So who will pay JQ's bills now?

[Ero-plano]

JETSTAR'S chief has given the pilots union a tough warning his low-cost group will stop carrying Qantas passengers on code share flights rather than pay equivalent wages to that of the national flag carrier.
Bruce Buchanan said Qantas needed to begin operating its long-haul routes with cost-efficiency if they were to return to profitability and he believed some of its pilots had "exhorbitant" salaries "out of whack with the the market."
The Jetstar group CEO was commenting on the wage and conditions package being sought by Qantas long-haul pilots, who have voted to take protected industrial action if settlement to their long-running dispute is not reached.
Mr Buchanan told the Herald Sun he fully backed Qantas chief Alan Joyce's determination to get core economies right to keep Qantas international competitively viable.


1- Why is BB even discussing QF wages with the media?

2- If QF wasn't propping up BB's Mickey Mouse operation through code share, subsidies and passenger offerings he would be out selling coffe and muffins.

If this disillusioned brain dead idiot doesn't know who's really paying his bills and his wage he's the one living in "cloud cuckoo land" with his mate AJ. As a stand alone unsubsidised operation JQ is gone overnight. If JQ had to find its own passengers (non QF), establish its own routes (not ones QF gave it), pay for planes (not QF paid for or subsidised), fuel, terminal space (non QF), advertising, wages etc it would not only be unviable, but unsustainable and loss making to highest degree.

If BB doesn't believe this open the books so his operation can be audited externally.

QF wages have nothing to do with this EBA, if a 2.5% pay increase is asking too much then management should slash their fat pay checks and lead by example. Its about keeping Australian jobs in Australia and protecting the group (QF/JQ) pilot jobs.

Fact is QF mainline (International / Domestic) makes the money for the group, always has, always will, whether its revenue or FF it comes from the front of the bus.

AJ has stated International operations are loss making at the moment, so when you take into account managements destruction of the brand, minimal route structure, old technology aircraft, company fines and environmental and economical disasters you can understand why. Everything thats wrong with International Operations is a by-product of poor management and leadership, not engineers or flight attendants or check-in staff or pilots, its a hand full of people who's "leadership" has revolved around the lining of their own pockets via external leasing, crewing companies and poor management decisions.

The staff and the travellling public are quickly lossing confidence fast, if as much effort was concentrated on managing the company as it is on bashing staff maybe the group could be even more profitable.

[WorthWhat]

QF mainline (International / Domestic) makes the money for the group, always has, always will... No so sure about this Aero.

Until AASB8 operating segments standards are applied to the Qantas Group, what makes up Qantas' profit/loss will remain a mystery.

Even the analysts disagree.

[balance]

Might be a mystery to you, WW. To those of us inside "the Qantas Group", it's pretty bloody obvious, and it is exactly as described by Ero...

[Ero-plano]

Until AASB8 operating segments standards are applied to the Qantas Group, what makes up Qantas' profit/loss will remain a mystery.

WorthWhat, Qantas is a publicly listed company so major shareholders need to be the ones who speak up and find out the real story. I guess with big profits and no dividends for a few years some might be asking the question already.

JetStar on the other hand is not publicly listed even if it is owned by Qantas, so I'm not sure who decides what accounting information is open to public eyes. I guess the court case with Jet Connect opened a few eyes about truth, lies and deceit at the top end of both entities.

It wont be hard to find out answers once QF books are opened up. Why does Qantas own A320's for example (do they profit from leasing these planes, break even or do it for the love) and why does one of GD and former CFO PG's companies (Global Aviation Asset Management) lease aircraft to Qantas? Conflict or interest? Raiding the cookie jar? Your call.

[Artificial Horizon]

This is the problem with some Qantas mainline guys and girls, your heads are in cloud cuckoo land. Jetstar is the most profitable part of the the Qantas Group at the moment, they are wholly owned by Qantas Group so are of course going to have 'investment' from the group.

I appreciate the fact that the 'strike' talk has moved on from a 'payrise' to wanting to ensure all group pilots earn the same money. I would like nothing more, but I am quite realistic in believing that this will never happen. If Jetconnect and Jetstar paid Qantas wages the businesses would cease to be profitable, the way that Jetstar is being run at the moment is not good from a 'pilot' point of you but from a business point of you it seems to be working.

