GD..Under performance, greed & incompetence?

[The Black Panther]

I had the aggravating experience of hearing this corporate goose in action on Monday. It is almost embarrassing to listen to this smooth tonged board room lizard languish in his despot style of control. Let's face it Qantas hasn't exactly been the leader in maker the right corporate decisions over time. More than external incidents have left the Q holding the golden goose. Let me say at this point this attack on GD is from a corporate performance level and his ethical corporate standards, I am sure he would be a great guy to have a few beers with and the watch Turvey Park take on Temora at Wagga Oval but his under performance and almost unethical treatment of staff and stakeholders is unbelievable. I ponder where could Qantas have been today under a Gerry Harvey type performer.

The most distasteful conduct by GD has been his continuous degrading of Qantas and the competitive nature of our industry. Year after year the staff and shareholders endured 911, Sars, Oil, Low Cost Carriers yet surprise surprise the profits continued to flow at industry high levels. Qantas made the reports in both aviation and financial periodicals. Yet trusty GD continued the doom and gloom philosophy to ensure he kept wages pressure low in all segments of his employ. Then came the statement that staff and customers were of little concern, shareholders were #1 and after yesterday continue to be number one. This attitude against all mainstream corporate icons who valued there staff's skills, loyalty committed to a corporate social responsibility.

Add to that the insatiable remuneration appetite that the hierarchy has maintained. Up to and including 2005 I recall the average staff wage increase was less than 3% per annum. It that stage the executive board members had increases of 14-30% p.a. Yes per annum I said. While we have seen similar headlines in corporate Australia nothing would match the unequal treatment of staff and executives that was happening at the red room. Unfortunately there were no Ricardo Semler, Gerry Harvey or Richard Branson amongst Q executives, nor a drop of ethical standards or the fairness, our fathers and probably their fathers embraced as founders of this great country of ours.

This recent comparison using 2007 Annual reports shows the more evidence of the under performance and over rewards occurring within the big Q. The much smaller competitor of Qantas, Virgin Blue is a simple example of the greed that exists in one boardroom while not in another. Don't get me wrong rewards can be used effectively if used fairly.
Revenue V: 2169m Q: 15165.7m Qantas yards ahead, as we would expect.
Net Assets V: 743.5m Q: 6195m
Profit achieved to Net Assets V: 29% Q: 11.6% (Less than half) This shows how efficiently net Assets were utilised to produce a profit. BG outperformed GD by a country mile.
Cash flow from Operating Revenue V: 18.7% Q:15.5% Obviously cash flows in service industry should be high however again BG get more from his staff than GD.
Profit from Revenues V: 9.9% Q: 4.7% Once again BG outperforms GD by more than double finding more profit from available revenue in percentage terms.
KPI of CEO remuneration to profit/rev (Note the lower the better)
V: 13.78 Q: 141.35 Finally the reward meter. The higher the number the more the CEO remuneration is nonaligned with declared profits.
Say no more..... GD don't expect an invite to Australian Story. GD you are very average.

So what can be done. Not much actually. Shareholders have observed a CEO undersell an iconic company only to be caught out by other greed players who wanted to have two bites of the pie at the last minute. The whole plan collapsed and the share price rose to where is should have been before a takeover offer. MJ fell on her sword and now GD takes the accolades for the price rise. (give me strength) This occurred in a political environment where similar parallels have occurred. Business has grown, profits have soared, investment is at all time highs. How is your bank account? Can your sons and daughter afford their first house? Why is it we have low interest rates but high cost of living and less disposable income. Because the GD philosophy is not isolated. Where has this economic boom taken us? Do you see your family and friends more, do you have more holidays, has your quality of life climbed at the same rate as the economic boom that Mr Howard would suggest?

Staff will continue to be compared to a lower labor cost models from under developed countries and outsourcing staff will continue in technical and non-technical areas. The 787 and 380 will likely been maintained overseas of by a third party. Qantas staff numbers will recede while Jetstar business will grow. Contract work will also grow. GD will move on shortly and enjoy his retirement. His legacy will be shareholders stand above all other stakeholders in a business, above staff and customers. He will be remembered as the CEO who took the 'home' out of Qantas. He, who took the 'spirit' from our company.

Who will we remember? We will remember those Australians with compassion for the social structure and individuals, achievers in sport, medicine and business, the compassionate ones who gave without expectation. Watch Andrew Denton's "Enough Rope" occasionally, it will give you faith in our wonderful country but don't expect GD as a surprise guest.

