Anything he says is IR and Qantas view to take as much from you as possible
Thanks to the Qantas people that provided the statement from the Stream Lead.
Rather unsurprising, numbers to which he refers only tell the part of the picture his
IR overlords wants Qantas pilots to focus on.Wonder why that is?
I see these negotiations as an opportunity for both pilots and for the business. The fact is that the international aviation market is ruthless and incredibly tough. While the Group as a whole is generating a ROIC of just over 19%, the half-yearly results showed the 60% EBIT decline for international and an operating margin of just 2.4%. These numbers make capital investment into long haul flying subject to highly detailed costings, revenue modelling and scrutiny – including flight ops’ cost base.
Whilst Stream Lead may be talking his book, after all handsome rewards await him if a cheap deal is signed. Leave his personal interest aside let us digest these rather interesting figures.
EBIT- Is Earnings Before Interest and Taxes, perhaps one of the least worst international comparisons.
Ignoring Qantas 'preferred' non-legal measures of 'profit' and focusing on statutory numbers is very difficult. Qantas neither provide segment breakdowns of expense and revenue, selectively choosing what to tell investors. Corporate Governance and the lack of disclosures is another conversation.
So Stream Lead selectively tells 'colleagues' about an EBIT decline. This is on the surface true. The EBIT did decline but why?
Little Napoleon provides the answer...Fuel expense rose.
Why does Qantas International suffer from a large impact from a rising fuel price? Fleet metrics.
- Singapore Airlines generated as a company, not a group in FY17 an operating margin of 7.2% FY18 Operating Margin was 5.2%
- Fuel represents (as a percentage of the revenue it generates) 31%
Qantas on the other hand, according to Stream lead only generate 2.4%, in 1H19.
Little Napoleon actually explains why.
Internationally our performance was heavily impacted by higher fuel costs, mostly because of the long haul nature of our network and the effect that has on fuel burn.....with an increase in fuel expense of $219 million.
Rather axiomatically Qantas International burn more fuel per RPK. Qantas spend 39% for Qantas International on fuel to generate their HY revenue.
It is after all the biggest operating cost by a country mile. That his master have the wrong fleet is ignored.
Were Qantas to have accelerated the fleet replacement, their Operating Margin would not be subject to swings because they would simply burn and pay less money for fuel to generate their revenue.
In the interests of balance, Stream Lead selectively cherry picking numbers to support yet another IR war on his colleagues adds nothing to his credibility. He is not in a position of objectivity to provide any sort of financial commentary of balance, when he sits opposite the pilots he allegedly once represented.
By the way, it might be interesting to ask what Operating Margin Jetstar International delivers?