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Ken Borough
9th Sep 2009, 04:49
Today's AFR on page 52 carries a report of an interview with Jet* CEO after he had delivered a speech to a travel industry meeting. The report says

" ...central to Jetstar's operations, as its profit was derived entirely from add on revenues, such as food rental cars and hotel reservations."

Make of this what you will but if Buchanan has been correctly reported, why couldn't Qantas have sold food, rental cars and hotel bookings just as effectively as apparently has Jetstar and therefore averted the cannibilisation of its brand?

In addition, one wonders how this view comapres with other statements made by Buchanan and others on the profitability of Jetstar?

framer
9th Sep 2009, 05:20
why couldn't Qantas have sold food, rental cars and hotel bookings just as effectively as apparently has Jetstar and therefore averted the cannibilisation of its brand?

I would guess that they could have....for the short term. For the long term however QF would still have to reduce its cost base to compete in any way with the younger leaner carriers. Rather than do that quickly and aggressively overnight (can you imagine the crying that would have gone on then?) it made more sense to start jetstar with the low cost element built in from the start. The price sensitive market is too huge to ignore and the service oriented market has grown weaker.
Just my uneducated 'line driver' thoughts. I too lament the loss of service.

dragon man
9th Sep 2009, 06:51
What ive always wondered is how much of these supposed savings (and remember a large part of an airline costs are fixed) go into running a second organisation. ie the AOC, Chiefpilot and seperate training organisation, the seperate CEO, CFO and all the accounting section, HR department, Safety Dept, Medical Dept to name just some. But hang on maybe Jetstar doesnt have those last 3 they just use the QF ones for nothing. Just a thought.

QFinsider
9th Sep 2009, 07:27
Given airlines have managed yield for years and the the red e deals Q have are testament to that, they could have easily sold a percentage of seats at deep discount or even transferred old aircraft to the "Q lite". Given the small (very small) contribution crewing is to operating overhead one wonders why..oh hang on that would thwart the "industrial strategy" that sees an industrial consultant run Qantas making millions for himself in the process whilst duplicating all the systems just to save a few %

dragon man
9th Sep 2009, 07:39
But thats the big unanswered question, at the end of the day if all the true costs are accounted for for is it really a cheaper option. Personally i doubt it.

Mstr Caution
9th Sep 2009, 08:17
Dragonman,

I posed a similar statement back in March on Pprune.

An example of sacrificing a successful product to protect the main / core brand is Estee' Lauder.

Estee' set up a lower cost product & re-branded these products which they distrubute thru Target stores nationally. The product has been & continues to be very profitable at the lower end of the market.

However Estee' has decided to scrap the lower cost / budget brand to reduce costs for the entire Estee' group even though the budget brand has been hugely successful.

The result being reduced costs via employment,advertising, duplication processes, distrubution costs & consolidation on the main or premium products.

Beeroclock
9th Sep 2009, 08:21
Long term it will be,wages alone is huge and once they have majority of staff numbers as Jokestar and minimal as QF they will eventually rebrand Jokestar as QF in someway.There will be a role reversal once the numbers add up and a leaner meaner Qantas will exist.. Oh the thought of it hurts...:ugh:

ebt
9th Sep 2009, 08:32
I don't think that there has been a cannibalisation of brands because they have been largely separated - Qantas as the premium brand and Jetstar as the low cost brand. Somehow, I think there may have been some cannibalisation if Qantas started selling insurance, car rentals etc as much as Jetstar does because it wouldn't then be as business focused.

QFInsider, I hear what you're saying about yield management but that can only be at best a tactical type fix. It's no use adjusting the yield curve to allow for some fares to be ridiculously lower if your costs are still going to be higher than the competition. The punters will soon realise that they have a greater chance of getting a low fare with the LCC and so will go with them accordingly.

