Virgin Blue - Who's Telling the Truth?

[1013]

From today's press:

Airline Chief contradicts Branson on fuel hedging

by Geoff Easdown

Virgin Blue chief Brett Godfrey has turned the tables on former boss Sir Richard Branson by giving a markedly different account of why the carrier was $150 million out of pocket because of soaring fuel prices.

A report in Aircraft and Aerospace Asia Pacific magazine published yesterday quoted Mr Godfrey as saying the decision not to take hedging insurance against changes in oil prices was made by Virgin Blue's major shareholders.

Sir Richard had previously insisted it was Patrick Corp and its chief executive Chris Corrigan who held out as the airline's controlling shareholder from a decision to take hedging cover.

Mr Godfrey said: "We have four shareholders who control 92% and three of them are on the board".
"The four major shareholders were well prepared to take the risk".

Patrick Corp, with a 62.4 per cent stake, has four seats on the board.
Mr Corrigan holds a casting vote as chairman.
Sir Richard, who has never attended a meeting of the Virgin Blue board since the carrier floated, has two seats with a 25.6% stake.

"Chris Corrigan is an astute businessman, but he is not used to running airlines" Sir Richard said in a phone call last week.

"One of the biggest disagreements we have had with Chris over the last six months was his absolute reluctance to hedge fuel.There has been a heated debate at the board about it.
It has cost the airline about $150 million" Sir Richard said.

But Mr Godfrey told Aircraft and Aerospace Asia Pacific that he, Mr Corrigan and Sir Richard bet that nothing would happen and had not paid a hedge premium. " We lost," he said.

[Sunfish]

My guess is that Mr Godfrey has just committed the act that will get him terminated as CEO. No employee ever gets away with telling someone that Directors with egos that big still make mistakes.

[Beer Can Dreaming]

Whilst not being a huge Godfrey fan its great to see Godfrey telling what is the obvious truth.
If he gets the sack then so be it.

What I do get miffed with is the way Branson never turns up to the meetings (even with a 25.6% shareholding), blames the entire previous financial years loss on Corrigan and expects us to believe him!!!

Sounds like Sir Dick was pissed with Chris Corrigan or something judging by the way CC has barely been the major shareholder for a few weeks and its all his fault.

Grow up Sir Dick - the public just aint that stupid !!

[elektra]

How about the Qantas Board who effectively bet a fortune that fuel prices would not rise by having one of the most inefficient long haul fleets in the world. Air France, Singapore, Cathay, KLM, United, BA, JAL etc etc have long moved away from the "heavy metal" gas guzzling 744 as their long-haul mainstay. How much higher has the QF fuel bill been than it needed to be over the past couple of years? Who's now paying the price? From being aggressively in the lead for most of its fleet planning history QF will now soon set the record as being the last of the world's major carriers to get the 777. 10 years after it entered service!

Like the days of the Two Airline Policy where any given flight on say Australian could be operated by an A300, 727, DC9 or 737 (similar maybe even worse in AN), the employees ultimately pay the price of timid boards or headstrong yet blinkered management.

[Metro Boy]

But what about all those airlines that have ordered the A380?

[MR MACH]

Management can take a bow
By Alan Kohler
August 24, 2005
Sydney Morning Herald

The 2005 profit season is less than halfway through but it's already clear that there is plenty to like about the current crop of Australian management teams.

Sometimes it's easy to be distracted by aberrations such as Sons of Gwalia, or to be cynical about some of the lumpy pay packets revealed in the annual reports, but company after company these past few weeks has over-delivered with very powerful profit results. That's not because expectations were too low, or because they are being swept along by an Australian economy that is outperforming, but simply because of consistent, high quality management.

It's something investors are celebrating, judging by the outperformance of the Australian market in August so far (up 2.7 per cent versus steady for the World MSCI index).

Typical of what we have been seeing lately is Qantas, which has earned more than the entire American airline industry in the face of stiff headwinds. Most of the attention when Qantas reported was on Geoff Dixon's warnings about future profits and the fact that he always says that sort of thing while announcing record earnings - but perhaps we should pause to reflect on what he has achieved. Running airlines is a terribly difficult business, especially when fuel prices have been rising so much, but Qantas beat expectations by 3 per cent, held net profit margin at close to 6 per cent and return on equity at 12 per cent during a down cycle in his industry. It's times like this when good management really matters.