[Max Q.f]

A succinct and accurate post.
He is an underperformer who only posesses the large mouth of a marketer.

His industrially driven policies are no match for quality. He has missed the continued assault by Emirates, Etihad and Singapore.
Year by year increment by increment they continue to encircle Qantas.
The answer?
Grow a low yield unproven "brand" at the expense of the mainline. The mainline product provides the yield. It is yield that provides the revenues for this poorly spoken uneducated yob to waste on some industrial wank fuelled by Oldmeadow's 20 year old vision of aviation.
He will be put out to pasture, as he is as old as history.
The scary part if his legacy will be that when the real numbers of J* are revealed from behind the clever veil of accountancy, it may well be too late. Cost is but one part of the profit equation. Importantly it is the transparency of this cost as it relates to "group" assets that is important. Something sadly missing in the accounts at Qantas.

He is a sad individual with ittle going for him who has, due connections been promoted far above his level of competence.

[Pass-A-Frozo]

Profit from Revenues V: 9.9% Q: 4.7%

Just out of interest, what would the Profit from Revenue figure be if GD cut QF Pilot's wages to those of VB pilots?

[Launch_code_Harry]

http://upload.wikimedia.org/wikipedia/commons/thumb/0/06/Flyfishing.jpg/350px-Flyfishing.jpghttp://en.wikipedia.org/wiki/Image:Flyfishing.jpg

[27/09]

PAF

I think the post was to illustrate the gross inequity of GD's remuneration to the performance of the company when compared to another airline. In every area he falls well behind, I don't think cutting pilots or other staffs wages is going to make that much difference.

[WynSock]

PAF, you are having a larf no?
Not much difference I would guess as pilots wages are not a huge cost to the company.

[hotnhigh]

No Australian Story for GD? There use to be another program on the abc that would have been able to fit him in, Hmmm what was it called again????? :ouch:

[PEETEESIX]

This demise of industry and “modern” life began centuries ago when at the beginning of the industrial age corporations were given the rights and freedom of humans beings. A corporation is nothing but a process linking owner, employee, and customer. All equally important because they are human. The pigs are in the farm house and have been for a centuries, growing arms and legs, there is only one way all this will end. Mother nature always kicks in and puts everything back into balance. We could start in our own backyard and remember what airmanship once was.:ugh::ok:

[Reeltime]

The problem with the Dixon era is no-one on the board has questioned his initiatives. Apart from James Strong there is very little aviation industry knowledge.

They've basically acted as his cheersquad.

'Lets spend millions updating the classics'......'sure'

'Lets order A330's with floors that can't support sleeper seats'...'ok'

'Lets spend millions on Australian Airlines as a 'trial' and see what happens'....'yep'

'Lets bracket fuel costs with staff costs to make em look bad'...'alright!'

'Why don't we just get rid of heavy maintenance'....'You da man!'

'Lets hear it for Geoff! Bonuses all round!!' ;)

[Pass-A-Frozo]

'Lets order A330's with floors that can't support sleeper seats'...'ok'


I'll pay you that one. Going (back a few years now) from a 767 Business class to the new A330 business class domestically was a joke!

[Capt Kremin]

I am no friend of GD but my information is that the A330-200 floors could take Sleeper seats, but it would take a gutting of the interior to do it. So they don't.

[Pass-A-Frozo]

Owen Stanley:
Mate I don't wish to be rude but I don't think you could even explain (or understand) the effect on debt vs. equity to a publicly listed company let alone the effect of the pricing of factors of production for an airline.
If you don't agree or understand the cost of factors of productions for airlines and the effect of labour inputs on profit from revenue don't ask for an explanation on an internet forum.
I can recommend a few courses for you - PM me for them if you wish. I can provide you with some Masters level courses that will explain everything for you although I fear you wouldn't even gain entry.
As much as you wish it isn't that simple. What I will say is that is if you increase the cost of labour it has a significant effect on profit from revenue. Especially for a company with the payroll of QF. Many factors don't have a 1:1 relationship (i.e. $1 more means $1 less profit)

If you wish to look at what people think of the way QF has been managed take a look at the current share price (since the private equity takeover failed).

