Qantas poised to inject millions into Jetstar Japan

[tempsky]

Todays SMH
Qantas poised to inject millions into Jetstar Japan

October 29, 2013 - 12:23PM http://images.smh.com.au/2012/10/08/3697590/Matt-O-Sullivan.jpg?rand=1349678334051 (http://www.smh.com.au/business/by/Matt-O%27Sullivan)


Qantas is said to be on the cusp of pouring more money into Jetstar Japan as it seeks to secure its position in the domestic Japanese market against other newcomers.

Japanese newspaper Nikkei has reported that Jetstar Japan will raise 11 billion yen ($118 million) next month from Qantas and Japan Airlines, which each have stakes of 33.3 per cent.

It is not known whether Jetstar Japan's other shareholders, Mitsubishi and Century Tokyo Leasing Corporation, will participate in the private placement. They both have takes of 16.7 per cent in the budget airline.

Comment was being sought from Qantas this morning on the expected cash injection.

Since it began flying in July last year, Jetstar Japan has become the largest budget airline in Japan with a fleet of 17 A320 aircraft. Low-cost airlines are a new phenomena in the Asian nation.

But the cost of entering the Japanese market has weighed on the financial performance of Melbourne-based Jetstar, which booked $50 million in start-up losses from Jetstar Japan and Jetstar Hong Kong in the year to June.

The airline did not split out the losses when its parent, Qantas, reported its full-year results in August.
Japan Airlines has conceded that Jetstar Japan has experienced growing pains since launching domestic flights.
JAL chairman Masaru Onishi said in June that turning Jetstar Japan into a profitable business would depend to a large extent on the timing of a start to short-haul flying to destinations in China, Korea and Taiwan.

He expected Jetstar Japan to begin international flying within the next two years.

Macquarie Equities has estimated that Jetstar Japan is losing about $50 million a year as it competes against Peach and AirAsia Japan, which will be rebranded Vanilla Air next month.

Malaysian budget airline AirAsia decided several months ago to pull out of the airline joint venture in Japan.
After initially relying on selling tickets via the internet, the budget airlines are looking to boost ways of encouraging consumers to fly with them in a market where people tend to book through travel agents.
Qantas poised to inject millions into Jetstar Japan (http://www.smh.com.au/business/aviation/qantas-poised-to-inject-millions-into-jetstar-japan-20131029-2wcqw.html)

Another Aaaamazing business.

[Ken Borough]

Que?

Qantas poised to inject millions into Jetstar Japan (http://www.smh.com.au/business/aviation/qantas-poised-to-inject-millions-into-jetstar-japan-20131029-2wcqw.html)

[Troo believer]

Qantas spin is that Skymark is not a LCC yet Jetstar Japan will flounder in my view for one basic reason. They hub out of Narita not Haneda and that will always be to their disadvantage unlike Skymark. The time it takes to get from Tokyo to Narita airport is a significant impost in both time and money. Flying from Haneda or Shinkansen from Tokyo is far more convenient. Wrong hub for most Japanese I should think.
How many shares will they buy back tomorrow? Short or long?

[Wonderworld]

Even the JQ Japan CEO won't fly JQ! She of course traveled J on QF021 :rolleyes:

[Buttscratcher]

$50 million loss ........ Something about good money after bad
Their biggest problem is their based out of Narita ...... Not great for a domestic LLC, and lame for international, especially when Peach operate out of Hanada
Good luck

[swh]

Another great example of how the Jetstar franchises are independent.

[dragon man]

What I find amazing is that no one in the press or any of the financial gurus ever question how much money collectively has been sunk into all the Jetstar franchises, what their collective loses are and that in my opinion they will never return a reasonable rate on that money.

[neville_nobody]

What I find amazing is that no one in the press or any of the financial gurus ever question how much money collectively has been sunk into all the Jetstar franchises, what their collective loses are and that in my opinion they will never return a reasonable rate on that money.

Unfortunately the press don't tend to challenge the big corporations. Qantas especially tend to get a easy ride as they always pull out the old line about how tough aviation is.