[Sunfish]

I guess Alan Kohler thinks the big banks and Telstra are well managed for the same reason.

My guess is that instead is that they are monopolies or oligopolies.

Translation: The fact that QF made this much money is because of its monopoly position, nothing else. The Australian economy is also poorer because of the lack of competition.

[TIMMEEEE]

And if QF was a Melbourne based company all would be great with the world, eh Sunfish.

Funny lot we Australians.
A company makes a record profit in difficult circumstances, not to mention a very competitive environment and we continue to slag them.

Just remember this company does employ over 36,000 Australians directly - indirectly you can more than treble that figure.
Yes it is an international organisation and they do employ some staff offshore as do all international companies.

Perhaps we would prefer to see them losing money hand over fist and retrenching tens of thousands of employees by downsizing?
Just look at the US airlines for an example and even worse how their pension plans have been slashed in most cases.
No wonder they have 60 something Flt Attendants!

Make up your feeble minds people which you would prefer to see.

It makes me laugh how some Australians would prefer our profits and Australian jobs go offshore by giving everything unfarely to foreign companies just in the name of competition.

In this case Singapore wants something but wont give the same rights to our own carrier.

In my book to condone this behaviour is called treason, not fair competition and degrades our standard of living.


Damned if they do and damned if they dont.

[Tunguska]

Very well said Tim.

Using the Sunfish business plan we should destroy any advantage we have of protecting Australian jobs for the sake of competition.
They dont provide an equal playing field and Sunfish wants us to bend over for a right-royal rogering.
Maybe Sunfish likes that sort of thing,I dont know.

I hope your kids will enjoy working down the salt mines Sunfish, because thats where they are destined to be when Australia becomes just a nice place to visit, a bloody great quary and a few grazing lands that havent been repossesed by greedy bankers.

Fully agree the Singaporeans will have to buy a large stake of QF as super long range airliners will have the capacity to seriously degrade their earnings by denying them visitors.

Back to the topic at hand.
Not sure whether Mr Godfrey has told the truth unwittingly or just put his foot in it.
Either way Branson is rapidly losing credibility on this one.

[elektra]

Very emotive stuff Timmee...and not anything that we should likely ignore. Far from it.

But the benefits of "Open Skies" extend far beyond the number of Aussie voices in a Sydney Crew Room. I'm a pilot, have been for 39 years, but having lived through the Two Airline Policy years I can see how destructive protectionism is when it goes beyond the "Infant Industry" stage.

Just ask yourself why it is that QF are the only large-ish airline in the world with a long range fleet focussed solely on the 744? How could QF economics be different to everyone else? I love the concept of building Australia jobs. But doing it by protection is chasing fool's gold. Harsh but true.

[ferris]

In my book to condone this behaviour is called treason In my book, to make record profits (BTW where does QF actually compete with anyone?:zzz: anywhere there is ACTUAL competition they withdraw from), yet still try and send as many jobs OS, as QF are trying to do, is the treason. Perhaps you only notice if it's pilot jobs?

[Sunfish]

Dear dear, here we have the last bastion of the protectionist league.

It has been axiomatic for at least the last 50 years that protection DESTROYS JOBS.

Qantas jobs are no different.

Today I bought an $89 two horsepower air compressor from Bunnings - made in China, together with $89 worth of air tools.

Five years ago the same gear would have cost me $1500 - made in Australia.

Do you think I should have refrained from this purchase and bought Australian?

Umm no, anymore than my fellow Australians did. Furthermore, for every job that is lost because of economic innefficeincy, at least two are created. Thats why Australia's unemployment rate is at an all time low. It would be even lower if it wasn't for the protected state of Qantas.

The reality is that if you QF types cannot provide the service, to the same cities, at the same price, then you deserve to go under bigtime, and you eventually will, bigtime.