[Sunfish]

Peete:

his demise of industry and “modern” life began centuries ago when at the beginning of the industrial age corporations were given the rights and freedom of humans beings. A corporation is nothing but a process linking owner, employee, and customer. All equally important because they are human. The pigs are in the farm house and have been for a centuries, growing arms and legs, there is only one way all this will end. Mother nature always kicks in and puts everything back into balance. We could start in our own backyard and remember what airmanship once was

Errrrrr...............no. The joint stock company was invented by the Venetians around 1300 AD. To do two things that it still does extremely well today:

(a) Manage RISK, by allowing people to spread their assets over a number of companies and therefore reduce their overall risk levels.

(b) Provide a vehicle for undertaking commercial ventures that require more money than any one individual posesses or can borrow.

This facilitated the growth of the Venetians trade since the sinking of one ship no longer spelled ruin for a particular merchant.

The enabling technology for the joint stock company was double entry bookeeping (every credit must be matched by a debt or debit), invented by Luca Pacioli around 1300AD, and at whose tomb in San Sepulchro I have lit a candle and said a prayer.

PAF:

Mate I don't wish to be rude but I don't think you could even explain (or understand) the effect on debt vs. equity to a publicly listed company let alone the effect of the pricing of factors of production for an airline.
If you don't agree or understand the cost of factors of productions for airlines and the effect of labour inputs on profit from revenue don't ask for an explanation on an internet forum.
I can recommend a few courses for you - PM me for them if you wish. I can provide you with some Masters level courses that will explain everything for you although I fear you wouldn't even gain entry.
As much as you wish it isn't that simple. What I will say is that is if you increase the cost of labour it has a significant effect on profit from revenue. Especially for a company with the payroll of QF. Many factors don't have a 1:1 relationship (i.e. $1 more means $1 less profit)

My, my, you keep harping about your education in the business world PAF, yet of course your knowledge only comes from theory. Furthermore the subject on which you are prattling is about an hours read and not difficult at all. Sounds to me like you are simply behaving like an intellectual snob - recommending courses indeed!......

.....but in any case you conveniently miss the point - which is a discussion of the obscene amounts paid to Senior Management who are managing an underperforming airline.

Care to comment on why QF's returns are so low PAF?

Lets hear your wisdom about return on capital employed, fixed and variable, direct and indirect costs???????

Care to talk about contribution margins - probably QF's most closely guarded numbers?

Didn't think so.

[excellr8]

GD......A skid mark on the bed sheet of Australian aviation?????????

[Lowkoon]

Being a bit harsh on skid marks arent you mate?

[Launch_code_Harry]

Bump for Sunfish. Are you there PAF?

[roamingwolf]

PAF would have to be crew on the new globemaster wouldn't he?after reading his last message his head wouldn't fit in a herc let alone a f-18.

[Going Boeing]

I am no friend of GD but my information is that the A330-200 floors could take Sleeper seats, but it would take a gutting of the interior to do it. So they don't.

The first 7 A330's (4x200's & 3x300's) were ordered and delivered in a domestic configuration (despite many telexes from Airbus requesting confirmation that that configuration was what they really wanted). The -300's were modified at a cost of $20-$25 million per aircraft because it was essential that they be used on international routes but money was not made available for the -200's so they became "white elephants" restricted to domestic operations despite having much longer range than the -300's. In Jetstar operations this is not a problem as they are using the QF domestic business class seat (ie much lighter than the Sleeper business class seat), but when the B787's enter service, JQ will return the A332's to QF and it will be interesting to see how QF use them then. An additional 8 A332's are on the way (2 already in service with JQ) and these aircraft will have stronger floors which will allow them to be used on international routes such as Melbourne to Beijing, Sydney to Mumbai, Los Angeles to Auckland (short period only), etc

Peter Gregg admitted that he was on the committee that made the original error in judgement, but it is interesting to note that at no stage did senior management bonuses decrease to compensate for this fcukup.

[Qantas 787]

I can tell you Gregg was very much responsible for the A330 decision........

[blow.n.gasket]

Owen Stanley wrote along with PAF

Just out of interest, what would the Profit from Revenue figure be if GD cut QF Pilot's wages to those of VB pilots?

C'mon mate, work it out and lets us know? Give us the benefit of your vast knowledge and intelligence. Could the answer make a fool of you?


