Australian demise announced today

[Wirraway]

Tue "The Australian"

Roo axes leisure offshoot
Steve Creedy

QANTAS'S first Asian expansion play has proved a failure, with the flying kangaroo expected to announce today the axing of its Cairns-based leisure brand, Australian Airlines.

Australian's distinctive ochre planes will be repainted and returned to Qantas mainline operations from mid-year as the company concentrates on launching its low-cost Jetstar International.
It is understood Qantas officials believe Australian's demise was necessary to wipe the slate clean and allow it to concentrate on its twin-brand philosophy.

The decision to drop the Australian brand will be announced at a press conference in Melbourne today which will also reveal Jetstar's international routes to Asia.

Job losses among the airline's staff of more than 400 are expected to be negligible, with most staff being absorbed by the mainline operations.

The five all-economy Boeing 767s will be converted to two-class configurations and the airline is expected to retain Australian's base in Cairns.

Qantas announced in February it was restructuring its management and that it would group its flying businesses under the Jetstar and Qantas brands.
Jetstar is about to formally seek approvals to fly the routes from November and to change its air operators certificate to fly widebody, two-class A330 aircraft.

A Jetstar spokesman said the strategy would be targeted at Asian and Asia-pacific destinations 10 hours or less from Australia.

"They are a mixture of new markets for the Qantas Group and seeking to put capacity into markets that we see have high growth potential," he said.

But Australian has also been struggling for some time and failed to reach the growth targets initially set for it.

Launched in October 2002, the all-economy airline was designed to operate on routes considered too marginal for Qantas to fly profitably.

Australian's launch plans had envisaged the carrier would operate 12 aircraft within two years but its plans were undercut by the combined effects of the SARS epidemic, terrorism and war.

Revised expectations called for a sixth Boeing 767 to be added by last year but high fuel costs torpedoed even that modest expectation.

Its lower cost base also failed to prevent a 2005-2006 first-half loss before interest and tax of $6.9 million.

That compared with a profit of $8.5 million in the first half of 2004-2005.

Capacity fell by 1.9 per cent after the airline cancelled flights to Bali and suspended services to Sabah, in east Malaysia, while traffic fell by 7.2 per cent and passenger loads dropped 3.9 percentage points.

Today's announcement comes as Air New Zealand has threatened to walk away from talks with Qantas if it cannot conclude a deal on trans-Tasman co-operation this month.

The airlines are reportedly close to finalising a code-sharing deal on the Tasman but comments over the weekend by Air NZ chief executive Rob Fyfe suggest frustration at the pace of negotiations.

Sources close to the negotiations report that it has come down to a single sticking point.

Mr Fyfe repeated comments at the airline's half-yearly results that progress was slow.

"The process has been going on for some time and we haven't moved at the pace I would like," he told Auckland's Sunday Star-Times.

"We will get to the point where I will move on.

"I would be hopeful that we'll make a decision this month whether there's an opportunity to do something with Qantas or there's not."

Mr Fyfe also indicated the airlines' plan could involve significant capacity cuts.

He noted each flew five Auckland -Sydney services a day, typically at the same times and with passenger loads of 60 to 70 per cent.

He suggested that if the airlines pooled their aircraft and together flew eight times day, they would reduce costs and produce better profits and improved pricing to customers.

=========================================

[Ex QF]

The demise of Australian was also reported on The Today program on Ch 9 this morning.
See also that Jet* Asia are having some additional problems with funds.
From: http://www.etravelblackboard.com/index.asp?nav=2&id=49866
Tiger Air willing to take rival airlines routes
Monday, 10 April 2006
Tiger Air, Singapore’s largest budget airline has expressed interest to take over routes from rival company Orangestar Investment Holdings. This possibility is as a result of the $60 million exhausted funds from shareholders by Orangestar who run Jetstar Asia and Valuair.
This comes after the publishing of Orangestar figures in the Straits Times newspaper earlier this week. However, it is unknown which routes Tiger Air are taking over from the Orangestar group, which is part of Qantas Airways Limited (QAN.AU)

[The_Cutest_of_Borg]

Sad news for a truly dedicated bunch of guys and gals if it is true..(I suspect it is).

