Geoff cant get enough.

[hotnhigh]

BRW. 25 May 2006


There is plenty of uncertainty at Qantas at present, including finding more costs to cut to fund a blow-out in its fuel bill, rising tensions among its 38,000-strong workforce on the eve of the expiry of some key enterprise bargaining agreements, and a decision by the board to expand its revenue base by moving into land transport such as general freight. With so much uncertainty it is no surprise that Geoff Dixon will extend his contract by another year to 2008

[Turbo 5B]

Great news.
I hope all goes well for him.:yuk:

[Elroy Jettson]

But there's just no money in freight! Can't someone please tell him? :}

I guess that's what happens when you surround yourself with self serving yes men (and women).

Should be good bonuses in it though, and he could be long gone before it fails and has to be sold off. Might be a few 80s corporate "High flyers" who would have a word of caution or two about diversification.

There was a hint about QF going in to rail as well wasn't there? Maybe he fancies himself as better than Branson at that sort of gig. Deluded. :hmm:

"All Aboard to another loss making venture"! Eh G.D.? :8

[Wirraway]

Thurs BRW

Dixon delays departure
The Qantas chief has extended his contract at a critical time for the airline.
By Adele Ferguson
BRW. 25 May 2006

There is plenty of uncertainty at Qantas at present, including finding more costs to cut to fund a blow-out in its fuel bill, rising tensions among its 38,000-strong workforce on the eve of the expiry of some key enterprise bargaining agreements, and a decision by the board to expand its revenue base by moving into land transport such as general freight. With so much uncertainty it is no surprise that Geoff Dixon will extend his contract by another year to 2008.

What is surprising is that the company has been very low-key about Dixon's decision. When he extended his original contract from December 2005 until July 2007, the company trumpeted the news. This time it was mentioned casually in response to a question from BRW to the chief financial officer, Peter Gregg, about Dixon's imminent retirement. Gregg replied: "I think you will find Geoff is staying until 2008."

Dixon has little choice. The next couple of years will be some of the most challenging in Qantas's 85-year history, requiring an experienced chief executive to oversee them.

One of the biggest challenges will be renegotiating six enterprise bargaining agreements at a time when it is busy slashing costs and cutting its workforce to pay its fuel bill, blown out by record oil prices and a limited hedging policy. The potential for industrial action is high and it requires negotiation by a chief executive who is not going to step down six months after the negotiations are complete. In a business that produces a gross profit margin (earnings before interest and tax expressed as a percentage of sales) of about 7%, a strike by one of the many unions representing Qantas employees could put a big dent in profits. Industrial relations is a key issue for the airline. Not just the cost of labour is at stake; it is also the flexibility of staff and the productivity gains that flexibility brings.

With labour and fuel now making up 60% of the airline's total costs, it is no surprise that margins are being squeezed and the company is searching for more productivity gains.


Qantas must also look for new revenue streams to try to halt the crunch on its margins, and Dixon thinks he has the answer: general freight.

To this end he is talking to the country's second biggest general freight operator, Lindsay Fox, to buy his trucking business Linfox. The only question is the price and whether Australia Post will be involved. Fox is believed to want more than $1.1 billion for the business, but the rest of the industry thinks it is worth between $700 million and $1 billion, depending on whether the Armaguard cash logistics business is included.

Fox is a seller. He had hoped to swap the company for shares in a consortium led by Macquarie Bank to offer a counterbid for Patrick Corporation. The deal fell apart, and Fox is now trying to find a new buyer.

Besides a generational change going on at Linfox, where Fox's children want to pursue other business opportunities, land transport will only get tougher as Toll Holdings and Patrick Corporation merge to create a one-stop shop, providing clients with everything from ports to road and rail. Such an enterprise will put further pressure on freight forwarders and trucking companies to get bigger or get out. Companies such as TNT Australia, Linfox, Scott's Transport Industries, trucking group K&S Corporation (which is 70% owned by Scott's), SCT Logistics and Sadleirs Transport are already being squeezed.

The Department of Transport forecasts that freight transport in Australia will increase 73% by 2020, growing in volume from 375.3 billion tonne-kilometres (btkm) in 1999-2000 to 648.5 btkm, worth $130 billion. Qantas wants to get a slice of the pie.

A move into general freight makes sense. The airline, in partnership with Australia Post, already has a big interest in land transport services, following the joint purchase of express freight operator Star Track Express for $750 million in December 2004. Qantas and Australia Post are also the dominant providers of domestic air-freight services through their joint Australian Air Express business.