Interesting question but how do you compare like with like?
Qantas pilot's wage bill in the region of $350 million/year,
VB pilots cost some 20% less than Qantas, you do the math.
Unfortunately you would then be comparing the wage structure of 747, 767 330 and 737 pilots with that of VB's 737 drivers.
Would that be a fair and reasonable comparison?
Maybe Virgins 777 wages (when they work it out)Vs Qantas remuneration might be more applicable.

[Capt Kremin]

The six Jetstar A330-200s will be returned in domestic config as will be two of the new ones on order. There will be 4 -200s in International config delivered straight to mainline from the factory.
The planned 22 aircraft fleet will be,
International-10 X A330-300s, 4 X A330-200's
Domestic - 8 X A330-200's. I guess that will mean that more A list guys will get slots on them.

The domestic A330's-200's won't have a crew rest. Once again, the floor strength on the -200's is a furphy. The main stumbling block to making them international is the that they would need a complete strip down to reconfigure them.

[speedbirdhouse]

Yes the 200 series [longrange] A330s were configured with only enough galley space for 1 meal service. Galley bulkheads are not modular as in the boeing product and are integral to the airframe.

Geniuses those QF executives...........

[Keg]

I guess that will mean that more A list guys will get slots on them.

It won't be very long before the A list pilots would be able to get A330 slots on the basis of their Q seniority anyway.

[G Cantstandya]

I don't want to upset QF guys here but I heard the other day that the JQ drivers that are currently flying the 330 will be wetleased back to mainline like aus airlines when it's time to go back...

anyone heard of something similar??

[Keg]

That rumour gets trotted out from time to time. I'm not sure how JQ can do that an still manage to crew the 787 operation....unless they're prepared to pay QF rates of pay in which case you may as well give the aeroplanes to QF.

Keep in mind too that QF is currently wearing significant costs of crew sitting around doing nothing due to having lost the aircraft to J* to start off with. It'd be nuts to keep them doing nothing (but still paying them full QF rates) whilst also paying the J* pilots to flog the aircraft around domestically.

[Pass-A-Frozo]

Just out of interest, what would the Profit from Revenue figure be if GD cut QF Pilot's wages to those of VB pilots?

C'mon mate, work it out and lets us know? Give us the benefit of your vast knowledge and intelligence. Could the answer make a fool of you?


Well let me answer that with a question.

If contribution margin is basically the difference between sales revenue and variable costs - what do you think the problem is with QANTAS? Are the costs too high or is the price too low?

Do you think GD should be trying to cut costs or sales revenue?

Here is what Professor John Shank said about it:

In 1989, John Shank (now Professor Emeritus at Dartmouth University) participated in the same panel discussion as Bob Kaplan. Professor Shank’s comments included the following:



I now believe at the broadest possible level that my [former] support for the contribution margin concept was misplaced and short-sighted. … I have been looking for some big successes from contribution margin analysis for 25 years, and I have come up empty. … In fact, it almost seems to be axiomatic, and let me call it Shank’s Axiom.



• If the problem is small enough so that contribution margin analysis is relevant then it can’t have a very big impact on a company.

• And if the possible impact in a decision setting is major, if it can really affect a company in a major way, then it’s silly to consider most of the factors to be fixed.



… Not only can I find no notable big successes from contribution margin concepts in the real world, I can point to many examples of what I consider to be notable failures from the application of the contribution margin mind-set. … I believe that more than one entire industry has competed itself to the brink of insolvency using contribution-based pricing.

- Journal of Management Accounting Research, 1990 (Fall), p. 17



Professor Shank refers to the trucking and airline industries in the years following their deregulation as two examples to illustrate his point. If an airplane is about to leave the gate with empty seats, the marginal cost of adding additional passengers to fill those seats is almost zero (a small increase in fuel consumption, and a few bags of pretzels, perhaps). Hence, an airline applying contribution margin analysis will make every effort to try to fill the plane to capacity, including offering deeply-discounted, last-minute fares. However, it is an open question as to whether the numerous bankruptcies and near-bankruptcies that have occurred in the airline industry in the years following deregulation resulted from a “contribution margin mind-set,” as Professor Shank suggests, or rather from the underlying economic characteristics of the industry. Given overcapacity in the industry, the fact that airlines have high fixed costs and low variable costs, and the fact that airlines have difficulty differentiating the services that they offer from their competitors, it is not clear that any one airline would have improved its situation using a full costing approach to pricing.