I have first hand experience of the AO operation and it was the way an Australian airline should be.

Going off track, I am surprised that last nights 20-1 program has not yet been raised on this forum.

Listing the top Australian TV commercial of all time... "I still call Australia home" by Qantas. Hmmmmmmm

Expensive... no doubt. Good production values... no doubt. Best of all time?!!!? Well if Jamie says it it must be true.

[Sue Ridgepipe]

Media Release
Qantas Airways Limited ABN 16 009 661 901
Further information and media releases can be found at the Qantas internet website: www.qantas.com.au

MELBOURNE, 11 April 2006: The Qantas Group today took a major step in its two-brand
strategy, with the announcement of Jetstar’s proposed international route network* from November
2006.

The Chief Executive Officer of Qantas, Mr Geoff Dixon, said as part of the strategy to focus on two
strong brands – Qantas and Jetstar – the Australian Airlines brand would cease to exist from July
2006.
Mr Dixon said Australian Airlines staff would operate services under the Qantas brand. (This is
called a wet lease operation in the aviation industry.)
“From a customer perspective, these flights will be like all other Qantas international services. They
will have Qantas flight numbers, aircraft will be branded in Qantas livery and crew in Qantas
uniforms will provide Qantas inflight product,” he said.
“Australian Airlines has done an outstanding job over the past few years, but we are determined to
take full advantage of Jetstar’s success, with its highly competitive cost structure and service
standards.”

Mr Dixon said that Jetstar had created 1,300 new jobs since it commenced flying.
“A further 550 new positions will be created by mid 2007 for its international operations,” he said.
“We are creating two distinct and viable flying businesses in what remains a very difficult operating
environment of continuing record high fuel prices.
“Jetstar will be grown aggressively over the next three years while we continue to expand Qantas’
international operations.
“The result will be two separate, competitive brands, with Qantas targeting premium business and
leisure passengers and Jetstar concentrating primarily on leisure markets.
“This is a very positive development that will boost Australian tourism at the same time as enabling
the Qantas Group to grow.”

Mr Dixon said the changes announced today would see:
• Australian Airlines aircraft and crew continuing to operate from the Cairns base under the new
arrangements;
• Cairns remain a major hub for Qantas international services, with 49 return flights per week;
• the establishment of new Japan routes for the Qantas Group, with Jetstar flying daily Sydney-
Osaka and Osaka-Brisbane-Sydney services;
• Jetstar flying to new destinations for the Qantas Group in Vietnam (Ho Chi Minh City) and
Thailand (Phuket); and
QANTAS GROUP INTERNATIONAL NETWORKS

• Group services to Honolulu increase to eight flights a week, with Jetstar offering three per week
from Sydney and two per week from Melbourne in addition to Qantas’ three weekly Sydney-
Honolulu flights.
Mr Dixon said that from 1 July, around 40 Australian Airlines cabin crew positions would be lost
progressively, with no compulsory redundancies expected.
“Around 370 Australian Airlines positions will remain in Cairns, in addition to Jetstar’s own Cairns
base, which is expected to grow,” he said.

Mr Dixon said from July:
• Qantas’ thrice-weekly Adelaide-Darwin-Singapore A330-300 services would operate non-stop
between Adelaide and Singapore;
• the five services operated each week by Australian Airlines between Cairns and Singapore
would be operated by Qantas via Darwin;
• Australian Airlines’ four weekly Cairns-Gold Coast services would cease, with a new daily
Qantas international flight linking Brisbane and Cairns to cater for the inbound tourism market,
particularly from Japan; and
• Australian Airlines’ current twice-weekly Cairns-Hong Kong and four weekly Cairns-Sydney
services would cease.
Qantas will continue to provide:
• double daily flights between Cairns and Tokyo;
• daily flights between Cairns and each of the Japanese cities of Nagoya and Osaka;
• a daily international flight between Cairns and Sydney, to cater for the inbound tourism market,
particularly from Japan; and
• a total of seven services per week to Bali from Sydney, Melbourne and Perth, with Sydney and
Melbourne flights to progressively transition to Jetstar.

