QF Observer Post 49
There were many factors why QF did well during those years of SARS, Sep 11 etc.
some of the factors that makes this downturn so much more severe and could not be compared to previous disasters are:
Lehman Brothers Bankrupt
AIG nationalised
Citibank/ Bank of America almost nationalised
when the banking system collapse as in the situation we find we are in now, banks are not willing to lend money unless you have excellent credit rating QF credit status is just 2 notches above Junk status, BA is Junk status and that why they are losing millions of sterling each month.
With such bad credit rating, and recently only managed to raise around 500 plus million in cash by selling shares super cheap, QF needs to borrow money. QF keeps saying their cash reserves is over this and that billions but so far the facts have not shown that to be even true. Share prices are dismal, they need to even top up their own super plan with over a period of 3 years liability added to their balance sheets
On top of that we now have Delta and V Aus competing on pacific not just from sydney but also brissy and Melbourne.
We then have MH continuously and relentlessly discounting fares like there's no tomorrow. AJ himself said the prices have gone down to 50% and is eating into margin, this is not sustainable.
Add to that QF has also got such a high labor cost base, compared to other airlines.
Not to mention Japan, germany, UK, US, Singapore, HK all very important markets all in deep deep mud of recession. No economic experts have been able to even guess when all these countries will come out of it.
I forgot too the brand is damaged by regular consistent safety problems. Some of which was so serious people were injured. None of the above factors happened in sept 11, in SARS etc.
If those above factors continue to prolong over 6 months, it will be the end of Q.
according to sydney morning herald article on april 19 CX slashes Flights,
"This slow-down will be deeper and longer" than previous recessions, said Winson Fong, of SG Asset Management in Hong Kong. "The bad news will continue to come."
"A toxic combination of low fares, a big drop in premium travel, weak cargo loads, poor yields and a negative currency impact is making it more important than ever to preserve cash," said the airline's chief executive officer, Tony Tyler.
Now if you add a dose of chicken flu outbreak
and u will have a recipe guarantee Q's demise.
Has anyone thought about how long will oil prices stay low? Will it suddenly go up again? Who knows?
remember chicken flu has not been completely eradicted with occasional eruptions in pockets of Asian and Europen region.
*I cannot get over the fact that 590 managers including senior managers are shown the door, this means these 590 manager's contribution (I'd be polite here) is something the company could have done without
all along... This is equivalent to making no contribution whatsoever, that's a lot of money wasted...total waste of money. Once out the door, these managers know they will not get any comparable money that they get at Qantas for basically moving the mouth and fingers and making no contribution. I hope they are prepared for this.