[prunezeuss]

Very few economic rationalists or theorists ever get to manage their own businesses.
Many are employed as consultants who are scape goated when things go awry.
In this thread we have gone from the sublime piece of quantative comparison(posted by Black Panther) to the plagiarized piece of economic fadism posted by PAF.
Run such a dissertation by GD and you would be met with a blank look and a request for another glass of red.
Businesses as large as Qantas are enormously complex.
The rise or fall of these corporations does not hinge on one factor alone.
The comparisons made between QF and VB and hence BG and GD make fascinating reading.
It would appear that BG would do a much better job of running QF than GD and as an employee would be far more cost effective.
GD is very astute at marketing GD
PAF is very astute at Googling
"What would the Profit from revenue figure be if GD cut management incentive bonuses at QF to the same level of those at VB?"

[Sunfish]

I see you've discovered contribution margins PAF, good on you!

I have some sympathy with the good professors argument as well, marginal cost pricing will drive people out of business simply because at marginal price levels, no one can cover their fixed costs and the result is predictable and disastrous.

However, the true purpose of contribution margin analysis is to compare operating units of a company on a cash basis without the inherent distortions thrown in by cost allocation.

Thats why I wonder about Jetstar. What is its contribution margin compared to mainline? Probably almost zero. What is its cost allocation? Probably almost zero, hence it shows a profit.

Let me give you a fictitious example of an aircraft manufacturing company to ponder.

Total revenues 20,000, 000 variable costs 10,000,000 fixed costs 8,000,000. profit 2,000,000.

Allocated as:
Division Sales Variable cost Contribution Allocated Costs Profit

Structures 10,000,000 5,000,000 5,000,000 2,000,000 3 mill

Engines 5,000,000 3,000,000 2,000,000 1,000,000 1 mill

Foundry 5,000,000 1,000,000 4,000,000 5,000,000 1 mill loss

You then, as a bright little manager, without looking at the contribution margin, decide that your foundry is a loss making proposition and close it.

Think I'm joking? I've seen at least three companies (One public, two private) make exactly that mistake, and in fact CAC used exactly this logic to close its aerospace foundry at Fishermans Bend, and then wondered why it hadn't saved any money, which of course is obvious - you don't get rid of fixed costs that easily.

However cost allocation is the accounting equivalent of metaphysics, and if you haven't seen this example yet, your not getting a good education...


It also illustrates exactly why Qantas will never get prosecuted (or even charged) with predatory pricing over Jetstsar.