Mr Dixon said Jetstar’s long-haul services would complement Qantas’ international network and
provide customers with low fare, direct flights between Australia and a range of emerging and
established holiday destinations.
He said Jetstar’s proposed route network included six destinations in Asia and the Pacific –
Bangkok, Phuket, Osaka, Ho Chi Minh City, Bali and Honolulu – operated by two-class Airbus
A330-200 aircraft.
“The network will ultimately provide more services to Asia and the Pacific before expanding with
second stage flying to Europe and other destinations.
“The Jetstar fleet will transition to the 311-seat Boeing 787 Dreamliner aircraft – part of Qantas’
$20 billion fleet reinvestment program – from August 2008.”
Customers affected by these changes will be contacted by Qantas or their travel agent.

[Mr.Buzzy]

Mr Dixon said Australian Airlines staff would operate services under the Qantas brand

Jetstar is next..... Another "rebranding", one giant QANTAS "love-in" on different payscales. The unions in tatters!

Thanks Mr. Dixon and Howard. Now I feel even more elite as a working taxpayer. You see, gradually, we are becoming extinct!

Less people... Working harder.... For less money.... paying too much tax.... spending less time with families................. Really, is it any wonder that people don't want to work anymore?

Bring on the 7 year cycle! It's long overdue!

bbbbbbbzzzzzzzzzzzzzbbbbbbbbbzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz zzzz

[Bug Smasher Smasher]

Less people... Working harder.... For less money.... paying too much tax.... spending less time with families................. Really, is it any wonder that people don't want to work anymore?

Hmm, the old job as a glassy is looking better and better. More time off, home every day, way less tax, no seniority, no back stabbing, no b.s. politics and way better chicks.
Thanks very much Little Johnny, Big Bad Jeff and all you JeffStar sellouts. Way to kill a great industry. :mad:

[TwinNDB]

Mr Dixon said Australian Airlines staff would operate services under the Qantas brand. (This is
called a wet lease operation in the aviation industry.)
“From a customer perspective, these flights will be like all other Qantas international services. They
will have Qantas flight numbers, aircraft will be branded in Qantas livery and crew in Qantas
uniforms will provide Qantas inflight product,” he said.
.

So the Australian Airlines guys stay under the same contract but will now fly QF branded aircraft.

How many possibilities are there in QF at the moment for the 'rebranding' of aircraft and thus introducing a 'B' scale.

Twin.

[The Professor]

“Way to kill a great industry”

The airline industry in Australia has grown more in the last couple of years than ever before with more growth to come offering greater opportunities for the airline labor market than existed under regulation. As the industry becomes more aligned with global practices regarding employment, outsourcing and service levels it will also become more robust and capable of coping with the vagaries of the market place.

[Eagleman]

No Buzzy, Qantas is next. A down sizing to just the SYD, MEL, BNE PER with long haul to US, UK and Japan.

JQ has the correct cost base thanks to the brilliance of the JPC (hic). :yuk:

[lowerlobe]

I realise that this is a rumour network but to all those doomsday Nostradamus wannabe’s let’s wait for a while and see how J* International actually goes.

Jet* Asia was (is) a resounding flop, and as far as J* in the domestic market is concerned being profitable in Australia is one thing but the international playing grounds are quite another.

Domestically the only competition to J* was VB and to be honest J* uses a lot of QF’s infrastructure as well as Fuel and other consumables at airports around Australia but will not have that advantage at many overseas ports.

The only constant in aviation is change but it is not always disastrous, let’s wait and see

[Sunfish]

It's generally agreed that producing a lower price "brand" to compete with your original brand is not a good idea. My guess is that Jetstar will eventually follow Australian back into the Qantas brand.

[Capt Claret]

Sunfish, I see a different resolution. QFDom relegated to the major hubs of BNE, SYD, MEL, PER & possibly ADL, with all other services operated by Jet*.