Don't blame me for being the messenger, it's just reality. Each and every country and business does what it can do best, or it fails and the resources are deployed elsewhere. Thats progress.

Who gives a flying f*&^ if Qantas goes under if overseas tourists can then get to Australia for (say $150) instead of $1500? The tourism market will boom as a result, creating ten jobs for every one of the highly protected QF jobs?

Furthermore the Sydney centric bias also distorts the economy because it doen't allow overseas visitors and investors free access to all Australian capitals.

Translation: You QF types are as protected as Koalas and the rest of us Australians are paying through the nose to protect your f^&%^ing jobs.

Furthermore, we are sick of it! I do not know of anyone who will willingly fly QF Internationally! You are providing third world service and charging first world prices!

What more do I need to say? You are a wart on the bum of progress.

[The_Cutest_of_Borg]

Sunfish, go back to the Professional W@ankers forum where you belong.

You have no business being here.

[Buster Hyman]

this company does employ over 36,000 Australians directly
And AN employed 16,000! Out of the ashes came Virgin, Australian, Jet*...Do the PAX figures indicate a drop in travel? How bad is the tourist industry suffering from the lower cost of travel? Apart from the 16,000, is anyone else losing sleep over AN's demise?

Now, I'm not advocating for one moment that QF go the way of AN...far from it. And I certainly don't advocate that SQ cherry pick the profitable routes from Oz, but QF shouldn't expect the government to bail them out every time things start getting hairy. And government support isn't always counted in $$$'s.

[elektra]

The thing is, for as long as you fall for the "lets look after QF" stuff, you accept the "we have to do it this way" stuff from GD. The two go together.

All I (and many others) am saying here is lets be realistic about the source of QF profits and ask ourselves exactly when will this galactically managed carrier be ready to cope with Open Skies. As we speak, gazillions of Economics 101 students around the world are being taught that profits in excess of the market standard are, or ought to be, the signal for more capacity and more competition.

Why are they all wrong......when if ever would more competition be right?

The last 1000 or so years of economic history suggests to me that QF's strength lies more in their entrenched position than their capabilities.

[OZcabincrew]

sunfish,

you are one bitter person and one bitter Australian if you would like to see an Australian icon such as QF go under. I don't agree with everything QF do, but hey, that's life.

I know lots of people that prefer to fly Qantas internationally, my friend works for a travel agent and i've asked her on this matter and she said she has people asking only to fly Qantas. I have flown Qantas internationally a few times and see no problem in them, the crew are great (i prefer crew who actually talk to you not like the asian carriers who are too polite and reserved to actually hold a conversation) and the "third world service" you actually refer to, has in my case been first class.

You are obviously one of these people that go out there trying to find faults in everything and everyone, which makes you a very sad person. A little advice, try smiling, look at the positive side of things and maybe then a little light will be shed on your little dark, depressive world.

[Alien Sex God]

Scumfish is just pissed off with Qantas because he can't use his frequent flyer points when it suits him. I reckon he should go get a life.

[Sunfish]

Ozzy and others, my criticism of Qantas is based on three things.

1. As it has the bulk of international capacity, the prices it charges has a direct effect on the quantity of inbound tourism. If there was more capacity at a lower price our tourism related industries would make a lot more than they do now.

2. The number and capacity of International direct flights into a city are a very very major determinant of the ability of that city to attract international investment as well as tourism. Qantas ensures that the bulk of its international flights arrive or depart from Sydney - to the disadvantage of Melbourne, Brisbane, Adelaide and so on.

At least in the 1970's and early 80's, there was a deliberate conspiracy to ensure that every QF 747 flew into or out of Sydeny every trip, for all I know this is still going on today. I know, I suggested trying to break QF's monopoly on 747 turnarounds when AN tooled up for wide bodies, and I was pounded into the ground for it.

3. QF's purchases of aircraft make a very big hole in Australia's balance of payments - yet the aircraft of the national carrier are not used for the benefit of all Australians, just the lucky ones who live in Sydney.

Translation: What part of the words "Rotten stinking monopoly" don't you understand?

[TIMMEEEE]

Sunfish

You are one dude with serious issues.

