Ah, you have me there Sunfish, I was attempting to be both subtle and simple. Though I don't have proof that I am or was one of the "50 analysts who understand this all" I'd like to hope I'm up high in the second tier at least. Perhaps you and I have crossed paths sometime. You may have even mentored lowly Sherm.
Point I was trying to make is that of course QF's strength lies in it's ability to run QF mainline and JQ cheaper and better (to the benefit of both) than could two stand alone entities. OF course there's implicit subsidy and support of yield and costs. Never in doubt. That's the whole issue under "Economies of Scope". Contribution analysis as you know rests on the actual manual of internal transfer pricing protocols. Yes that book exists and the fact that it can exist is a strength, not a weakness.
You mention pi$$ing.....I think that on balance the analogy I would use is to paraphrase LBJ who might have said "If I was Qantas I would prefer to have Jetstar inside the tent pi$$ing out than outside the tent pi$$ing in".
Would appreciate your views on the actual questions I suggested for Captain Kremin:
1. What would Qantas look like if someone else had started Jetstar and Qantas was competing with this JQ sized competitor on the current QF mainline cost structure?
2. If yields for Qantas mainline fell say 10% in the above scenario amidst a bloody “price war” (and given that, as you often state landing fees, fuel costs, interest rates etc etc are the same for all carriers) how far would productivity (or aircraft and people) have to rise and in particular, how far would unit and overall labour costs at QF mainline have to fall in order for the Group to regain profitability?
3. To what extent therefore are Qantas yields quarantined from reduction by having the competition “in house” at a lower unit cost, therefore making money for Jetstar and lessening losses by Qantas?
Sunfish, the question of how, when and indeed whether QF could maintain a dominant and flexible market position under a single brand is the real question. What would the EBA's look like, how much compromise would AIPA have to make, how would productivity need to change, what fleet would you need? etc etc.
Some cynics (or maybe they're realists!) might argue that the mess QF is in now is the result of a horrible witches brew of Sydney centricism, mean spirited anti-labour management ideology and a truly terrible fleet mix centred on aging 767 and 744 units. They might say that and I wouldn't care to comment. They might also say that the yearly cost to the QF Group living in such a protected world that it can survive despite NOT having a fleet of say 30 B777s is far more than any supposed profit made by the JQ operation. Again....I wouldn't care to comment.