And because I'm such a sensitive soul: This isn't what I want to happen, just how I see it panning out, over time.

[TwinNDB]

Couldn't agree more Capt Claret.

Mainline domestic flying CityFlyer routes and servicing some other ports as required while continuing International routes where there are other full service airlines operating in competition.

Otherwise I think Jet* might be it and from what we have seen today, possible rebranding in QF colours of some Jet* aircraft to operate 'leaner' routes, so the punters don't know the difference.

Twin.

[assymetric]

You got it Sunfish.

It is only a matter of time before J* start operating in Qantas colours (see Jetconnect and now Australian).

It will be interesting to see what all the guys and gals at big Q who have been laying it on to all the J* folk about their pay with J* International handle the issue of Australian operating thei routes.

:rolleyes: :rolleyes: :rolleyes: :rolleyes:

Guys
Put your money where your mouth is.

[QFinsider]

The cost base didn't make the difference...

Stand on any international tarmac in europe and imagine the lack of penetration J* will have? If AO could not achieve the revenues J* won't either. As a matter of fact my sources in at Bulls*it castle tell me there is plenty of garbage being sprouted by the wizz kids on J* Int...Ironically enough much of it is not legal.....

I do not see the cost base as significant, the only brand having penetration is Qf. But then again it doesn't worry management they keep pouring money into J*Asia-even Gregg acknowledged it isn't going to break even till 2010..Talk about a sustainable future....

In the management hand book of mediocrity...If you don't know what to do-just do something! J* Int is that something...

I agree it will ultimately fold back into mainline...It after all can't survive with borrowing significant resources from mainline....:E

[Ultralights]

Just heard on the news that Australian aircraft will be transfered to Jetstar? and Jetstar will take over their routes

[DutchRoll]

Just saw Geoff and Allan at their news conference - staring longingly into each others eyes. It's so romantic, isn't it?

[RYAN TCAD]

Well, - like i said back in '04 or '05 - JetStar Grows / Qantas Goes. Jobs growth may well be a bi-product, but goodbye to the Qantas pilot and his current wages and conditions as we know it.

I'll still never forget the day GD announced the launch of JS and assured 'QF would not be cannabalised'. Well, he may have a technical point as JS is part of the QF group! - But you know what i mean - right?

Bo!

[Eagleman]

Gentlemen,

JQ is the future of Qantas. Yes it is possible that it will one day wear the QF livery, but IT WILL BE THE VICTOR. QF is finished. If you think differently, dream on about the past.

Wait for AJ to follow GD's next wish. Implementation of the new IR laws in the group. AJ has given an undertaking to lead the way with JQ. The JPC delivered. How else would Al become the favourite to take GD's place.

:p :p

[Taildragger67]

QFInsider,

I can't comment on any legal/non-legal stuff, but might I address your point about brand penetration... ??

From a European perspective, there are new carriers popping up all the time. Some survive, some don't - but the main driver in the UK/Europe is price. Basically, as long as the price is right and the aircraft looks tickety-boo, the punters will be there. It takes a fair bit before they won't be (Phuket Air a recent example).

The brand-penetration thing is less important in Europe than Aus - the European market is sooo big that the 'build it and they'll come' philosophy can work (ie. enough punters will give it a go). We wouldn't have any LCCs if it didn't (eg. Ryanair - zero to bigger market cap than BA in not-very-long, plus all the others like Ezy, etc.). Even VS was a start-up only about 20 years ago. Even in Aus, lack of brand penetration can be overcome - EK had no brand penetration in Aus, eight years ago and now they're running 40-odd flights a week into the place. Even MU can justify its services (because they charge very cheap fares).

I'm not making a comment on whether or not J* is/will be good, bad or otherwise or if it will/won't/should/shouldn't fail - just that the European market does see things a bit differently to the Aus market. If the cost base means the fares are 'right' (to get bums on seats) then it'll be a go-er, at least from punters originating here.