Who gives a rat's arse about the balance of payments when capital equipment is needed to promote/produce business?

I'm sure the $75 million underground drilling/mole equipment used in the mining industry really concerns the likes of Rio Tinto/BHP etc.
These companies have to import because we dont produce them in Oz.
I suppose we should resurrect the GAF Nomad production facilities Sunfish (Victorian once again), ditch our turboprop commuters and run around in the GAF Nomad I suppose?

And yeah Sunfish, if Qantas was a Melbourne based airline the sun would shine from their you-know-where!

The favourite words I like to hear in Melbourne............clear for take-off!!!

Take a Bex and lie down old son.
Your postings make little sense, have little credence and sound like the bitter and twisted ravings of a lunatic.

Besides, wasn't this thread about VB?
Trust you Sunfish to change the subject with all your bitter and twisted angst.

[cunninglinguist]

all I can say is, I wish I had hedged my fuel.
$1.25 a litre, ar***ole oil companies:mad: :mad: :mad:

[elektra]

Timmeee et al,

I don't hate QF, don't hate anyone actually. Wasted emotion. But I don't understand how, when we all know that more passengers into OZ = more jobs overall, why people continue to say that this wonderfully managed airline cannot yet be subjected to open competition. If not now, WHEN?

If they were struggling and trying to restructure (Air Canada?) then I might see a case to give the, say a 3 year window. But these QF management people are openly praised as Lords of the Skies. It's nothing to do with Melbourne at all. Can they cope or not? If they need protection to stay alive then by definition they are not extremely well managed, they are just pampered. There isn't a third option.

You ask why this thread has moved frm VB to QF? Simple, its about competition. I lived in the corporate floors of TN at the time deregulation was being mooted to the absolute dismay of a high percentage of executives at both ends of Franklin St. They had every argument under the sun. But the sky didn't fall in and there are now way more domestic jet jobs (and lets not forget there are jobs other than pilots!) than ever there would have been if the pro-regulation/duopoly mob had had their way.

On what possible grounds do we defend the QF monopoly on Australian rights across the Pacific. Or on anyones rights? QF are well run, have a modern fleet and polite, fun-filled enthusiastic staff with stellar, cutting edge management and leadership talent. Right? Why couldn't they cope?

And if not now, WHEN?

[Don Esson]

This is supposed to be about DJ's fuel hedging or lack thereof.

Our mate Sunfish has hijacked a thread yet again to indulge his fanciful conspiratorial fantasies. We all need to ignore him and refuse him oxygen.

[Pete Conrad]

Elektra, whats deregulation done for Australia? Are we any better off nowadays? I honestly ask you? Are we not back to the days of a duopoly? In an age of rising jet fuel and increasing labour costs and redundancies, has deregulation helped the Australian aviation industry? Are regional centres better served nowadays? Is staff morale better? are there better career prospects in Australia?

I aint anti deregulation, but if anybody thinks that the Australian aviation scene is better off these days a a result, they are seriously deluded.

This industry has been trashed by the likes of Impulse who have succeeded in making pay for your type ratings a requirement and resulted in Qantas now pitting one subsidiary off against the other to provide a service for however cheap and nasty as they can get it.

It was once an industry where you could get into a great regional like Kendell, then know you had a 30 plus year career ahead of you, now it's just full of desperado's and table thumping fools like the idiots that run Jet*, again that do nothing but pit and play off one group of employees against another in the name of cutting costs and again sacrificing pay and conditions.

And Sunfish, your comments and opinions are like your lower intestine........ stinking and loaded with danger!

[TAC On]

Pete.

I agree with a lot you say about the state of the industry, but you talk entirely from a pilots perspective. The vast majority of that which ails our side of things is directly related to the quality of the scumbags and parasites inhabiting the glass towers and mahogony offices, and their preparedness to exploit our human weakness's

If you ask the questions, "Is the travel industry as a whole, and the country's economy, as a whole, better or worse off from dereg", I think the answer would be a resounding Yes. More domestic travel and greater inbound tourism are a fact.

Sheet home blame where it belongs, and keep your eye on the bigger picture

TAC On