Adding general freight and freight forwarding to Qantas's business mix would expand its service offerings to freight customers. In addition, it could improve Qantas's share price. Macquarie Bank recently argued in a note that Qantas's foreign ownership cap of 49% means that, as a pure airline, its pool of potential investors is artificially limited.

If the airline becomes more of an industrial company, by expanding into land transport, the pool of potential Australian investors might increase.

General freight operators trade on higher price/earnings (p/e) multiples of 15 or 16, compared with airline stocks, which trade on a p/e of 10 or 11.

If a move into other areas helps to boost the share price, the company will be keen to pursue it. In the past five years, its share price has been a perennial underperformer of the S&P/ASX 200 index. Over five years it has fallen 5.3%, compared with a 54% increase in the S&P/ASX 200. Over two years, Qantas has risen 3.5%, compared with a 32% rise in the S&P/ASX 200, and in the past three months Qantas's share price has dived 17%, compared with an 8.7% rise in the index.

Qantas is no stranger to Fox. When it launched its low-cost carrier, Jetstar, in Australia, Dixon decided to use the Fox family's Avalon Airport instead of Melbourne Airport. Then in March this year it announced it would move its heavy maintenance operation for jumbo jets from its 55-year-old Sydney base to Avalon.

Dixon is also keen to expand the airline's revenue base by taking Jetstar to the global scene. This will not be as easy as it sounds and is another reason why Dixon will want to stay on until it is up and running.

Qantas has not had a good record with its extra overseas operations. Australian Airlines was a flop and the brand will be gone by the end of June. Jetstar Asia, in which Qantas holds a 44% stake through Singapore's Orangestar Investments, is bleeding - in the six months to December 31, it lost $27.4 million. In March, Orangestar announced it was raising $S36 million in fresh equity to help fund the business, and the airline is cutting back its fleet from eight to six.

On April 26, Qantas lodged a 19-page authorisation application with the Australian Competition & Consumer Commission (ACCC) to allow it to co-operate with Orangestar. Because Qantas is only a 44% stakeholder in Jetstar Asia, it is not a "related company" of the Qantas group, and therefore is not allowed to participate in things such as scheduling, capacity or price decisions for Jetstar Asia without breaching section 45 of the Trade Practices Act. The submission, obtained by BRW, is more telling in not what Qantas is applying for, but the reasons for it. Clearly, the operation in Asia is bleeding cash and is a far cry from the original business plan drafted in 2004.

In its submission to the ACCC, Qantas says: "Subject to commercial and regulatory considerations, Qantas would be more likely ... to place its QF code on Orangestar services. This could significantly improve trade and relations between Australia and countries such as Vietnam, India or Cambodia. Furthermore, Qantas could also extend the scope of the Qantas frequent flyer program to enable Australian consumers to earn and/or redeem points on more intra-Asian services."

In other words, Jetstar International, which will have a cost structure as much as 40% below Qantas's, will displace Qantas services on routes that are only marginally profitable at the moment. This would give Qantas a chance to open a lot of new markets that until now have been too tough for it to fly.

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

[Raider1]

The reported interest in QF buying out LINFOX might not be all that silly, after all LINFOX would give QF:
1. Access to road freight.. and lets face it a lot of freight that customers pay overnight airfreight for actually goes by road.
2. Control of Avalon airport........mmmmmmm the possibilities :)

[cunninglinguist]

Any truth to the rumour GoD got 38,000 letters asking why he should be paid 3 or 4 million dollars per annum when there are good accountant/lawyers available for 250k :=
or go down to the local Centrelink and offer someone 50k to come in and cut the :mad: out of jobs, pay and conditions, I mean, how hard can it be :ugh:

[YesTAM]

Oooh Boy! Sell those Qantas shares now! Qantas buying Fox will result in a total loss of value for both companies - until the Fox managers make a reverse takeover of the management of Qantas. Qantas knows nought about road freight, not so Fox about air (you had better believe I have been quizzed in detail by another freight organisation)

I've worked with the Foxians, and boy! They make Qantas management (and Board) look pathetic. I hope Lindsay sells. You Qantas drivers and CC will be better off working for Fox (which is what will happen). Might even get involved myself.

[numbskull]

G.D is a power freak who doesn't know when to get out.

He's too busy shrinking QF mainline and expanding into either:

1 low yield businesses

2 loss making enterprises

3 enterprises which neither he nor his management team have any experience of.

I guess though we can rely on the board of directors to take charge of the situation!!!!!???????????. Trevor Kennedy was such a fine upstanding citizen. James Packer and Peter Cosgrove know all about running an airline!!!. Its almost like G.D has managed to stuff his board with people who have no idea about running an airline so that he gets to have unfettered reign.