[Sunfish]

Taildragger, you have got it bass ackwards. Qantas can play with J* International, Australian etc., precisely because it has an effective monopoly on capacity. In an unregulated market, the idea of a "low cost" brand of the same airline would create market confusion.

ie: Is j* as safe as Qantas?.

Is J* International different because of the food/seat pitch/baggage conditions?

In other words, why does Qantas have a low cost brand? What is missing? Is it the expereince of the pilots? What have they "cut" to give a lower fare?

In other words, you get cognitive dissonance. Ie: What is the difference between flying with Qantas and fkying with Jetstar?

[Max Tow]

Sunfish
Agreed.
In the unusual conditions of the Aussie domestic market, many sectors tend towards monopoly or a cosy duopoly (viz Corrigan's ambitions for VB).
In this arguably less than healthy environment, GD can escape the reality that companies become inefficient with time (higher costs & inefficient working practices which gather like moss on the proverbial rolling stone) by simply transferring the lower yield part of the biz to a new organisation which has no such economic baggage. In business terms, this process of replacing a high cost base with a blank sheet (rather than by attempting more drastic measures such as industrial confrontation or Chaper 11 slate cleaning) can't be faulted. Elsewhere in the developed world, the sheer volume of new entrants & low cost competition tends to confound such schemes (eg BA/Go,Delta/Song) but in the Oz domestic market it seems to work - perhaps because with only 2 majors, the public don't have much difficulty in getting the proposition that J* is just QF at a better price.


In terms of the international scene, Australia is inevitably a low yield market- with a population of only 20m, business traffic is limited and traffic growth has to come from encouraging leisure visits at fares which can bear little relationship to the distances involved. Most European carriers have already voted with their feet (and we are seeing BA gradually doing the same - why fly to MEL or SYD when the RPK to SIN of HKG may be better?) and have abandoned the volume sector to the deep pockets of the prestige-driven mid-East carriers. QF can't do the same and drop out of its home market, so the J* option might be a "least-worst" option. This forum obviously looks at the issue from a pilot employment/reward perspective, but even in this narrow context one can still ask whether it is better for employment for QF to match low yield with low costs, or to just become a smaller top-end carrier whose destinations and frequencies are governed by the existence and size of premium fare business traffic (& abandon the rest to the mid East & Asian carriers). The natural tendency would be for employment to be exported to the cheapest (or most subsidised) labour force - one only has to look at the virtual extinction of local manufacturing and its replacement by imports - so where's the alternative?

[Taildragger67]

Sunny,

My point was replying to QFI's point about market penetration in Europe - s/he mentioned "a European tarmac". I specifically steered clear of cost base issues (except to say that if you can lower your cost base, you can charge lower fares for the same margin).

As for eroding the main brand - there have been several LCCs started by mainliners over here.

So, if it charges competitive fares, Jet* on "a European tarmac" can survive. I'm not saying it WILL - just that the European air travel market appears to be rather more accommodating to start-ups than the Australian market. Barely a month goes by without some new tail being spied at EGLL or EGKK (let alone EGSS).

[BankAngle50]

Wonder what would have happened if AIPA had accepted the 717 Impluse pilots from day one? Seems like theres egg on all our faces now!:hmm:

[QFinsider]

My point about cost was aimed at the inability of AO to generate sufficient yield despite the lower cost. Not only did the margin fall the revenue did too. As such I alluded to the reality of the thin route. Whilst it is possible that the J* product ex Australia may work, I think it will struggle in a market with plenty or other carriers. It struck me the lack of ability of AO and indeed J* Asia to grab a foothold. I also believe that underpinning the business plan is a denial of the elasticity of leisiure travel. I think the assumptions are very loaded for the business case. With repsect to the legality or otherwise, my sources tell me there are a number of rubbery measures being applied to strengthen the business dynamic. It is this point which leads me to consider how errant their thinking is. If they fudge on the legals....

I also question the demographic..i am not so sure our market of retirees will want a discount carrier on their much awaited retirement.

