QF from Frankfurt
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QF from Frankfurt
A persistent rumour doing the network is that we will lose another international port from the Network.
In the last few years alone ports are closed..
They tell you in the misinformation departments that it isn't profitable enough.
Ironically it is impossible to obtain any information on the cost structures of these so called less profitable routes. Any attempts to obtain through internal channels are met with the usual bureacratic insolence. Sometimes even follow up comments from a fleet manager about why you are wanting the information?
So to the chase, Frankfurt is rumoured to go.
On th back of stagnant revenue growth and plenty of hidden costs in the group operations, another port is destined to go the way of others. You heard it first here.
So in effect it will be an operation to LA and London.
Clever thinking management will again ignore investment 101 and concentrate all thier efforts into maximising short term gain. Should a shock occur in either of these two ports the result will be catastrophic.
returning to the analysis I would like to see the opinions of any analysts that have an interest in aviation..My analysis of the Rat based on the inside of it, is a company in a disarray. Employee relations adversarial, product delivery failing due continued cost cutting.
Fat must be trimmed but when saving money impacts upon the ability of the segments to deliver the promised product it is very worrying!
I wonder what the strategy is?
It is my contention, it is such a short term grab. there is no strategy in the long term, other than to shrink mainline in order to place more business with Australian and Jetstar. Geoffrey this will certainly lower the cost base of your so called "legacy carrier" The only legacy is the mess in which it will be when you and your bunch of goons parachute out.The more analysis I do of the Rat the more I beleive it is doomed. I wonder if we will be able to bring that CEO to heel for his negligence, hold that idiot ChairDame to account and pursue the rest of those errant visitors to pay for their negligence.
Rome
Paris
In the last few years alone ports are closed..
They tell you in the misinformation departments that it isn't profitable enough.
Ironically it is impossible to obtain any information on the cost structures of these so called less profitable routes. Any attempts to obtain through internal channels are met with the usual bureacratic insolence. Sometimes even follow up comments from a fleet manager about why you are wanting the information?
So to the chase, Frankfurt is rumoured to go.
On th back of stagnant revenue growth and plenty of hidden costs in the group operations, another port is destined to go the way of others. You heard it first here.
So in effect it will be an operation to LA and London.
Clever thinking management will again ignore investment 101 and concentrate all thier efforts into maximising short term gain. Should a shock occur in either of these two ports the result will be catastrophic.
returning to the analysis I would like to see the opinions of any analysts that have an interest in aviation..My analysis of the Rat based on the inside of it, is a company in a disarray. Employee relations adversarial, product delivery failing due continued cost cutting.
Fat must be trimmed but when saving money impacts upon the ability of the segments to deliver the promised product it is very worrying!
I wonder what the strategy is?
It is my contention, it is such a short term grab. there is no strategy in the long term, other than to shrink mainline in order to place more business with Australian and Jetstar. Geoffrey this will certainly lower the cost base of your so called "legacy carrier" The only legacy is the mess in which it will be when you and your bunch of goons parachute out.The more analysis I do of the Rat the more I beleive it is doomed. I wonder if we will be able to bring that CEO to heel for his negligence, hold that idiot ChairDame to account and pursue the rest of those errant visitors to pay for their negligence.
Rome
Paris
Oh Gaawd! If this is true, I wonder if it is possible that QF bean counters are making elementary accounting mistake #1?
You should never EVER analyse a segment of a business operation by the "profit" it makes. You do it by looking at its contribution to overall revenue (contribution margin). This is calculated by subtracting direct costs (crew, fuel, food) from revenue.
The reason for this is extremely simple. Indirect fixed costs (like management, training ,IT, insurance, publications, marketing etc. etc.) are allocated to each segment to arrive at a supposed "Total" cost of an operation from which you can calculate a "profit" - which is a notional figure.
This allocation process is the accounting equivalent of metaphysics and theology. Its arbitrary, subject to endless argument and discussion - especially in airlines.