And let's not forget too that the Group benefits flow both ways - Qantas gains from the added buying power of the Jetstar operation. Together there are scale efficiencies which make both companies more efficient. At the end of the day, it all comes down to the Group bottom line, which is what the shareholders care most about.

rmcdonal
9th Sep 2009, 12:16
Amazing how Jetstar with its seperate Chief Pilot and CFO, (albeit with subsidised safety and Medical dept..........) made $137 mill profit this year.

Qantas made how much?
I think you missed the HEAVILY subsidised maintenance (to the extent it COSTS Qantas to do it), the gifting of profitable routes, the initial cost of setting up the airline in the first place, IT…..
Sure they made a few dollars but if I cut off my right arm and sold that I reckon I could make a bit of money too. :suspect:

goodonyamate
9th Sep 2009, 15:51
Amazing how Jetstar with its seperate Chief Pilot and CFO, (albeit with subsidised safety and Medical dept..........) made $137 mill profit this year.

Qantas made how much?

$4 million

And the following ONE OFF costs....

$130 million in engineers dispute (which had the support of the techies :ok:)
$152 million in aircraft write downs... (bye bye classics and 1 400)
$18 million goodwill write down......
$164 million in frequent flyer estimates

A nice time for these when the market was expecting a low result
So for anyone out there thinking Qantas is not making money, and jetstar is the saviour....look at the financials in a bit more detail.
Cheers

Jelly Shots
9th Sep 2009, 21:25
goodonyamate
There was also the fines that QF has paid recently for the cargo price fixing debacle.
I would like to see a complete breakdown on the Geoffstar figures to see exactly where the money comes from as well as the uncooked figures of how QFs money is spent.
It's been said before but if Geoffstar was a stand alone airline,I wonder what the results would be.

genex
11th Sep 2009, 02:53
Its actually called JETSTAR....it is a legitimate company and part of the Qantas Group. Please use its correct name. If I were for example to refer to the sharp end drivers at Qantas as Pampered Precious Tarts instead of pilots I am sure you would criticize me and you would be correct for doing so. Leave the slanging matches to lesser being eh?

There is a key point which Jelly sort of alludes to here and it centres around two questions: First, what would the QF Group profits be if it hadn't started Jetstar but had simply lowered its costs in accord with the long term trend it has shown and with the steadily declining yields it has faced for years?

Second question: what would the Qantas Group profits and route structure be if it acted as in Question 1 but someone else had started an airline the size of Jetstar? Say a 50 aircraft Tiger?

Just wondering.....

breakfastburrito
11th Sep 2009, 03:15
genex, what the P&L profile for the two companies would have been if j* had used old 747-300/400's for international ops & old 767's for domestic & the new aircraft had gone to qf? Lets compare apples with apples.
...just wondering

framer
11th Sep 2009, 03:38
What would VB look like now had JQ not been started?
I think your perspective plays a fairly strong role in how you view JQ, if you are a shareholder it probably looks like a good move in ensuring the groups ability to capitalize on different economic environments.If you're a QF mainline employee it probably looks like the start of the end.

WalterMitty
11th Sep 2009, 03:40
I thought everyone already knew where jetstar's profit is made. That's easy, A Building, Coward St Mascot. The same place they make it up every year.:hmm:

hotnhigh
11th Sep 2009, 04:22
G'day genex,
all about perceptions of associated costs.......
In the start up of Jetstar International, you might remember that qantas mainline 330 pilots were being sent all over the world, coupled with the addon cost of accom and allowances, to complete sim cyclics due to the fact that the qantas sim was being utilised by jetstar candidates. How could this possibly be the most cost effective way for 'the group' to operate? And how much did jetstar pay for this time in the qantas sim?

Maybe a call to Group flight training to get the real truth hey?