Even the Business TV shows are just a few friendly questions. Rarely is some ever under the pump.

The only person I've ever seen asked hard questions and have them concerned is the guy from the Australian Shareholder's Association.

The airline did not split out the losses when its parent, Qantas, reported its full-year results in August.

Yeah funny that.....................:rolleyes:

[Ngineer]

which booked $50 million in start-up losses from Jetstar Japan

Pumping money into a loss making business?

The Joyce strategy — not investing in Qantas long haul until it becomes sustainably profitable in two to four years time 

Qantas distracts before the big questions on Thursday | Crikey (http://www.crikey.com.au/2012/08/21/qantas-distracts-before-the-big-questions-on-thursday/?wpmp_switcher=mobile)

I am somewhat confused.

[moa999]

Reading between the lines here.

Air Asia Japan, a JV between Air Asia and ANA has just stopped flying and is returning all planes to Air Asia.
ANA is instead starting up another LCC in November - Vanilla Air, which it will solely own, and operate alongside Peach (33% ANA).

With this capacity (5 A320s) dropping out of the market all of a sudden, I suspect Jetstar Japan is looking to expand more quickly...

That said at 17 jets it is a worry that they are not turning the corner on profitability.

---

As for the comment on independence, well if a partly owned subsidiary needs more capital they make a call on each shareholder. Up to that shareholder to decide if they want to invest or not.

[hotnhigh]

Keep feeding the pup!

[almostok]

they may have 17 aircraft but they don't seem to be flying much. Every time we taxi out of Narita, at different times of the day, we see 4 or 5 (sometimes more) JQJ a/c parked at the hangar. Maybe not enough pilots??

[OneDotLow]

More good money after bad. And for what?? So that the group has the largest share of all the low hanging fruit.

I've given up asking when they will be called to account.

[Gas Bags]

Air Asia, being one of the most successful LCC's to date, dipped their toe in the water in Vietnam, and pulled it out really quickly. They have now done similar in Japan....

[ebt]

GB, there were other factors at play in both of those investments - AirAsia was blocked by the Vietnamese government from using their name (in part due to lobbying by Jetstar) so they chose not to go ahead. In Japan they couldn't agree with ANA on how to run the airline, and ANA in the end had a gutful so they pulled the pin.

Jetstar Japan (and AirAsia for that matter) have run foul of the local regulators before, so I think that has slowed down their progress in the short term.

[Collando]

Jetstar Japan (and AirAsia for that matter) have run foul of the local regulators before, so I think that has slowed down ther progress in the short

That's because unlike CASA their regulatory body is on the ball !

[V-Jet]

Only two possible reasons anyone would do something so stupid.

1) Ego. I can't be wrong, so I must double up - ergo, gambling.

2) Theft / Fraud.

There are no other possible scenarios. It is seriously like watching the Hindenburg video. Over and over again.

'Oh the humanity!'

[myshoutcaptain]

Singapore Airlines have put close to $122 million into Virgin Australia in return for 19.9%.... and they're yet to return a profit after 12 years of operation.

Perhaps diversity in the business is good foresight.

[porch monkey]

"Yet to return a profit?" Your research needs work.

[Bagus]

This shows how QF is so ignorant,Air Asia can't make money there how will JQ make,invest that money in Australia

[denabol]

Geez, Qantas according to Plane Talking has put in an extra $60 million without getting any increase in voting rights.

Jetstar problems emerge in Japan and China | Plane Talking (http://blogs.crikey.com.au/planetalking/2013/10/31/jetstar-problems-emerge-in-japan-and-china/)

But the ASX filing also decoupled the increase in Qantas money at risk in the venture with Japan Airlines, Mitsubishi Corporation and Central Tokyo Leasing from its voting rights. Amazing. More money, but no more say, in a venture where Qantas is always going to have a minority voice. How brilliant is this?
Probably just as amazing as its Jetstar Hong Kong venture, which Mr Joyce repeatedly said would be controlled by Qantas, guaranteeing that it was illegal under Hong Kong’s basic law, where basic common sense and some engagement with marketing intelligence might just have saved the airline from the limbo in which that project currently finds itself.
Or the amazing foray into Jetstar Pacific in Vietnam, which ‘owes’ Qantas what some believe to be hundreds of millions of dollars which are being looked after for it by Vietnamese majority owners who can and will do whatever they like with it.