The danger of "closing" something on the basis of "Profit" is that while the direct costs disappear (ie, no fuel, crew or other direct costs), the fixed costs are still there. You still need management, HR and all the rest.
Tp put it another way, you have Barbara at reception, Marge in PR and betty in the canteen. You downsize your business by 10%, the payroll for these three does not drop by 10%.
It gets worse. These fixed costs now have to be spread over a smaller number of operations - resulting in higher costs and less profits. This is the accounting equivalent of a spin.
I saw a Public Company do this once and they wondered why their profit was even less after they had closed an "unprofitable " division.
I don't really think QF would possibly do this. Sorry for the rant.
You should never EVER analyse a segment of a business operation by the "profit" it makes. You do it by looking at its contribution to overall revenue (contribution margin). This is calculated by subtracting direct costs (crew, fuel, food) from revenue.
The reason for this is extremely simple. Indirect fixed costs (like management, training ,IT, insurance, publications, marketing etc. etc.) are allocated to each segment to arrive at a supposed "Total" cost of an operation from which you can calculate a "profit" - which is a notional figure.
This allocation process is the accounting equivalent of metaphysics and theology. Its arbitrary, subject to endless argument and discussion - especially in airlines.
The danger of "closing" something on the basis of "Profit" is that while the direct costs disappear (ie, no fuel, crew or other direct costs), the fixed costs are still there. You still need management, HR and all the rest.
Tp put it another way, you have Barbara at reception, Marge in PR and betty in the canteen. You downsize your business by 10%, the payroll for these three does not drop by 10%.
It gets worse. These fixed costs now have to be spread over a smaller number of operations - resulting in higher costs and less profits. This is the accounting equivalent of a spin.
I saw a Public Company do this once and they wondered why their profit was even less after they had closed an "unprofitable " division.
I don't really think QF would possibly do this. Sorry for the rant.
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Ansett employees said that it would never go broke - it did, and QF could well go the same way.
I think you will see continued pressure on work rules, and if cooperation doesn't occur you will see greater use of contractors eg Addeco (Jetconnect) and London base. Case in point: Addeco crew get 24hrs in Frankfurt vs QF main 48hrs. Why?
I am surprised that Mr Dickson has not already applied/tried this formula to the Techies.
What's the answer - I'm not sure, but $1 fares will not pay the mega bucks for the shiny new A380.
As Corrigan said during the week, its time to take the gloves off and get back fare levels to a realistic level - no doubt a sensible first step. That will ensure a sustainable future, balanced against realistic and equitable work practices, and we can all live happily ever after.
I think you will see continued pressure on work rules, and if cooperation doesn't occur you will see greater use of contractors eg Addeco (Jetconnect) and London base. Case in point: Addeco crew get 24hrs in Frankfurt vs QF main 48hrs. Why?
I am surprised that Mr Dickson has not already applied/tried this formula to the Techies.
What's the answer - I'm not sure, but $1 fares will not pay the mega bucks for the shiny new A380.
As Corrigan said during the week, its time to take the gloves off and get back fare levels to a realistic level - no doubt a sensible first step. That will ensure a sustainable future, balanced against realistic and equitable work practices, and we can all live happily ever after.
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It already has
Sunfish, sorry to say it but they did it with Rome! But you are onto exactly where my investigation is taking me
Big loads consistent demand yet the port was in their shiny management speak "unsustainable"
Cost apportionment is the key. Hidden in the financials are the reasons why Geoffrey calls it a legacy carrier. And the very way he and his cronies can be taken to task, but as alluded to in other topics a broker/analyst is interested in volume churns.
Let's take a simple example.
In the financial data are costs fror QF and for group.
On the surface these seems straightforward, the key is the internal transfer pricing and by what formula they apportion the cost to respective cost centres.. Try and find out how apportionment takes place is harder than finding the cure for cancer. Understanding cost appoortionment is as fundamental as performing rudimentary ratio analysis on the numbers the company "serve" up in their financials.
Let's look at the simulator centre to illustrate my point.