In discussing the costs incident to various types of operations, the analogy was drawn of the restaurant, which adds a rack of peanuts to the counter, intending to pick up a little additional profit in the usual course of business. However, the accuracy of the analogy is evident when one considers the actual problem faced by the Restaurateur (Joe) as revealed by his Accountant-Efficiency Expert (Eff. Ex.)
EFF. EX. Joe, you said you put in these peanuts because some people ask for them, but do you realize what this rack of peanuts is costing you?
JOE It ain't gonna cost. 'Sgonna be a profit. Sure, I hadda pay $25 for a fancy rack to holda bags, but the peanuts cost 6 cents and I sell 'em for 10 cents. Figger I sell 50 bags a week to start. It'll take 12 ½ weeks to cover the cost of the rack. After that, I gotta clear profit of 4 cents a bag. The more I sell, the more I make.
EFF. EX. That is an antiquated and completely unrealistic approach, Joe. Fortunately, modern accounting procedures permit a more accurate picture which reveals the complexities involved.
JOE Huh?
EFF. EX. To be precise, those peanuts must be integrated into your entire operation and be allocated their appropriate share of business overhead. They must share a proportionate part of your expenditures for rent, heat, light, equipment depreciation, decorating, salaries for your waitresses, cook,...
JOE The cook? What'sa he gotta do wit'a peanuts? He don' even know I got'em!
EFF. EX. Look, Joe, the cook is in the kitchen, the kitchen prepares the food, the food is what brings people in here, and the people ask to buy peanuts. That's why you must charge a portion of the cook's wages, as well as a part of your own salary to peanut sales. This sheet contains a carefully calculated cost analysis which indicates the peanut operation should pay exactly $1,278 per year toward these general overhead costs.
JOE The peanuts? $1,278 a year for overhead? The nuts?
EFF. EX. It's really a little more than that. You also spend money each week to have the windows washed, to have the place swept out in the mornings, and to keep soap in the washroom. That raises the total to $1,313 per year.
JOE (Thoughtfully) But the peanut salesman said I'd make money -- put'em on the end of the counter, he said -- and get 4 cents a bag profit.
EFF. EX. (With a sniff) He's not an accountant. Do you actually know what the portion of the counter occupied by the peanut rack is worth to you?
JOE Ain't worth nothing - no stool there - just a dead spot at the end.
EFF. EX. The modern cost picture permits no dead spots. Your counter contains 60 square feet and your counter business grosses $15,000 a year. Consequently, the square foot of space occupied by the present rack is worth $250 a year. Since you have taken that area away from general counter use, you must charge the value of the space to the occupant.
JOE You mean I gotta add $250 a year more to the peanuts?
EFF. EX. Right. That raises their share of the general operating costs to a grand total of $1,563 per year. Now then, if you sell 50 bags of peanuts per week, these allocated costs will amount to 60 cents per bag.
JOE What?
EFF. EX. Obviously, to that must be added your purchase price of 6 cents per bag, which brings the total to 66 cents. So you see, by selling peanuts at 10 cents per bag, you are losing 56 cents on every sale.
JOE Something's crazy.
EFF. EX. Not at all. Here are the figures. They prove your peanut operation cannot stand on its own feet.
JOE (Brightening) Suppose I sell lotsa peanuts - thousand bags a week 'stead a fifty?
EFF. EX. (Tolerantly) Joe, you don't understand the problem. If the volume of peanut sales increases, your operating costs will go up. You'll have to handle more bags, with more time, more depreciation, more everything. The basic principle of accounting is firm on that subject: "The Bigger the Operation, the More General Overhead Costs that Must be Allocated." No, increasing the volume of sales won't help.
JOE Okay, you're so smart, you tell me what I gotta do.
EFF. EX. (Condescendingly) Well -- you could first reduce the operating expenses.
JOE How?
EFF. EX. Move to a building with cheaper rent. Cut salaries. Wash the windows bi-weekly. Have the floor swept only on Thursday. Remove the soap from the washrooms. Decrease the square foot value of your counter. For example, if you can cut your expenses 50%, that will reduce the amount allocated to peanuts from $1,563 down to $781.50 per year, reducing the cost to 35 cents per bag.
JOE (Slowly) That's better.
EFF. EX. Much, much better. However, even then you would lose 26 cents per bag if you charge only 10 cents. Therefore, you must also raise your selling price. If you want a net profit of 4 cents per bag, you would have to charge 40 cents.
JOE (Flabbergasted) You mean after I cut operating costs 50%, I still gotta charge 40 cents for a 10 cent bag of peanuts? Nobody's that nuts about nuts. Who'd buy 'em?
EFF. EX. That's a secondary consideration. The point is at 40 cents, you'd be selling at a price based upon a true and proper evaluation of your then reduced costs.
JOE (Eagerly) Look! I got a better idea. Why don't I just throw the nuts out -- put 'em in a trash can?
EFF. EX. Can you afford it?
JOE Sure. All I got is about 50 bags of peanuts -- cost about three bucks -- so I lose $25 on the rack, but I'm outa this nutsy business and no more grief.
EFF. EX. (Shaking head) Joe, it isn't quite that simple. You are in the peanut business! The minute you throw those peanuts out, you are adding $1,563 of annual overhead to the rest of your operation. Joe, be realistic -- can you afford to do that?
JOE (Completely crushed) It'sa unbelievable! Last week, I was gonna make money. Now, I'm in a trouble -- justa because I think peanuts on a counter is a gonna bring me some extra profit -- justa because I believe 50 bags of peanuts a week is a easy.
EFF. EX. (With raised eyebrow) That is the object of modern cost studies, Joe, to dispel false illusions.

[QFinsider]

We can hope...

Here s a little gem lifted from Wikipedia...

After the failed Qantas takeover bid in December 2006, and on the back of growing concern of Qantas' future due to the A380 debacle, an independent review of the board of directors by the shareholder's representative group found irregularities and serious shortcomings in the current leadership. The outcome was a vote of no confidence in Mr. Dixon's continuing leadership; as well as that of Peter Gregg (CFO) and John Borghetti (GM) and a recommendation to call a new board election. This is expected to occur towards the end of the year.

:E

[Pass-A-Frozo]

the plagiarized piece of economic fadism posted by PAF.

I think you need to recheck the definitions of a quote and plagiarism.