[spelling_nazi]

I was told that Joyce's bonus depends solely on growing jetstar , not on it having to make any money. Any truth in that?

[neville_nobody]

I sure hope these guys know what they are doing if it gets out of hand this sort of stuff can sink an airline. On face value they don't seem to be reporting Jetstar to the ASX. Investors might just wake up one morning and find QF broke without any warning.

[dragon man]

If I understood Joyce correctly the company will be cash flow negative in the first 6 months of this financial year. With off balance sheet liabilities taken into account the company is very short of money which I think means at some stage they will need to raise money thru a rights issue which would have to be at a substantial discount to the present share price. Present load factors domestic and international do not provide confidence that Qantas has turned the corner and is anything but a train wreck waiting to happen. Why anyone would purchase shares in Qantas under the present management is beyond me. I think this will end in tears.

[busdriver007]

The board just finished another $100 million Buyback. At least someone was buying shares:rolleyes:

[V-Jet]

The board just finished another $100 million Buyback. At least someone was buying shares

I hope that was with cash, not borrowed funds??

[Mstr Caution]

Throwing increasing amounts of cash into a scheme where the intrinsic value has yet to be realised.

With expectations of exploiting Asian markets with Amaaaazing returns.

Charles Ponzi would be impressed.

[SOPS]

I'm only a dumb pilot, but to me this seems like a really good way to go broke.

[Stalins ugly Brother]

Wouldn't the board be better off buying lotto tickets :ugh:

[busdriver007]

When Jetstar Japan was set up Qantas put in 42% equity but by law foreign companies can only have 33% voting rights so why would you invest more on behalf of Mitsubishi and Japan Airlines...the plot thickens. How's that $3.5 billion that they supposedly had in the bank going? This will not stop until this is all gone! Who are the new directors? Maxine Brenner use to work for Investec and Garry Hounsell is Chairman of Investec Global Aircraft Fund and they obviously step out of the room when the subject of leasing aircraft comes up!:ugh: How the west was lost, the Assets go private and the Debt goes public.

[Buttscratcher]

Everyone in Japan knows it won't work...... How come Big Gay Al thinks it can?
Bizarre ****, dudes

[Jacana]

Did you know Jetstar is the first and only international low cost carrier operating in multiple countries. There are going to be teething problems naturally.

[FYSTI]

Did you know Jetstar is the first and only international low cost carrier operating in multiple countries. There are going to be teething problems naturally. Did you know that Ryanair (established 1985), Easyjet (established 1995) and all the other European LCC's have been doing international flying this for quite some time?

Define the price of 'teething problems". Thus far it must be north of $750 million, with continuing negative cashflow, equity dilution (Vietnam, Hong Kong & Japan) and no signs the outlook will change in the medium term. Teething problems indeed.

[V-Jet]

Teething problems??? Like Barings Bank had 'teething problems' with a rogue trader?

Qantas has a rogue CEO and board. A brilliant mix of total incompetence, complete ignorance and lack of understanding of business in general (and airlines in particular) with a good measure of group think thrown in for luck.

They can't run an airline in their own country (or any country in Big Gay Al's case - love the name BTW!) so how in gods name do they expect to do it anywhere else? Let alone China!! I am speechless they even think they can get away with it.

'How I won WWI' by Field Marshall Douglas Haig might be a riveting read, but surely only a lunatic would use it as a 'How to' manual for airline operations!!

[neville_nobody]

Did you know Jetstar is the first and only international low cost carrier operating in multiple countries. There are going to be teething problems naturally.

There this small airline called Air Asia you might have heard of them..:hmm:

[Buttscratcher]

.... Virgin - Atlantic, Oz, Pac, US, Africa

( I slot 'em into the LLC basket, yeah)

[IsDon]

"Big Gay Al"?

I have a significant problem with that name.

He's not that big.