It's simple, you blokes have backed the right horse and are reaping the rewards. And good luck to you. But don't start with the company propaganda about how good jetstar is for the brand etc,etc.
The reality is, had the mainline pilots not availed themselves to reduced lines, had their leave entitlements assigned then qantas pilots would have had redundancies advised to them now. This would have included not only so's but some junior fo's as well. As it stands, the junior 767 fo's have more than 7 years in the company are going to be demoted. So when your 2.5 year jetstar international fo starts complaining that he has to wait a bit longer for his command opportunity, it really pisses people off. The fact is he is in that position as result of decisions made by the ceo and the jpc at the time. The jobs and aircraft were given to jetstar international because they were cheaper. Again perceived costs.
Shame really, as no ones job was on the line at the time. Just another opportunity for some opportunist to shaft qantas blokes purely for self greed. The hall marks of another era seeping through but done in a more subtle way.

Transition Layer
11th Sep 2009, 05:15
hotnhigh

As it stands, the junior 767 fo's have more than 7 years in the company are going to be demoted. So when your 2.5 year jetstar international fo starts complaining that he has to wait a bit longer for his command opportunity, it really pisses people off. The fact is he is in that position as result of decisions made by the ceo and the jpc at the time. The jobs and aircraft were given to jetstar international because they were cheaper. Again perceived costs.

:D Brilliant...right on the money :ok:

Genex, this is exactly why there is ill feeling towards the Geoffstar, oops sorry Jetstar brand.

Jelly Shots
11th Sep 2009, 06:49
Its actually called JETSTAR....it is a legitimate company and part of the Qantas Group. Please use its correct name
Calm down genex, you are getting a little sensitive.The name Geoffstar is not meant to be insidious or derogatory.It says nothing about it's staff as opposed your snide description of mainline pilots.
It shows a sense of humour and is nothing more than saying who 's idea it was in the first place for another airline.

Others have said as I was attempting to be subtle about and that was the huge set up costs that Jetstar would have had to pay for if it was a stand alone airline.

Thats not counting the running costs and other help that it gets from it's parent.

QFinsider
11th Sep 2009, 07:10
An audited set of stand alone accounts would lay waste to any theories on transfer pricing, cross subsidisation and the whole litany of crap that permeates from the likes of Buchanan (boston consulting group) et al.

Jetstar was and always will be an industrial lever. It is not replicated by any other airline. Previous experiments have very quickly led to management discarding the erosion of yield..Financial aviation writers talk of the erosion of yield of the mainline business. That may be so. What yield does J* generate? Very little, it is a volume business targeting a market that is price sensitive. So if mainline yield erodes in a downturn, what happens to J*?

Our management persists, aided by those who spit the vitriol.
I will bet most who spit that sort of venom were somehow denied advancement during a recruitment process, if not we all have choices. Seeing the growth of J* NZ and next J* Asia seeing commands slipping away from Australia at a growing rate, J* Australia pilots now see what has happened to us at mainline. Globalisation is great when you have your period in the sun, J* Australia's is passing.

If somehow yield and margin don't matter anymore, then point me in the direction of the new textbook/practice. I fail to see how selling a seat for less makes more profit, it doesn't. Qantas always acts in isolation, ignoring competitor behaviour and indeed staff behaviour. Want to lever staff watch them get more disengaged and disinterested. You had better hope J* makes all the money you claim. Want to work for less, more often then you have the recipe for J*. It is not a stand alone business. It is not cheaper than mainline. Fixed costs are that.

It is an entity created for the "workchoices" period, still embraced by the Fabian society wankers from the labour party. It's reality created in QCA. It would not survive scrutiny of a trained analyst, someone who could get their hands on the real figures. Those real figures will never surface, until of course the business is truly laid to waste and imports like Joyce parachute out back to the bog from where he left.

The accounting is so creative it defies logic.
the scary bit is the staff of Jetstar enmasse are yet to realise their day in the sun is passing and the travelling public better get used to more substituted flights, operated by group airlines not even trained by Qantas, nor holding an australian passport.

What The
11th Sep 2009, 07:26
I am led to believe that there is now substantive proof of what you have claimed.

The figures for Japan show that Jetstar carried the same number of passengers as Qantas did prior to handing over the routes.

The difference however is that those passengers were carried for $1000 LESS per passenger than when carried by Qantas.

