When a company stops defending itself from allegations that its finances have seriously deteriorated, as has Qantas today, it is reasonable to assume that the claims have some substance.
Keep this situation in context with the long anticipated announcement this afternoon of voluntary but if it sees fit forced
redundancies among its 767 and 747 pilots.
Rewind one day. Yesterday Tom Elliott on Radio 3AW broadcast what on the face of it was a damaging report, based on an unidentified document that purported that Qantas was in significant financial trouble.
The report however did not mention that response if any Qantas had made in reply to the substance of the Elliott report which can found here.
As it turns out today, 3AW says that it did, as one would expect, put these and other matters to Qantas but received what sounded like a remarkably weak, imprecise and evasive response.
Which was also
Plane Talking’s experience when it sought a response to the 3AW report much earlier today.
Since then Tom Elliott has made two reports in quick succession concerning the Qantas situation, one interviewing Fairfax business columnist Elizabeth Knight, and the second former Qantas chief economist Tony Webber, both of which can be found on the 3AW web site.
This is the iSentia (formerly Media Monitors) summary of both stories.
13/05/2014 16:09 3AW Drive Tom Elliott 4:45
Elliott discusses whether Qantas is in a worse financial situation than what is commonly understood. He mentions a document titled liquidity challenge which spoke about Qantas’ debt and the potential sale of its frequent flyer program. Fairfax business columnist Liz Knight says that the document appears genuine and that it suggests that Qantas is concerned about a further downgrade in its debt. Qantas currently has a junk rating.
Knight says that it appears from the document that it is not a question of whether Qantas will sell its frequent flyer program but when. Knight talks about the possibility of further redundancies at Qantas. She says that there is information to suggest that by the end of the week, Qantas will have offered pilots a redundancy package. She says that there are too many pilots on their books. Knight says that the heart and sole of Qantas is its well-trained pilot workforce.
13/05/2014 16:14 3AW Drive Tom Elliott 5:35
Interview with Tony Webber, associate professor at the University of Sydney Business School and former Qantas chief economist.
Webber comments on a document titled liquidity challenge which speaks about Qantas’ debt and the potential sale of its frequent flyer program.
Webber says that Qantas clearly has a greater liquidity issue than most analysts expected. He says that their revenue and yields are lower than expected. Webber does not believe the selling off of terminals or the frequent flyer program would have any impact on consumers. He says that Qantas’ international business has been in decline for over a decade. He says that over the past 12 months, the biggest contributor to the excess supply in Qantas’ market is their own partner, Emirates. Webber says that there is no possible way that Qantas’ board and senior management can hold their positions for much longer.
He believes that Qantas’ credit rating might be brought down another level. Elliott adds that 3AW has spoken to Qantas a number of times off-air and asked them to address the concerns. Elliott says that Qantas has replied that they think the market is fully informed and that they do not believe the document which Elliott has obtained is a Qantas document.
Some comments:
The value of the Qantas frequent flyer program depends on the perceived strength of the Qantas brand.
It is the often expressed view of this observer that the current Qantas management has so damaged the company that it might not find the expected value in the full or partial sale of the loyalty program.
Qantas group CEO Alan Joyce and chair Leigh Clifford have failed the interests of the company’s shareholders, employees and customers, none of the promised benefits of the Jetstar franchise have materialised, the Emirates partnership is a negative for Qantas, not Emirates, which has benefited with increased Australian premium travel yields and market share at the apparent expense of Qantas.
Since the late February review of Qantas that coincided with a disgraceful first half loss announcement, and followed its failed efforts to get an unsecured $3 billion loan from the Abbott government, and the loss of its investment grade ratings on unsecured debt, Joyce appear to lose some authority in the company.
The expansion of the Jetstar franchise based in Singapore was put on hold, and the costly but botched division of Qantas into independently managed international and domestic brands was put down, allegedly for the time being.
It is abundantly obvious that the Clifford/Joyce management of Qantas will not solve any of Qantas’s problems. Given the inability or incapacity of the company to defend its record over the past five years, those problems may well be much more serious than previously understood.