Good luck with the strike action, I hope that something good comes out of it.

[noip]

AH,

Your gyros have toppled and you have a severe case of vertigo. There is pretty well nothing in your post that is even close to being correct. Your views on issues for the Mainline Pilots dispute seem to reflect Company propaganda rather than reality, for example.

N

[breakfastburrito]

AH, the truth is that perhaps a handful of executive actually know the actual profitability of each of the business segments given the potential massive array of cross subsidisation available for accounting "trickery".

Management have an agenda, and endlessly repeating the propaganda does not make it fact. They could be right, or they could be wrong. As many here knowledgeable about accounting have suggest, figures can be made to do anything desired.

Qantas don't want to run a boring slow growing international business, BB has let the cat out of the bag, they see compound annual growth rates of close to 20% in Asia and that is what they are determined to chase. See my post here (http://www.pprune.org/dg-p-reporting-points/456231-qantas-post-august-24-a-5.html#post6574173) on this.

[seat1A]

Jetstar is the most profitable part of the the Qantas Group at the moment

Do you know this is fact because AJ and BB said so? You are the one in cloud cuckoo land if you believe them.

[73to91]

He will :ok: if you listen to him.

Ero - why is he even discussing QANTAS at all?


WHEN Bruce Buchanan enthuses over Asia's incredible travelling expansion, the Jetstar boss speaks with the rapidity of a man flat out staying in front of aviation's most exciting market race.

Buchanan leads the world's fastest growing low-fare airline group, staying ahead of a North Asian market expansion of about 20 per cent a year fuelled by China's and South Korea's massive rising middle classes.

And he speaks with the authority of the increasing autonomy of the international Jetstar Group - which he sees inevitably overtaking the size of its parent, Qantas - and a confident directness on the local rivals Virgin Australia and the beleaguered Tiger.

He also warned the combative pilots union of "dire consequences" if it tries to press Qantas long-haul wage levels on to Jetstar.

Buchanan believes Australians who still think of Jetstar as primarily their locally-based low-cost carrier do not realise it will soon offer 60 destinations, half from the Singapore base of its Jetstar Asia sister.

"We've carried 20 million passengers in the past year after seven years of operation - the big low-cost carriers like Air Asia, Ryan Air in Europe, South West in the US, none of them reached that milestone so quickly. We're the fastest growing airline in the history of aviation," he said.

Last week Buchanan unveiled a $500 million investment in new aircraft which will take the Singapore base to four wide-bodied Airbus A330s and 17 A320s, new routes to Beijing, Ningbo and Hanoi and extra flights to Hong Kong, Taipei, Ho Chi Minh City, Kuala Lumpur, Bali and Jakarta.

The Asian business has tripled in three years.

"We're going to see a 4-5 times multiple for low-cost carriers in North Asia by the end of this decade," he said.

"I think there will be new Jetstar airlines which will appear in other parts of the world as well."

Buchanan "absolutely" believes Jetstar will become bigger than Qantas.

He thinks Jetstar and its main competitor Air Asia have already reached a size where economies of scale will make it tough for nationally-based airlines which used to have captive audiences to catch up.

Buchanan is comfortable with carrying the profit load on behalf of struggling Qantas, which he sees as temporary due to the business market strength of Qantas.

But he sees Jetstar revenue as growing faster than that of Qantas.

He believes some Qantas long-haul pilot salaries are "exorbitant' by international standards and said he would not tolerate any pay deal which would see Jetstar pilots paid the highest Qantas wages.

"If they try to impose those sorts of conditions, the dire consequences this will actually cause . . . we won't put the Qantas code share on our flights if that actually was to get up," Buchanan said.

"We're happy to get rid of it, no skin off our nose."

Buchanan said Jetstar only had a small proportional revenue on code-share connections to Qantas long-haul flights.

"We'd take the Qantas code off and you know what that will do?" he said.