Maybe Diminutive Gay Al.

[V-Jet]

"Big Gay Al"?
I have a significant problem with that name.
He's not that big.
Maybe Diminutive Gay Al.

I thought the same, but despite his TINY physical stature (if you haven't met Elaine, he would be easily lost in a row of Samsonites) he does have the big job, so I thought it still had merit.

[waren9]

i wonder if jacana meant about the franchising thing? have any of those other airlines done the franchising thing like jetstar to get market access?

dunno

[Buttscratcher]

There are lots of ways QANTAS can lose money without throwing it into an unwinnable Peach, Vanilla, ANA, JACAB, Nipon Homeland Security war....... simply give us a healthy EBA increase and be done with it
C'mon Al, cough up buddy!

[Jacana]

First International LCC as in based in multiple countries, not flies internationally.... der

[neville_nobody]

First International LCC as in based in multiple countries, not flies internationally.... der

Ryanair/Easy Jet/ Air Asia already do that. Air Asia run subsidiary companies under the brand Air Asia. ie Air Asia Indonesia etc.

Jetstar are just trying to replicate these businesses, only they could go broke doing it!

[Jacana]

Extract from Wikipedia

"On 1 December 2005, Jetstar commenced operations from Sydney (http://en.wikipedia.org/wiki/Sydney), Melbourne, Brisbane (http://en.wikipedia.org/wiki/Brisbane) and the Gold Coast (http://en.wikipedia.org/wiki/Gold_Coast,_Queensland) to Christchurch (http://en.wikipedia.org/wiki/Christchurch) in New Zealand. On 7 December 2005, it was announced that Jetstar would establish the world's first global low-cost airline. At the end of 2005, it was announced that Jetstar would fly to Perth (http://en.wikipedia.org/wiki/Perth), from Avalon Airport."

I may be mistaken but got my info from this article.

[Buttscratcher]

2005 Wiki article?
Great research there man.......and those routes and bases are truly International ( if you live in any other part of the world other than Australia )
Good work
...... Now do a search on, say, Virgin

[Buttscratcher]

......oops, you list NZ. Sorry, my bad, you're right, they were a 'global' operation even back then!
Good work, we best give them all our Yen, then

[Jacana]

Offensive post removed.

TID

[Collando]

Hey Jacana, how long have you worked for Qantas HR

[Collando]

Methinks Jacana is a management troll !:\

[Buttscratcher]

I think he's just a young Jet* turkey who believes the hype, and who has no clue how the Japanese system works
Poor bloke
If he'd have lived there, or worked there, then perhaps he'd be less defensive on the QANTAS money laundering over this doomed operation
My take on this is JAL is grasping at straws, our gay leader is a sucker for Suzuki san's saki, and we'll end up paying through our declining conditions

[V-Jet]

+1
Although (apart from the obvious) I don think BGA is a sucker for anyone's trinkets. I just think he is grossly incompetent and throwing money at anything hoping something pays off. Like an increasingly drunk sailor with a shore pass gambling wildly by throwing everything on red, then black, then red again.

It is insane behaviour...

[Buttscratcher]

Yes quite right, and we should be more than concerned

I don't know what to do about it tho......any ideas?

[Troo believer]

Pilots are leaving after broken promises and returning to JAL. Apparently 7 A320s are parked at Narita costing thousands per day in fees. All is not well with the LCC model. Expansion without pilots is very difficult to achieve and the extra dollars is probably to keep the show on the road rather than expand as indicated.

[boocs]

Easy solution! Pay them more (which probably means proper/average salary)

b.

[ALAEA Fed Sec]

Apparently 7 A320s are parked at Narita costing thousands per day in fees.

Haven't they got another 2000 A320's on order?

[Jack Ranga]

:D lol!

Yeah, the order is for the special model that doesn't require engineers.

[V-Jet]

I was a fan of refusing to go back to work after BGA shut the place down. I would have (if worst came to worst) preferred to have put the horse down than to be the jockey forced to ride it with a broken leg.

He is killing the airline. Either 'we' decide when it dies or he kills it. Otherwise we are merely Jews being loaded into cattle trucks by the Nazi's hoping things will be better in the holiday camps.