Same passengers, $1000 less revenue for QF Group per passenger.

Doesn't make sense, does it.

Mstr Caution
12th Sep 2009, 02:56
Want to lever staff watch them get more disengaged and disinterested.

A dis-association from J* would go towards engaging staff!

Some believe the current association is a stain on the premium airlines model.

OchreOgre
12th Sep 2009, 04:07
Does anybody know where JQI's cost center for NRT go? I heard QF in NRT. Also does JQ in general, carry cargo/mail?

my oleo is extended
15th Sep 2009, 11:40
OchreOgre - Not 100% sure about NRT, but yes, JQ cart around cargo and mail. Basically as most people are aware, they sponge/share/borrow/bleed/milk and extract anything and everything they can from Big Brother, but then naturally pull a 'Sargent Shultz' and 'no nothing' when queried about their cosiness !!

Come in spinner
15th Sep 2009, 23:16
More of the same crap here.

Yes Jet* Aust time in the sun is over, domestic wont expand much more, enter Brucestar that being J*NZ and the revitalised J*Asia.

Same arguement will continue this time towards Brucestar, Where are the costs,where are the costs and bloody Brucestar scabs:ugh: This is not my position I am just looking into my crystal ball. Lets not go down that track this time around.

Lets stop throwing mud like children, this does not help our cause.

QFinsider
16th Sep 2009, 11:07
Absolutely correct Spinner...

The concept is proven, was a few years ago. Now what does J* Australia and her pilot group choose to do?

Buchanan is an absolute featherweight, his "aviation knowledge" is confined to quaffing chardonnay and getting caught playing..tsk tsk (hardly makes him unique) He was Boston consulting, a necessary requisite for the sort of BS that is allowed to pass as aviation strategy in Australia. That philosophy starts with Abalone(transport minister) and only gets worse...
So Bruce will stay on message until it is too late to stop him...Unless the pilots choose to take them on.........

J connect will replace J* as the new greatest thing, or is that J* Asia or Vietnam??

captaintunedog777
20th Sep 2009, 06:53
What The

Are you that bl%ody naive. This is exactly why comments from pilots count for zilch.

Throw in a global finacial crisis, pig flu and a 30% higher cost structure. Are you out of Kindy yet?

Now where's that band-wagon. It's nice to know Australia's aviation future is in such safe hands.:ugh:

What The
20th Sep 2009, 09:17
Sad part is, it is actually true.

$1000 less per passenger. Same passengers.

Nothing to do with the GFC but all to do with the Jetstar model of lowest airfares in order to stimulate the market.

What has been finally proven is that this is rubbish.

They stimulated their egos, not the market.

As a result, Qantas shareholders lost hundreds of millions of dollars of revenue.

Enough said really.

captaintunedog777
20th Sep 2009, 15:44
What the

Wake up smell the roses. :ugh:

Gobetter
20th Sep 2009, 22:58
What is Onestar's OTP out of NRT? Easy answer (from their very own airport manager) it's VERY POOR! Not only are the same passenger's now paying less per seat, therefore less yield to the QF group, but they would be unlikely to continue using Onestar if they are continually late!

Way to lose buisness.

Keep up the good job - in serious need a of a sarcasm font.

desmotronic
20th Sep 2009, 23:39
There are "signs of an upturn" in the number of airline passengers on first or business class -- a measure of business confidence and the most lucrative sector for carriers, IATA said on Thursday.

Latest July statistics from the International Air Transport Association add to flickering signs of recovery in the economy but offer little relief for battered finances of airlines themselves since yields remain low, the Geneva group said.

In July the number of premium travellers on international markets fell 14.1 percent compared with the same month last year, but this was less than the 21.3 percent decline in June.

"Premium travel correlated with world trade which bottomed in May and started rising in June, but further rises are forecast to be relatively weak," IATA said in a monthly report.

Yields, or average revenue per seat sold, fell 23 percent in July and premium revenues fell 35-40 percent, IATA said.

Economy travel fell 1.2 percent in July.

