible teeth with shiny veneers, underneath it all his teeth are still a row of derelict terrace houses.
Qantas fleet optics are not much better.
Let all hope that the fuel price doesn't rise too quickly for even the most blind to see which airline CEO swims naked.