I would rather be in charge and hold the cards. Anyone with half a brain knows what is happening, question is, are we prepared to write our own (and the future of the airline's) destiny, or will we die a miserable death....

[ALAEA Fed Sec]

Yeah, the order is for the special model that doesn't require engineers.

Apparently in Japan they don't need Pilots or passengers either. They just sit there.

[maggot]

V-Jet.... seriously?:rolleyes:

[Oktas8]

I'm wondering what Jacana could have said that is more offensive than V-jet's remarks.

Care to edit, V-jet?

[Angle of Attack]

I find it hilarious that a LCC be based out of Narita of all places no one wants to go to Narita to travel domestically, maybe if they did some regional flights but domestically it's almost comical....

[Mstr Caution]

I find it hilarious that a LCC is based in Japan !!

[ALAEA Fed Sec]

I find it hilarious that Qantas is going to be bought out by a LCC that they own.

[SOPS]

I'm just sitting on an overnight and being bored, found this while I was surfing.

Real men with some real vision I think.

VH-JET#1 & Her Sisters - Qantas and the 707 (http://www.707.adastron.com/qantas/707-development.htm)

If only Qantas had these people now.

[V-Jet]

No, no editing. And I don't see my comments as offensive. If senior management and the board are left to behave as they have (and I see nothing changing - if anything it's getting worse!) then Qantas will cease to exist.

I am of the 'die on your feet' rather than 'live on your knees' brigade, but I accept I am in the minority.

As I said in an engagement survey (and I got more creative than this over time) if I saw BGA and the board on fire, and it were at all possible to do so, I would get the largest barrel of petrol I could and take great delight in throwing it on them and watching them burn. Apparently that survey showed we were 70% engaged (or something ridiculous like that) so I concluded that I was probably engaged as I cared about what they were doing with my beautiful airline - just not the way one would normally expect.

I have read too many financial disaster books to be able to sit back and quietly accept what is being stolen and wilfully destroyed without at least voicing concerns in the strongest possible way.

I have been told by Qantas courses 'Captain you must listen' etc etc when something is wrong - consistently for 30ish years!! Why is it when the entire company is being flown past DPA with no fuel into a CATIII airport we are expected to sit back and say 'Thank god we have such inspired management!' ????

[Oktas8]

Well, I think you're right about the road that Q is going down. I haven't been here anywhere near as long as you, nor do I feel as strongly as you; I am not my job. But Q is in trouble, no doubt about it.

It is however offensive to suggest that your (our?) plight is comparable to Jews being force-loaded on a cattle truck for mass murder. Hasn't been, isn't now, won't be tomorrow.

So does anyone else wonder if J* Japan is going down the same road as J* HK? Lots of PR, lots of money (outgoing), but no reliable business as yet?

[FYSTI]

Godwin's Law (https://en.wikipedia.org/wiki/Godwin%27s_law).

[Buttscratcher]

I guess the shareholders don't get a lot of say in the matter.... But why are the boardmembers falling into line like sheep?
All we hear in the trenches is that International is bleeding money
Seriously?
There is one QF flight to Narita/Tokyo per day from Australia ..... One !
It leaves from Sydney and is always full as a fat girls sock
If dollars have to go somewhere, how give us an ex-Melbourne or ex-Brisbane like we did before, and not feed Jet* ex-Gold Coast through Cairns
It grills my cheese to see this unfolding, but he'll probably hand the old ex-ML, BN, PH to Narita over to JAL
There goes our flying, and there goes QANTAS international

[V-Jet]

I'll possibly apologise for the cattle truck comments. FWIW my family had 6 Jews in their house in the war. I have some understanding of what was involved.

The mindset I was alluding to is the 'It can't be any worse where we're going'. The point is, as with 'that business' in Europe, is that it certainly can be....