"Passenger numbers are now starting to turn up but there is a long way to go before activity returns to levels seen in 2007 and early 2008," IATA said.

"Moreover, with economic growth forecast to be relatively weak and much excess capacity (in the market), the problem of low yields remains."

On Tuesday IATA raised its forecast for total airline losses in 2009 by USD$2 billion to USD$11 billion.

(Reuters)

Transition Layer
21st Sep 2009, 00:24
desmotronic
As usual, Qantas is talking it down again...



Sydney Morning Herald
September 21, 2009 - 10:19AM

National carrier Qantas Airways Ltd says it is yet to see substantial improvements in business conditions.

Chairman Leigh Clifford said in the company's annual report on Monday that there was significant uncertainty surrounding an economic recovery.

"The global economic outlook remains uncertain and we are yet to see substantial improvements in underlying business conditions," he said.

"Many factors are in play that could affect the timing of the recovery.

"Uncertainty is also being created through significant capacity increases, domestically and internationally, by Qantas Group competitors, some of whom enjoy very favourable taxation and other arrangements."

In August, Qantas announced a $117 million net profit for 2008/09, down 88 per cent from the previous year.

Demand for flights has weakened in the second half of the financial year due to the economic slowdown, swine flu and increased capacity by on competitor carriers.

In response, Qantas announced plans to cut costs by $1.5 billion over the next three years, starting with a target of $500 million this financial year.

Key components of the cost-cutting plan include reconfiguring aircraft, including the superjumbo A380, technology advancements and fuel conservation.

Mr Clifford said the Qantas group was well positioned to withstand the economic downturn and seize opportunities during a recovery.

PPRuNeUser0198
21st Sep 2009, 04:00
IATA's report is not airline specific. Numbers don't lie and comments by Leigh are in-line with Qantas forward bookings.

my oleo is extended
21st Sep 2009, 13:09
Qf introduced a sly little plan some years ago. They internally have a 'mentoring'program, in which the most senior QF Execs choose 'an apprentice' whom they teach, mentor, indoctrinate and groom. These 'apprentices' end up in the senior ranks at QF. Years ago the QF Exec only groomed an internal QF 'apprentice', but recent years QF people groomed some JQ Managers and then pulled those JQ Managers over to QF.No outsider walks into the upper Echelons of QF without prior grooming. Simple as that, and a true fact.It takes time, and money, but like I said, its like the 'underworld'.No wonder John Travolta is so well accepted within the Roo, similar structures ??

The truth is that the QF Group is very strategic, organised and underground so to speak. There is a silent society of Managers and 'consultants' who run the joint like the Mafia.Trying to unravel the web cant be done unless you are basically born into the QF upper echelon, or unless you have spent years watching the dirty little processes take place from a position of trust, like what I have done.

The Group in general, including JQ, wont dissapear in a hurry,or overnight. As for the debate over Latestars longevity, they will exist and grow as long as they make money, which they actually do. Yes, lots of book juggling takes place, but at the end of the day the Investors couldnt give a toss whether the bulk of the profits came from the removal of passengers **** via the honeycarts, so long as a profit is turned.

Dash1
23rd Sep 2009, 13:30
Where will Jetstar NZ earn its money?
1.Jetstar NZ's Sydney, Melbourne, Brisbane, Darwin and Perth pilot bases. See TTMRA and government negotiations from both sides of the ditch leading to that.
2.Jetstar NZ's Auckland based A330s operating trans Pacific and into Asia. Who needs A330s based in Oz? Dreamin? The race is on. To the bottom that is.

lowerlobe
23rd Sep 2009, 21:00
Numbers don't lie and comments by Leigh are in-line with Qantas forward bookings.
Numbers don't lie.....that's the best one I've heard in ages.How many times do we see politicians from both sides use the same statistics to make the point that they have won.....
You can take your point as to whether it was Mark Twain or Benjamin Disraeli who said there are three types of lies...

Lies

Damn Lies

And Statistics...