Sunfish:

Your example is fine as such but consider Relevant Cost if you are comparing operating a Jetstar Aircraft vs. a QANTAS aircraft. I don't think your example really considers mutually exclusive projects. Not to mention the fact that proper analysis of Fixed Costs would not result in the decision you highlight in your example. You're right though that the allocation of fixed costs to specific projects can be a pitfall - however I'm not sure how this applies to the Jetstar / QANTAS example (aka GD performance)

NPV (Net Present Value) is the key. Especially if you consider the Jetstar creation / expansion as a mutually exclusive project to expanding mainline. The highest NPV wins.

Comparing various projects across an enterprise purely on the basis of return is a bad way to do things. It implies that the cost of capital for a particular project (i.e. the risk) is the same as the average for the enterprise. The market demands that the return on equity is based on the risk to that equity. Naturally if QANTAS changes its risk appetite then things change.

What you should be asking is does Jetstar add to the shareholder value of the Qantas group? If it does the next question is which adds more to shareholder value - ploughing resources into Jetstar as opposed to mainline.
All other things being equal - the market opinion of QANTAS (Geoff Dixon, the board et al) is factored into the share price. If that has been rising it either implies that the market is expecting or witnessing increased returns or the risk level of QANTAS as a business has fallen.

Contribution Margins can help when allocating a scarce resource so yes if pilots / aircraft etc can be transferred between the group, Contribution margins (especially during a pilot shortage) may be relevant. However I'd assert that's a short term decision.

For example which route to allocate airframes and crew to in the next few months. The introduction of something like Jetstar is a long-term decision (i.e. Capital budgeting decision). As such NPV is the order of the day.

I think your fascination with Contribution margins is based on some experience you've had with short term resource allocation. Add into the NPV mix sensitivity analysis and Jetstar may look even better.

So in short - no I haven't just discovered "contribution margin" I just don't think it's applicable to capital budgeting decisions. There is a reason why the majority of CFO's use NPV.

It's not a one sided "I love management" perspective. My opinion works both ways. For example I think that any pilot signing onto a 5 year (or even 3 year contract - AWA or EBA) at the moment for a pay rise you would like this year is crazy. Again it comes to risk - the airline can see a near full employment economy (possible inflation) and looming pilot shortage. They are just transferring the risk of these increases to pilots.

[DEFCON4]

PAF
How many people do you employ.?
What is the nature of your corporate empire.?
Like most pseudo academics you hide behind poly syllabic profundities.
When it comes to the courage and vision required to initiate a business you are found sadly lacking.
An armchair CEO sans credibility
You are flying in circles of ever decreasing radius and will eventually disappear.
For you a quote and plagiarism are one in the same ie. they belong to someone else and are not your own original thought.

[Pass-A-Frozo]

DEFCON4,
I apply my knowledge in a private sense and that's all you need to know about that. Not everyone in society earns their money and spends it all on repaying debt or consumer goods and you're off the mark to suggest I do (although not so long ago that's what I did do!).
The thread is about the financial analysis of QF's performance of late. What would you like that assessment based on? I understand from all your posts on the Cabin Crew threads you dislike management but how about offering a financial solution if you think the company is being financially mismanaged at the strategic level. I'm not sure what you would base that on if you don't believe in any kind of financial theory or the application of that theory. It's not some kind of 1st year Uni English theory - it's knowledge applied by those in corporate finance. Am I one of the top 10 CFO's in Australia - no . Does that infer that what I'm talking about is fatally floored - I'd say no. If you say yes then you should justify why using statements not just based on "I'm Cabin Crew and I don't think it works that way"
What's you basis for believing that financial tertiary education in this country is off the mark?

For you a quote and plagiarism are one in the same

Come on mate. You have internet access - you can find out the difference.

[DEFCON4]

I have a B.Comm.LLB From UNSW and it counts for nothing other than to understand the pseudo intellectual tripe that you and your ilk carry on with.
BTW...I am not your mate.

[Pass-A-Frozo]

Good University! It's a shame you didn't carry on to study some Masters level Finance.
UNSW B.Comm course - 2 units of Economics and maybe one of Finance if you wanted it as an elective?

[ABX]

The Black Panther,:ok:

Excellent and thought provoking post, I can only hope other QF shareholders and decision makers read it.