"It's going to put you (pilots) in a worse situation, because they won't have the passenger traffic to continue to justify flying as many aircraft. So you'll wind up in this ridiculous situation where you cause your own demise even faster

JETSTAR BROADENS HORIZONS
Passengers (2009-10) ............ 20 million
Destinations ..........................58
Asian fleet ............................21 aircraft (by December)
North Asia growth ..................Ahead of 17% annual projection
Employees ............................7000

http://www.heraldsun.com.au/business/jetstar-rising/story-fn7j19iv-1226096399562 (http://www.heraldsun.com.au/business/jetstar-rising/story-fn7j19iv-1226096399562)

[Kangaroo Court]

Artificial Horizon,


I believe it's a pilot's point of view-not you! Holy smokes, did you grow up on a boat without engaging anyone in a normal conversation?

At no time in the history of deregulation has an "airline within an airline" ever made it. Continental-Lite, Metrojet (USAir), Shuttle by United have all failed to materialize as a serious entity once the mainline feed and costs of operations were taken under consideration in a serious audit.

Jetstar is no different.

[DirectAnywhere]

cause your own demise even faster

So Mr Buchanan admits that pilots are now facing the demise of their job and terms and conditions and that the situation appears terminal.

If that's the case, why would I wish to make Bruce and Alan's jobs any easier if the outcome is guaranteed anyway?

Oh, and 94% of the pilots apparently feel the same. And the engineers. We may not be able to stop 'our demise' but the company will bleed cash. What a tragic state of affairs.

[Artificial Horizon]

Seat 1A, I would say that I believe that Jetstar is the most profitable part of the Qantas Group because that is what the accounts say that have been released by the Qantas Group (a public company). What you are saying is that I should believe there is a massive fraud going on here and the numbers are being skewed, this is a serious charge. You can go to jail for making 'false financial statements' in your public accounts. So I can believe one of two things:

1) Qantas management are all committing massive fraud that could land them all in Jail. Has the ASX or anyone, shown any interest in investigating such a thing.

2) I can believe a group of people who have a vested interest in showing that Jetstar is not actually profitable, just because they don't like the CEO.

Until the Serious Fraud office (or Aussie equivalent) shows some interest in this I will believe the accounts as published.

[Ero-plano]

"We're happy to get rid of it, no skin off our nose."

BB speaks of removing QF coode share off "his" flights. Imagine if Qantas did the same? Lets remove all Qantas passengers forced onto JetStar, lets remove all the planes from Jet Star, lets remove all the slide of hand accounting BB and see how you go.

While we're at it, lets bring AJ and BB's wages in line with their Asian counterparts as a gesture of leadership and equality. Let's compare wages of Pilots also, QF mainline International ops, 4 or 3 crew carry Second Officer's who reduce the operating cost base significantly. SQ/EK etc. have no S/O's and carry heavy crews. CX which does have a similar operation subsidises the living expenses of their Pilots.

You compare yourself to the likes of Ryan Air and South West amongst others. These guys are all stand alone entities and built their businesses on good management and smart thinking. What's BB done???? Bugger all. If we're playing the comparrison game you will find that the costs aren't far apart.

The JQ boys and girls sat down with the then CEO AJ to negotiate an EBA which would ensure they would get the 787 flying when it came along. They negotiated in good faith and took a less than desireable deal to get this over the line. Lets look at to today, will these guys ever see the cockpit of the 787 as an operating Pilot? The answer is yes if they move to Singapore, this was never the case during negotiations. Why don't we trust AJ and BB, because thay are liars and spin kings.

No one denies that the two brand tactic is a bad move, it has its place and is here to stay. How its controlled and operated is what has got up the nose of many on both sides.

When you agree to take a job at JetStar or Virgin or Tiger or Strategic or Qantas you look at the contract and if you like it, you sign away. Complaining that one gets more than the other etc etc is a waste of time. If you don't like your conditions, leave.

[hotnhigh]

For the true believers...
If Qantas is in such dire straits, let the smartest guys in the room cut the whole thing loose (QF that is.). Take with it, the simulators, hangar facilities, training facilities, aircraft, spares (or lack there of), the frequent flyer program, the qantas lounges, pilots, engineers, cabin crew, front line customer support agents, check in people, other ancillary staff such as the fuel hedging people, the procurement people, the finance people who organise the cash to buy aircraft. etc, etc. After all they are all on the qantas payroll, and then lets see how jetstar will go.
Obviously Joyce, Buchanan, genex and now ah can move onto greater things with jetstar. Once the "drag" has been removed.
Believe us all, it would be a great day if buchanan carried through on the statement....
"If they try to impose those sorts of conditions, the dire consequences this will actually cause . . . we won't put the Qantas code share on our flights if that actually was to get up," Buchanan said.

