Subcontracting makes a loss making route profitable? Were they even loss making?
This story has so much more to give......
The route revenue detail and pax numbers are known, the company has determined that while the revenue may cover the OPEX the revenue does not cover the CAPEX on the existing equipment.
Depending upon how this is viewed by the bean counters and who is liable for the investment of CAPEX, the shareholders or the company. This is what has killed the ATR in this country..... QLD is just the start.
When QF renewed the 717 with Cobham and then VA ditched the 190, they simply confirmed what everyone reading this needs to understand.....
The CAPEX required, the market volume, yields, utilisation, slot availability, directionality and simply how much the punters behind you are willing to pay and come out with one equation....
The Australian Regional market will only sustain the use of preowned (jets) ie significantly lower CAPEX equipment.
This is why your regular punter is getting on a jet that has not been in production for 20 years. Alliance, Network, Vara are all only using this equipment because its the only stuff our market pricing will sustain.
VA is now on the slippery merry go round of what is a defunct regional network where they cant make money with the regular toys. Outsourcing to QQ is a smoke screen for both companies because the OPEX for these sectors with the F70/100 simply does not equate to the known route revenue detail.
The company is trying to stay alive, the crews think they are getting screwed by the company but it comes down to how much people are willing to pay for a service in the first place.
Remember what airfares were like 15 years ago..... add in a bunch of Gen Y expectation and smattering of the smartest men in the room.
The race to the bottom is certainly looking interesting, who will be the next to sip the poison chalice>>