Not too sure about some of the thread hijackers after you though!?!:rolleyes:

[DEFCON4]

Black Panther..... quite an outstanding piece of analysis
We have a compliant media who have been hoodwinked into believing that QF management are superlative.
Closer scrutiny such as yours indicates that they are not.
Lets hope that this rolling stone obtains a lot more traction.

[Sunfish]

NPV's are about projects Frozo, and when you do your NPV you also have to take into account costs.

What has been discussed and suspected about Qantas is that "The Qantas Group" is a fiction, Jetstar is profitable because the accounts are structured to make it appear profitable, and showing Jetstar making money is a convenient way to hide the enormous profits Qantas mainline makes from gouging the flying public.

There is a book you should read (probably long out of print) called "Up the Organisation" about the rescue of Avis many years ago.

One of the things management contemplated at the time was setting up a separate "discounted" car hire operation to compete against the cheaper discount operators without compromising high revenue corporate account sales for the main Avis brand.

The project looked good on paper until the marketing manager said "In Poland, we call that pissing in the soup".

The Jetstar operation is "pissing in the soup" in marketing terms. And if Qantas think that starting Jetstar and outsourcing engineering pass for a good corporate strategy then good luck.

P.S. The more usual name for "pissing in the soup" is cannibalisation.

[noip]

I love these threads where us wonderful pilots hurl abuse at each other. Really helps us in the big picture (now which big picture was that?)


Now, where is Darth Bobo ... have we forgotten him?


N



:ugh:

[blow.n.gasket]

Yeh!
FOG.:}

[DutchRoll]

Leaving aside the mind-numbingly boring and largely irrelevant-to-the-argument pages of dry economic theory, I think Sunfish is quite correct. JQ is structured to show a profit regardless. There is no more "raw" example of this than the Honolulu manager who tried to bill a million dollars worth of logistics support (A330 spares, and so on) to Jetstar on commencement of their HNL services, to be told by the accounts people that the bill goes to Qantas. On querying this, it was apparently suggested in no uncertain terms that he wind his neck in, and do as he's told.

Also, if you were a shareholder before the failed APA bid, I can't understand how you wouldn't be absolutely spitting chips if you sold your shares on the Board's (and hence GDs) advice, knowing how the bid ended up and what happened to the share price afterwards.

Under GD, Qantas has turned a good profit, and people may argue that this proves his credentials. However in the current environment, with the levels of protection QF has on the lucrative routes, Daffy Duck could also make QF turn a profit, and GD and his team have made some horrendous screwups along the way.

[Pass-A-Frozo]

Leaving aside the mind-numbingly boring and largely irrelevant-to-the-argument pages of dry economic theory
Geez DR. If you are going to call it mind-numbingly boring at least work out with it is
It's Corporate Finance not Economics ;)
Although you could argue some of the Jetstar vs QF stuff is Economics (if you focus on opportunity costs!) :p
Irrelevant though? So what techniques do you think the board / senior management use for making investment decisions?
I can't understand how you wouldn't be absolutely spitting chips if you sold your shares on the Board's (and hence GDs) advice, knowing how the bid ended up and what happened to the share price afterwards
I don't believe the board advised anyone to sell their shares on the open market?

Owen Stanley, this one is for you:

Get a grip fellas and strive to earn, the only thing holding you back are the choices you make, if you make the choice not to earn, SHUT THE F!CK UP

Owen Stanley - 12 May 2005

[watch your6]

The shallow end of the gene pool is getting crowded.
Pass A Dozo,Aircraft and gigs are all jockeying for space.
PAF has purchased all copies of "Corporate Finance for Dummies" and is attempting to sell them to QF management.
They are not interested..they are re-reading Animal Farm

[DutchRoll]

Corporate Finance. Economics. Whatever. I know pilots who are absolute whizz-kids on aerodynamic theory, who aced ground school, who know the Ops Manual backwards, and who can't fly or operate an aeroplane or crew for sh*t. Somehow though, the plane usually manages to get successfully from A to B. While managing a Company doesn't require hand-eye coordination, "theory" and "practice" have their own different spots in the dictionary for a reason.;)
I don't believe the board advised anyone to sell their shares on the open market?
OK. The Board recommended that the offer be accepted. The Board said the offer was good. Others disagreed and said the offer undervalued the Company. They were accused of having "mental problems". So who ended up being right?:confused:

[QFinsider]

Well Dutch old son...

In answer to your question it certainly wasn't the smartest guys in the room!! :E