[lc_461]

I guess the shareholders don't get a lot of say in the matter.... But why are the boardmembers falling into line like sheep?
All we hear in the trenches is that International is bleeding money
Seriously?
There is one QF flight to Narita/Tokyo per day from Australia ..... One !
It leaves from Sydney and is always full as a fat girls sock
If dollars have to go somewhere, how give us an ex-Melbourne or ex-Brisbane like we did before, and not feed Jet* ex-Gold Coast through Cairns
It grills my cheese to see this unfolding, but he'll probably hand the old ex-ML, BN, PH to Narita over to JAL
There goes our flying, and there goes QANTAS international


There are currently no direct links between BNE and Japan. JQ runs daily [maybe?] flights to NRT and KIX from OOL.. I don't have time to look it up now, but BITRE stats show that the Japan routes on JQ regularly sit below 70% load factor for most of the year... combine that with plenty of 2 for 1 sales... not sure how profitable the routes are for the ammmmmmaaaazing business.

On the other hand -- as mentioned above -- the daily QF NRT flight usually goes out full on a 744 -- is a nightmare to staff travel on and is above 86% load factor for most of the year..

Why they don't have another flight or to BNE/MEL escapes me.. even a couple of days a week..

[SOPS]

Is it the fact, that the only way to get people to fly on the amazzzzzzzing business, is to remove the Qantas option, so they don't have a choice?

[Buttscratcher]

Yup, SOPS, does look that way

Maybe the media should get onto this from this angle ..... The deliberate killing of QF International

Then again, Anset died, and the average Joe didn't really care

We are watching history unfold, and are amused to death

[spelling_nazi]

It's a national tragedy . I still can't believe these clowns are getting away with this vandalism

[SOPS]

SN, I posted the same thing about a year ago. Nothing has changed. It seems to me that they won't be happy until Qantas has gone altogether, and they can say "See, we were right, Jetstar is an amazzzzing business, Qantas was just a basket case loss maker":ugh:

[OneDotLow]

In the locked thread, it was asked "how much QF had spent on JQ".
Not sure of the total investment when including JQ Intl, JQ NZ and JQ Australia, but the investment in Asia alone is estimated at over a quarter of a billion dollars.

Qantas Stumps Up $60M (http://www.smh.com.au/business/qantas-stumps-up-60m-to-help-jetstar-japan-fly-higher-20131031-2wly0.html)

Jetstar Japan - $50M annual loss
Jetstar Asia - $4M profit
Jetstar Pacific - Not turned a profit since Qantas invested
Jetstar NZ - Not disclosed but "we in here for the long haul" - David Hall
Jetstar HK - $66M investment, but no planes flying yet


Amazing! :D

[lc_461]

Also no mention of JQ long haul. There also seems to be a link in the decline of QF profits with the growth of JQ. 2004-7 were record profits I believe (GFC aside)..

[moa999]

And a Quarter of a Billion Dollars is less than the cost of a single A380 (list is around US$350m)

Reality is with entirely leased aircraft there is not that much (relative to the rest of the airline) capital invested in the LCCs. And for this a large number of planes - 118 in all.
Japan - 17 A320s
Pacific - 5 A320s
Asia - 19 A320s, 3 A330s
Australia - 63 A320/321s, 11 A333/B788s
(source wikipedia, however accurate that is)

Mind you leasing planes means that you have to payoff all of that lease cost (effectively someone elses interest, depreciation and profit) before you make any money,

[Potsie Weber]

Aren't all the JQ A330's owned or financed through Qantas and then "leased" to JQ at depreciation rate only?

Are the 787's financed the same way?

[FYSTI]

Its not the capital tied up in aircraft that's the issue, its the cash already burnt. A lot of cash has been poured into these entities with very little to show for it. That capital is gone, and can only be recouped through a sale of the businesses.

The question is can QF afford to keep shovelling money into the endless cash pits of Asia? The analysts & market say no. If they go bust or are shut down, this capital loss is crystallised & the capital evaporates into thin air, gone from the business forever. The only way out is a face saving sale at a firesale price or they are gifted to the local partners.

[VR-HFX]

When I taxied out to 34L at NRT the other morning I counted 7 bright spanking new 320's on the hard stand in front of the JAL hangar. I assume the meter is running with the leasecos:sad: