Qantas's Dixon Cuts Costs, Restores Flights to Boost Earnings
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Qantas's Dixon Cuts Costs, Restores Flights to Boost Earnings
Bloomberg News Feature
Qantas's Dixon Cuts Costs, Restores Flights to Boost Earnings
Aug. 18 (Bloomberg) -- Qantas Airways Ltd., Australia's biggest airline, may report a record second-half profit after Chief Executive Officer Geoff Dixon lowered costs and restored international flights grounded during last year's SARS outbreak and the war in Iraq.
Qantas tomorrow is expected to post net income of A$294 million ($206 million) in the six months ended June 30, according to the average estimate of 10 analysts surveyed by Thomson Financial. It had a A$9 million loss a year earlier, when the war and severe acute respiratory syndrome forced it to cancel a fifth of its international flights.
"Qantas is one of the best-run airlines in the world,'' said John Gethin-Jones, general manager of global equities at Queensland Investment Corp., the eighth-biggest shareholder in Qantas with 20 million shares. "Compared to many other chief executives, Dixon's very focused. He has a very succinct and credible strategy.''
Dixon, 64, has also opened a discount carrier Jetstar, which began flying in May. It competes against Virgin Blue Holdings Ltd., founded four years ago by U.K. billionaire Richard Branson.
Brisbane-based Virgin Blue said Aug. 4 that competition from Jetstar contributed to a 22 percent slump in earnings in the first four months of its fiscal year.
Qantas invested A$100 million to start Jetstar and placed a $1.15 billion order for 23 Airbus SAS A320 planes. Branson started Virgin Blue with $10 million and snared about a third of Australia's domestic travel market in three years.
Market Share
Jetstar got 7 percent of the Australian domestic market in July, its first full month of service, and is aiming to have 10 percent by the end of the year, the unit's Chief Executive Officer Alan Joyce, 38, said in a July 27 interview.
Attempts by other full-service airlines to set up low-cost carriers have failed. British Airways Plc last year sold its budget German airline Deutsche BA for 1 euro, and KLM Royal Dutch sold its Buzz unit to Dublin-based budget carrier Ryanair Holdings Plc in April 2003. Both airlines said the discount units were unprofitable because of high running costs.
"Building a new low-cost airline while running a full service airline -- that hasn't succeeded anywhere else in the world,'' said Max Moore-Wilton, 61, chief executive officer at Sydney Airports Corp., Australia's busiest airport and Qantas's home base.
Asian Model
Qantas shares have risen just 0.1 percent this year, as record oil prices drove up the cost of jet fuel. Virgin Blue stock has fallen 28 percent. The 31-member Bloomberg World Airline index has declined 11 percent.
Qantas shares fell 1 cent to A$3.38 at 10:26 a.m. in Sydney.
Jet fuel in Singapore, Asia's biggest oil trading center, rose to a record high $50.90 a barrel on Aug. 3, according to oil-pricing service Platts. Qantas in May imposed a surcharge on all domestic and international tickets to recoup some of its added fuel costs.
Dixon is taking his low-cost model to Asia. In April, Qantas took a 49.9 percent stake in a S$100 million ($58 million) venture to start a discount airline with the Singapore government's investment arm Temasek Holdings Ltd. and Singaporean businessmen Tony Chew and F.F. Wong.
The carrier plans to fly to between seven and nine destinations within five hours of Singapore, Dixon said. Possible destinations include Bali, Phuket, Bangkok, Colombo, Hanoi, Hong Kong, Jakarta, Kuala Lumpur, Manila, Mumbai and New Delhi. The unnamed airline last week signed a lease on eight A320 aircraft and plans to start flying by the end of the year.
"Qantas management deserves the benefit of the doubt in terms of Jetstar because they have been able to achieve a lot that people said they couldn't over the years,'' said Misha Collins, who holds Qantas shares for the equivalent of $5.7 million he helps manage at BT Financial Group in Sydney. "The importance of Jetstar is that it keeps a second low-cost carrier from entering the Australian market.''
Cost Cuts
In February, Dixon increased his cost-cutting target by 50 percent to A$1.5 billion over the next three years to maintain earnings growth in the face of increased competition from Virgin, Singapore Airlines Ltd. and Dubai-based Emirates.
As part of the cost reduction program, Dixon said he'd buy more fuel-efficient Boeing 737-800 and Airbus A330 and A380 planes and shift workers overseas.
Dixon, appointed in March 2001, is preparing to take on the 14 labor unions represented at Qantas to help meet his savings goal.
The airline on June 22 announced plans to base 400 of its 4,000 international cabin crew in London to save A$18 million a year in hotel bills and travel allowances. The move riled unions, who have threatened to strike over the loss of allowances.
Labor accounts for 28 percent of Qantas's costs, compared with 22 percent at Singapore Airlines and 21 percent at Brisbane-based Virgin Blue, according to Bloomberg data.
Jetstar has replaced all Qantas flights on routes to holiday destinations such as Queensland's Sunshine Coast and Hamilton Island on the Great Barrier Reef to lower costs. That may be extended on more routes, said BT's Collins.
"There are a number of possible avenues and one is that the domestic business transfers from full-service progressively to low cost through Jetstar,'' he said.
To contact the reporter on this story:
Barbara Adam in Melbourne at [email protected]
===========================================
Qantas's Dixon Cuts Costs, Restores Flights to Boost Earnings
Aug. 18 (Bloomberg) -- Qantas Airways Ltd., Australia's biggest airline, may report a record second-half profit after Chief Executive Officer Geoff Dixon lowered costs and restored international flights grounded during last year's SARS outbreak and the war in Iraq.
Qantas tomorrow is expected to post net income of A$294 million ($206 million) in the six months ended June 30, according to the average estimate of 10 analysts surveyed by Thomson Financial. It had a A$9 million loss a year earlier, when the war and severe acute respiratory syndrome forced it to cancel a fifth of its international flights.
"Qantas is one of the best-run airlines in the world,'' said John Gethin-Jones, general manager of global equities at Queensland Investment Corp., the eighth-biggest shareholder in Qantas with 20 million shares. "Compared to many other chief executives, Dixon's very focused. He has a very succinct and credible strategy.''
Dixon, 64, has also opened a discount carrier Jetstar, which began flying in May. It competes against Virgin Blue Holdings Ltd., founded four years ago by U.K. billionaire Richard Branson.
Brisbane-based Virgin Blue said Aug. 4 that competition from Jetstar contributed to a 22 percent slump in earnings in the first four months of its fiscal year.
Qantas invested A$100 million to start Jetstar and placed a $1.15 billion order for 23 Airbus SAS A320 planes. Branson started Virgin Blue with $10 million and snared about a third of Australia's domestic travel market in three years.
Market Share
Jetstar got 7 percent of the Australian domestic market in July, its first full month of service, and is aiming to have 10 percent by the end of the year, the unit's Chief Executive Officer Alan Joyce, 38, said in a July 27 interview.
Attempts by other full-service airlines to set up low-cost carriers have failed. British Airways Plc last year sold its budget German airline Deutsche BA for 1 euro, and KLM Royal Dutch sold its Buzz unit to Dublin-based budget carrier Ryanair Holdings Plc in April 2003. Both airlines said the discount units were unprofitable because of high running costs.
"Building a new low-cost airline while running a full service airline -- that hasn't succeeded anywhere else in the world,'' said Max Moore-Wilton, 61, chief executive officer at Sydney Airports Corp., Australia's busiest airport and Qantas's home base.
Asian Model
Qantas shares have risen just 0.1 percent this year, as record oil prices drove up the cost of jet fuel. Virgin Blue stock has fallen 28 percent. The 31-member Bloomberg World Airline index has declined 11 percent.
Qantas shares fell 1 cent to A$3.38 at 10:26 a.m. in Sydney.
Jet fuel in Singapore, Asia's biggest oil trading center, rose to a record high $50.90 a barrel on Aug. 3, according to oil-pricing service Platts. Qantas in May imposed a surcharge on all domestic and international tickets to recoup some of its added fuel costs.
Dixon is taking his low-cost model to Asia. In April, Qantas took a 49.9 percent stake in a S$100 million ($58 million) venture to start a discount airline with the Singapore government's investment arm Temasek Holdings Ltd. and Singaporean businessmen Tony Chew and F.F. Wong.
The carrier plans to fly to between seven and nine destinations within five hours of Singapore, Dixon said. Possible destinations include Bali, Phuket, Bangkok, Colombo, Hanoi, Hong Kong, Jakarta, Kuala Lumpur, Manila, Mumbai and New Delhi. The unnamed airline last week signed a lease on eight A320 aircraft and plans to start flying by the end of the year.
"Qantas management deserves the benefit of the doubt in terms of Jetstar because they have been able to achieve a lot that people said they couldn't over the years,'' said Misha Collins, who holds Qantas shares for the equivalent of $5.7 million he helps manage at BT Financial Group in Sydney. "The importance of Jetstar is that it keeps a second low-cost carrier from entering the Australian market.''
Cost Cuts
In February, Dixon increased his cost-cutting target by 50 percent to A$1.5 billion over the next three years to maintain earnings growth in the face of increased competition from Virgin, Singapore Airlines Ltd. and Dubai-based Emirates.
As part of the cost reduction program, Dixon said he'd buy more fuel-efficient Boeing 737-800 and Airbus A330 and A380 planes and shift workers overseas.
Dixon, appointed in March 2001, is preparing to take on the 14 labor unions represented at Qantas to help meet his savings goal.
The airline on June 22 announced plans to base 400 of its 4,000 international cabin crew in London to save A$18 million a year in hotel bills and travel allowances. The move riled unions, who have threatened to strike over the loss of allowances.
Labor accounts for 28 percent of Qantas's costs, compared with 22 percent at Singapore Airlines and 21 percent at Brisbane-based Virgin Blue, according to Bloomberg data.
Jetstar has replaced all Qantas flights on routes to holiday destinations such as Queensland's Sunshine Coast and Hamilton Island on the Great Barrier Reef to lower costs. That may be extended on more routes, said BT's Collins.
"There are a number of possible avenues and one is that the domestic business transfers from full-service progressively to low cost through Jetstar,'' he said.
To contact the reporter on this story:
Barbara Adam in Melbourne at [email protected]
===========================================
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"Qantas is one of the best-run airlines in the world,'' said John Gethin-Jones, general manager of global equities at Queensland Investment Corp., eighth-biggest shareholder in Qantas with 20 million shares . "Compared to many other chief executives, Dixon's very focused. He has a very succinct and credible strategy.''
What about harmonious employee-employer realtionships, what about creating an environment where job security, conditions and remuneration is not continually under threat.
The airline on June 22 announced plans to base 400 of its 4,000 international cabin crew in London to save A$18 million a year in hotel bills and travel allowances. The move riled unions, who have threatened to strike over the loss of allowances.
Labor accounts for 28 percent of Qantas's costs, compared with 22 percent at Singapore Airlines and 21 percent at Brisbane-based Virgin Blue, according to Bloomberg data.
Virgin Blue is by defination a LCC!!! Of course its going to have a lower labour cost base. The structures of QF and DJ are totally different!
One is a full service international airline with multiple subsideries, and the other is a domestic service focused on offering the cheapest no frills deal by providing a no frills service.
Apples and oranges.
If Dixon thinks he will be able to reward staff like a LCC, but still operate a full service airline, he should open his eyes....... or pehaps just reduce his own paypacket and bonus.
CF2
Last edited by curfew2; 18th Aug 2004 at 05:50.
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well well well
Fellas, looks like the transfer of business case just got a nice leg up...if you can beleive what a journo says...
A progressive transfer of business from mainline to the LCC is one option that the company will not confirm until it is too late..
Wake up you self important AIPA!
A progressive transfer of business from mainline to the LCC is one option that the company will not confirm until it is too late..
Wake up you self important AIPA!
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The president of AIPA's quotable quote: "They've done farkin what?"
Might as well not be there, that AIPA mob. About as useful as a third tit on a nun.
Bet that bastard Dixon takes a healthy bonus this year.
Might as well not be there, that AIPA mob. About as useful as a third tit on a nun.
Bet that bastard Dixon takes a healthy bonus this year.
Schweinhund
Instead of just complaining about AIPA - why don't you nominate for election to the COM and then set about fixing all the issues that you are unhappy about?
Instead of just complaining about AIPA - why don't you nominate for election to the COM and then set about fixing all the issues that you are unhappy about?
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Schweinhund - german for pig dog. Almost right in your case. It should be whatever's german for sick dog.
"...that bastard Dixon..." as you so eloquently put it, is the man who has led Qantas to ever increasing success, which an idiot like you should even be able to interpret as meaning continued employment for all (again, sadly, even you), at the fantastic payrates they remunerate us with.
An ugrateful tosser like you has no place in a Qantas aeroplane.
You make me completely and utterly ill. Pox on you.
"...that bastard Dixon..." as you so eloquently put it, is the man who has led Qantas to ever increasing success, which an idiot like you should even be able to interpret as meaning continued employment for all (again, sadly, even you), at the fantastic payrates they remunerate us with.
An ugrateful tosser like you has no place in a Qantas aeroplane.
You make me completely and utterly ill. Pox on you.
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loss of allowances is a pretty sad excuse for strike, they can admit the real one...
If they aren't doing the layovers they don't need the allowances.
PS: RAD ALT stop stealing my lines.
If they aren't doing the layovers they don't need the allowances.
PS: RAD ALT stop stealing my lines.
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Rad Alt Dead. You fool. Perhaps you think we should be grateful that the company is currently attacking us on every front. With the attitude that you currently possess you would be perfect for an AIPA com that wants to give away everything that we have ever worked for. People like you are the reason that we now earn less than brickies.
You grovel at GD's feet and when he takes more of your pay and conditions away, you snivel even more. Let me tell you, you make me just as sick because YOU are selling out your collegues you pathetic simpering wimp.
You go into adama's low life class. Anyone that disagrees with him is assumed not to actually be a pilot. He can't cope with the idea that someone may actually be in a better position than he. You are both pathetic fools who deserve nothing better than you will get.
You grovel at GD's feet and when he takes more of your pay and conditions away, you snivel even more. Let me tell you, you make me just as sick because YOU are selling out your collegues you pathetic simpering wimp.
You go into adama's low life class. Anyone that disagrees with him is assumed not to actually be a pilot. He can't cope with the idea that someone may actually be in a better position than he. You are both pathetic fools who deserve nothing better than you will get.