Apart from "Chainsaw" Dickson and "hacksaw" Gregg, the rest of the board are mainly experienced with resource industries or financial services. There is not one single director who has any experience in any company listed on the ASX within the transport/logistics/services businesses.

And that's the way the place is being run - like a bank that's closing branches and treating customers like s#@t.

I know the board of directors need some diversity but they also need someone besides the CEO who knows what the business is all about.But what would a numbskull know!!:ugh:

[Lodown]

Sounds like the Qantas executive has slashed almost as much as it can and is looking for something else to throw its collective egos into and justify its collective jobs and data analysis skills. Like a well exploited oil field (read: airline market), it is becoming apparent that there are no more big costs to be cut and sinking additional wells will just add to costs and not increase the volume of oil being recovered. A decision is being toyed with to look for new oil fields. The question that I would like answered is that with all the focus internally over past years, is there anyone in Qantas with the appropriate knowledge and experience who would be qualified to recognise an underutilised or new oil field if they tripped over it? Sounds like the executive might need to shave its collective palms and get fitted for glasses.

[qcc2]

moved into the oil refining business. that would have given them control over the supply/demand of juice. :ugh:
hear that dame margret isn't too well. had some sort of operation. all hush, hush. good recovery:ok:

[ALAEA]

I THINK GEOFF HAS DONE A GREAT JOB LEADING THE COMPANY THROUGH TOUGH TIMES AND LOOK FORWARD TO HIS FUTURE LEADERSHIP

[Elroy Jettson]

I wonder, will GD have to sack all his truckies on the weekend because the price of fuel is higher at the pump on saturday and sunday? He could then hire them back on reduced terms and conditions on tuesday and wednesday as the average price drops...:hmm:

[Eagleman]

ALAEA,

you don't think a drover's dog could have done it just as well do you?

QF should have a workforce of no more than 25,000, productivity should be 15 to 20% higher, and the cost base should be 3cents / ASK lower.

GD is viewed as a great CEO now.....when time and competent share market analysts (and the QF knobled journos - love free trips) do realistic analysis of his performance, he will be seen as a man who has squandered the farm because he did not make the tough commercial decisions to strengthen the company.

GD has been protected from real competition by the Government. The only place he makes any money is between SYD - MEL, East Coast - Perth, Across the pacific and over to J'burg. Great business eh? If SIA of EK was to be allowed on the Pacific, QF would be in ruins. Protectionism is short term. Anyone who bleats that SIA has no right to operate on the Pacific is simply grabbing at straws and delaying the inevitable. SIA will operate on the Pacific. More to the point, QF could compete successfully against them when it happens if GD uses the time to:

reduce the workforce to no more than 25,000,
increase productivity by 15 to 20%,
lower the mainline cost base by 3cents / ASK lower

Will he do it.....no... he will get rid of 1000 senior managers. BFD

[Ultralights]

Fox would do really well selling to Dixon, seen before as the Alan bond deal. Sell to Dixon for a nice tidy price, wait a few yrs for him to stuff it up, and buy it back real cheap! just like Mr Packer and Alan bond with Channel 9

[missy]

moved into the oil refining business. that would have given them control over the supply/demand of juice.

I am surprised that oneworld or *alliance haven't moved into the petroleum business. Such a venture would enable fuel at cost price (only to the airline in the consortium, of course).

[ALAEA]

how can you all say such things about Geoff,the man is great leader

[soldier of fortune]

hi ALAEA(formally qf1) -ALAEA = qf1:mad:

[Turbo 5B]

well off the mark, soldier.

[Woomera]

Yes, he is. Now he's banned too:=

[BARON DRIVER]

ALAEA, you for real, Great Leader! dont think so, he'd sell his own mother if the shareholders told him too!

[qcc2]

have a the whole workforce behind them. they mingle at every opportunity with their staff and know how to inspire every level of an organisation.:D
GD if he mingles their is a good chance he gets kn**cked out by someone.:ugh:
inspire the workforce- go to the engagement survey -say no more.:ugh:

eagleman where would you like to cut 13000 people from the workforce?:confused:

[Eagleman]

There is another post on a differnt thread by lagrane. He has suggested 15%.

Aircrew numbers are simple to calculate. Engineering needs to be settled, is it or out

We carry far too many support staff. Outsourcing is the approach.

Airports / Catering / Finance / IT and dare I say it Security (QF Security I believe is larger than the Police Force of Tasmania)

You need a small cell to manage the contractual arrangements and service level requirements.

That is a quick and nasty, but accounts for around 8000