We are seeing the same assumptions with J* Asia. Yet our management are so tunnel visioned, they dont understand the model is flawed at the outset. My point in essence, if slick marketing and a flexible cost base work AO or J* asia would be doing it. :E
There are no magic bullets...

If in fact J* is a poriftable start up. Show me an audited set of accounts. P/L Bal sheets etc
The lack of solid information means that for a period the losses can be hidden and shifted....but longer term is the case is rubbery it will fold into mainline which after all is the established business providing the capital for these "adventures"

I feel sorry for my colleagues in AO. It's funny how management just walk away and a news release is all we get:(

[BankAngle50]

QFinsiderThe lack of solid information means that for a period the losses can be hidden and shifted....but longer term is the case is rubbery it will fold into mainline which after all is the established business providing the capital for these "adventures"

Totally agree QF.But I think we constantly miss the bigger picture GOD has planned. JQ has become the penultimate IR tool. Its serves one main purpose and that’s to drive our crew costs down. The punters don’t care who is up front, and a full service Y or J seat to CDG or wherever, is just that. They don’t care if it’s QF, EK, SQ, CX and now JQ. That’s why people still fly Korean.
Once these guys are online with the 330, why not use them to fly QF 330 as well. ANA do this currenlty with a mix of contract crews and mainline for example. Remember this insanity; these guys took 100K pay cut to do the same job. I’m sorry if I'm negative, but why use us when they do it for 40% less? :{

[OBNO]

$100K pay cut for the same job - How Proud they must be!

[missleadfoot]

I am an AO flight attendant and am very worried about the future. The fact that the "brand" has gone doesn't concern me at all, we knew for a long time that something was going to happen with us and the change was nothing unexpected. What does worry me is we "haven't" been absorbed but continue as we are still employed by Australian providing wet lease to QF. What does that mean? Why are Qantas paying to lease their own aircraft, cabin crew and pilots? Are they just trying to keep the peace by not making 300 cabin crew redundant? The pilots are fine, they slip back into QF but maybe it's because of the pilot issue we didn't succeed. Our pilots are still on QF pay, not good for a start up entrant where as I believe JStar Int have a different agreement. AO was a great company and will remain that until we are given the "move on" at the end of 2007 when our EBA expires. What happens then? To all the QF crew bitching about us undercutting their conditions what would you do? If you are offered a flying job are you going to turn it down? Probably not. QF havent hired cabin crew for years so from a personal point of view count your selves very lucky that you have what you have. Don't think for a moment that we would'nt rather be where you are, it just wasn't going to happen when we were employed, so we took flying jobs that were available, at AO. In the end we still do the same job, no one is better than anyone else, our coffee tastes the same as yours.
What happens in the future is unsure but we have a great bunch of crew here in Cairns, infact we won the SkyTrax award for best cabin crew. I hope that is taken into account when or if they offer positions within QF.
My main concern now is what will happen to us, do we have a future or not?

[CaptCloudbuster]

The pilots are fine, they slip back into QF but maybe it's because of the pilot issue we didn't succeed. Our pilots are still on QF pay

We pilots are not "fine". AIPA negotiated in good faith a range of efficiencies to secure the AO flying including REDUCING mainline FO wages pegged to 7th year. (out of a 12 year scale). We came to Cairns full of high hopes and are just as committed here with kids in school and morgtages to pay....

Ahh Australia, the land where we cut down the tall poppies and delight in playing the politics of envy. I've just returned from a trip and witnessed the delight of our AO cabin crew revelling in their new found status as the "benchmark" for cabin crew T & C's in Australia... well wake up girlfriend.... who's to say some other worker like Jitconnect on 20 odd thousand won't be the next "benchmark" in a few years time....

[Chief Chook]

Does anyone else find this offensive, or not, especially at Easter?
Happy Easter Darth Dixon (http://70.86.224.210/~aqwquuwt/forum/viewtopic.php?t=409)

[Dexter]

blaim who you want
alls dixon did was take advantege of a splinterd group who sqabble between themselves like little kids
im better than you nana nana na na.