"We're happy to get rid of it, no skin off our nose."

Wouldn't it be great to start flying back into some of these places head to head with jetstar...... It's all about choice.

[breakfastburrito]

1) ...Has the ASX or anyone, shown any interest in investigating such a thing.
Funny you should say that...

[buttmonkey1]

its amazing that jetstar is propping up the Qantas group
by selling coffee and muffins. no profit from ticket sales.

[Artificial Horizon]

BB,

I should add, that if the numbers are being fiddled then I hope that someone does investigate it and that AJ and his Minions get the book thrown at them.

Buttmonkey,

Whats your point, Ryanair has recently announced a 26% rise in profits for the last financial year to 401 million euros. Funnily enough Ryanair make ZERO from its ticket prices and all profits from secondary earning e.g muffins, drinks, hirecars and hotels booked through website etc..... This is a business model that works for many airlines, not just Jetstar.

[walaper]

I am sure punters would be happier too, that after buying a QF ticket they are actually on a QF aircraft .( Jit Connict not withstanding);)

[ANCDU]

This is the problem with some Qantas mainline guys and girls, your heads are in cloud cuckoo land. Jetstar is the most profitable part of the the Qantas Group at the moment, they are wholly owned by Qantas Group so are of course going to have 'investment' from the group.


AH, Joyce stated recently that Qantas Domestic is the most profitable part of the group at the moment. This begs the question how is this possible with part of this segment employed under the Long Haul Award, and "expensive" engineers and overpaid flight attendants?

Under Joyce's own theory of not investing in unprofitable parts of the group, shouldn't Qantas domestic be receiving bucketloads of money? Sure they are currently getting brand new 738's that have been ordered years ago, but there is no expansion, these are replacing old 734's and 767's one for one. Under his own theories we should be seeing the first 787's going straight into mainline domestic operation. These will be going to the loss making Asian operation. Its questions like these that is making employees nervous about their future.

The likes of Bruce Buchannon also makes Qantas employees nervous. With managers that have attitudes like this towards their "parent" company what hope to people have. The main and obvious reason for the decline in Qantas International profit is glaringly obvious....Jetstar international. The money spent setting up this operation (and employing BB, why didn't he get dismissed after his incident on the 744?) as well as a few better equipment decisions would see that division reaping the rewards that Cathay and SIA enjoy.

[assasin8]

Hey AH, seeing as Jetstar are doing so well from their muffin sales, why not ditch the high cost associated with running an airline (ie. leasing, maintenance, fuel, wages, etc) and just set up a muffin stall in the domestic terminal? "Jetstar muffin break"

Just think of the profits! :ok:

[Ero-plano]

assasin8, what I want to know is who pays for the coffee and muffins JetStar sells? If QF are paying for them, I guess its a 100% profit.... ha ha.

[QFdude]

Wow!!! I'm wondering if AJ is capable of showing some leadership and rein in a "rogue" CEO.

['holic]

I would say that I believe that Jetstar is the most profitable part of the Qantas Group because that is what the accounts say that have been released by the Qantas Group (a public company). What you are saying is that I should believe there is a massive fraud going on here and the numbers are being skewed, this is a serious charge. I have absolutely no doubt that Qantas' financial reporting meets the accounting standards required by ASIC. But anywhere they can transfer costs within those constraints they will, because that helps them justify the direction they want to take the company.

For example, why does QF lease A320s to JQ? Why were QF crew sent to HKG/LHR to do their A330 courses (with accommodation and allowances) when QF sim time was used for JQ crew? Both of these things would affect mainline profits, but are not required to be disclosed in a financial report.

Also, don't forget that QF International has performed well over the last decade. Even the years when profits were down (GFC, SARS, Iraq war) the commentary at the time was that it was still a good result as QF Int had outperformed the majority of its competitors. This quote is from QF's last half year report
Qantas improved yield by 9 per cent, and increased capacity by 3.3 per cent demonstrating a strong revenue recovery across both international and domestic business.
Yet here we are 6 months later, and it's the end of the world, and apparently it's been coming for a long time. So either something was wrong with QF's reporting over the last decade, or something's wrong with it now.

Dont forget, this is from the people that brought you:


200 hr pilots are safer
Ongoing engine failures aren't a safety issue, 2 out of 1700 engineers using their left hands is
QF pilots want a $200k payrise

So it doesn't take a great stretch of the imagination to believe that the numbers they release might be a bit skewed.

Jetstar is the most profitable part of the the Qantas Group at the moment, they are wholly owned by Qantas Group so are of course going to have 'investment' from the group.Really? JQ Asia has lost a total of $80m since it was started, has only just recently made a profit of $6m, and has had its leasing arrangements with JQA questioned as it was believed that its leases were being used to prop up its profits (starting to see a pattern here?). How do you justify the $500m they are getting?

[Keg]

At a recent meeting a QF executive indicated that QF had 'subsidised' JQ for a number of years from when they started but that it was the right thing to do in order to 'see off' the competition. He indicated that JQ domestic was profitable in their own right now and that QF Long haul wasn't. I asked how J* long haul was going and whether they were returning cost of capital. Nil response. I asked why QF long haul was getting all the press about not returning cost of capital whilst J* long haul received none- and yet more capital was being thrown at it- and it too wasn't turning a profit given the reports. Nil response.

Now we hear from Bruce that if the QF codeshare code was taken OFF J* flights that those flights would be unsustainable. Does that not indicate that QF is assisting in the subsidisation of J*? People are booking what they think are QF flights and flying on J*. How much are J* charging QF for those seats on a codeshare flight? Does anyone know? Are we making money on those seats or losing money on them? I suspect the latter due to being charged a motza for them. How much does QF charge J* for codeshare seats on QF flights? I suspect not enough to cover the costs and thus J* pockets a lot more than the seat costs them.

So you can see that the costs can be hidden quite easily and it's not even illegal. :ugh:

[allthecoolnamesarego]

AH,

Do a little bit of research on Direct operating Costs of airlines. You will find that pilot DOC's are anywhere from about 5-10% or overall operating costs. (depending on inclusions - simulators, crew transport etc).

An increase in Pilot wages makes 2/5ths of 4/8ths of F-all to the overall operating cost of the airline.

As has been stated on numerous posts on PPRune in the past, you could double pilot wages and it would add about $2 to the ticket price.

I wish I could find the quote from a few years ago, when Tiger were starting up. Apparently when asked how they would get enough pilots to fly their aircraft, the answer was something along the lines of "we could pay them $10 000 P/A more than the competition is paying, and it would only add about a dollar or two to the price of a Melbourne-Sydney ticket. (anyone have the quote handy??)

Please don't just accept the management (or union for that matter) spin. Dig around and find out.

Cool names.

[kotoyebe]

JQ must be making all the money. They had no qualms at all in paying a full J CHCSYD fare for one of their top executives and his fellow skiers in his party who were recently stuck in ZQN during a weather disruption there.

Funnily enough, JQ don't have star class or whatever they are calling it today, across the Tasman, and none of the other JQ disrupts were lucky enough to travel in J, maybe because there were plenty of seats in Y......

[SeeBee]

Qantas achieved an Underlying EBIT of $165 million for the half-year. The result is 175 per cent above the prior corresponding period, driven by a $411 million, or 8 per cent, increase in total revenue.
Qantas improved yield by 9 per cent, and increased capacity by 3.3 per cent demonstrating a strong revenue recovery across both international and domestic business

This is a quote from the latest half year result released in December 2010.
It combines both Domestic and International.
We are now told International will lose more than $200 million this financial year.

Either the result as stated in December is wrong or the $200 million loss is wrong or International has had a really terrible second half!
All while the load factor sits above 80%

Accounting standards correct or not, there is something seriously wrong with these numbers.

Maybe somebody can explain.

SeeBee

[Cactusjack]

SeeBee, I am not known for being very soft in my wording of matters, so I will explain things this way - If the figures you have posted are correct (and I believe they are) then quite simply management are absolutely completely incompetent fu#kheads. Simple.

[QAN_Shareholder]

Cool names,

Do a little bit of research on Direct operating Costs of airlines. You will find that pilot DOC's are anywhere from about 5-10% or overall operating costs. (depending on inclusions - simulators, crew transport etc).

An increase in Pilot wages makes 2/5ths of 4/8ths of F-all to the overall operating cost of the airline.

As has been stated on numerous posts on PPRune in the past, you could double pilot wages and it would add about $2 to the ticket price.



It may well only be 5% of operating cost but airlines have fairly thin margins and this could equate to 60% of profit. Now Qantas widebody pilots would be paid what, 40% more than equivalents at Jetstar or Virgin? And these sort of differences in profit can quite easily swing the decision whether or not to invest in new capacity.

['holic]

If the JQ guys I've spoken to are to be believed, the pay difference is nowhere near 40%. It's probably closer to single digits, and in certain individual cases exceeds average QF pay.

I thought it would have been more important to have a solid business model. As a shareholder, aren't you concerned about a further $500m investment in a part of the group that has failed to make any significant profits. And what about the requirement to return cost of capital? JQ Asia has never come even close to your arbitrary 10%.

Two sets of rules.

[Sunfish]

QANshareholder:

It may well only be 5% of operating cost but airlines have fairly thin margins and this could equate to 60% of profit. Now Qantas widebody pilots would be paid what, 40% more than equivalents at Jetstar or Virgin? And these sort of differences in profit can quite easily swing the decision whether or not to invest in new capacity.

With respect, like hell would pilots wage claims affect an investment decision! For one very, very simple reason:

Unless your new aircraft is supersonic, the flight times and crew duty hours are virtually identical between old and new aircraft assuming an unchanged route network (you all fly at Mach 0.95 or so?) SO PILOT WAGES ARE IRRELEVANT.


The numbers for investment decisions like these are analysed against direct operating costs per hour and per cycle over the routes network foreshadowed by the airline. Boeing and Airbus will do this for you as many times as you like using the most sophisticated computer models of airline operations on this planet using the assumptions you give them.

The analysis will, among zillions of other things, determine your spares holding and thier locations, maintenance requirements and locations, etc. etc. etc.

AND ALL THIS INFORMATION IS NORMALISED IN CONSTANT DOLLARS FOR THE VERY PURPOSE OF ELIMINATING FLUCTUATIONS DUE TO INFLATION IN DIRECT OPERATING COSTS.

What then happens is that detailed sensitivity analysis is done as part of the due diligence process to ensure that risks are managed.

To put it another way, there was no bean counter saying to the Qantas Board; "Look guys, our entire investment in Twenty A 380 aircraft is uneconomic if pilots wages retain their purchasing power. The only way this investment makes sense is if we screw pilots and engineers."

[QAN_Shareholder]

holic,

If the JQ guys I've spoken to are to be believed, the pay difference is nowhere near 40%. It's probably closer to single digits, and in certain individual cases exceeds average QF pay.


Any JQ widebody pilots like to contribute on whether they think their pay is only 'single digits' lower than Qantas widebody pilots! I think the comparison needs to be done in terms of pay per hour flown.

Sunfish,

To put it another way, there was no bean counter saying to the Qantas Board; "Look guys, our entire investment in Twenty A 380 aircraft is uneconomic if pilots wages retain their purchasing power. The only way this investment makes sense is if we screw pilots and engineers."

If your point is that 2.5% of 5% is a small number then I agree. The point I am making however is that the difference between what Qantas long haul pilots are paid and what Virgin and Jetstar long haul pilots are paid could well be significant enough to change an investment decision because it represents a large % of profit.

[mcgrath50]

Any JQ widebody pilots like to contribute on whether they think their pay is only 'single digits' lower than Qantas widebody pilots! I think the comparison needs to be done in terms of pay per hour flown.


The problem is, Qantas thinks it's smart business to employ (or contract) new pilots to fly 767 and 747 freighters despite the fact mainline crews are sitting around on minimum hours. That makes no sense unless you are just being bloody minded.