Dash 8 simulator, in the Qantas building. Asset owned by?, operating overheads paid by? Technicians etc paid by? Just how is this asset registered, how are its costs split between the users AND HOW DO THESE NUMBERS SHOW UP IN THE ACCOUNTS????
Geoffrey refers to the legacy carrier..It isn't necessarily a legacy carrier, it is the accounting treatment of the mainline company and the apportionment of costs to the entities in the group that makes mainline look stagnant.
J* just has to be LC-otherwise it wouldn't be the runaway success they claim it to be. How much infrastructure, specialist manpower and other TANGIBLE resources continue to be borrowed from mainline?? And I bet thet don't show up at a market transfer price in the P and L(profit and loss) of J*
To understand they way they spin their crap you just cut through their jargon
Big loads consistent demand yet the port was in their shiny management speak "unsustainable"
Cost apportionment is the key. Hidden in the financials are the reasons why Geoffrey calls it a legacy carrier. And the very way he and his cronies can be taken to task, but as alluded to in other topics a broker/analyst is interested in volume churns.
Let's take a simple example.
In the financial data are costs fror QF and for group.
On the surface these seems straightforward, the key is the internal transfer pricing and by what formula they apportion the cost to respective cost centres.. Try and find out how apportionment takes place is harder than finding the cure for cancer. Understanding cost appoortionment is as fundamental as performing rudimentary ratio analysis on the numbers the company "serve" up in their financials.
Let's look at the simulator centre to illustrate my point.
Dash 8 simulator, in the Qantas building. Asset owned by?, operating overheads paid by? Technicians etc paid by? Just how is this asset registered, how are its costs split between the users AND HOW DO THESE NUMBERS SHOW UP IN THE ACCOUNTS????
Geoffrey refers to the legacy carrier..It isn't necessarily a legacy carrier, it is the accounting treatment of the mainline company and the apportionment of costs to the entities in the group that makes mainline look stagnant.
J* just has to be LC-otherwise it wouldn't be the runaway success they claim it to be. How much infrastructure, specialist manpower and other TANGIBLE resources continue to be borrowed from mainline?? And I bet thet don't show up at a market transfer price in the P and L(profit and loss) of J*
To understand they way they spin their crap you just cut through their jargon
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I asked someone high up (only a couple of levels from GOD) what the company's vision is. He said it's not clear (surprise, surprise) but something along the lines of being "the premier Asia-Pacific airline." He went on to say that there are some people who are trying to rationalise LONDON even within such a vision.................................
God help us because GOD won't.
God help us because GOD won't.
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Another case in point would be the internal accounting done by the transfer of pilots to AO.
A fully trained 767 FO "costs" AO 100k to be paid to mainline. The value of that FO depreciates depending on how much time he spends in AO before he returns to mainline.
AO is owned and operated by QF, but it is regarded as a separate airline for AOC purposes. Whatever the financial advantage of the above arrangement it is indicative of the way costs can be manipulated to make any point Dixon requires...
A fully trained 767 FO "costs" AO 100k to be paid to mainline. The value of that FO depreciates depending on how much time he spends in AO before he returns to mainline.
AO is owned and operated by QF, but it is regarded as a separate airline for AOC purposes. Whatever the financial advantage of the above arrangement it is indicative of the way costs can be manipulated to make any point Dixon requires...
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But didn't QF recently get delivered a series of weighty tomes from the bluest of blue-chip management consulting firms, McKinsey & Co?
So surely they would by now have implemented their recommended strategies, wouldn't they?
I mean, McKinsey & Co couldn't get the stratgey wrong would they?
Didn't John Elliott start off at McKinsey which was where he got the idea to buy up Henry Jones IXL, a small Tasmanian jam-maker? He did pretty well, didn't he? Got himself a small jet of his own painted like a blue beer can. Haven't heard much about him lately though.
Back to QF. QFInsider, SunFish, surely QF would have a clear way of communicating their strategy to all employees, otherwise, if everyone didn't know what the strategy was, how would they know what they were supposed to be doing each day?
I mean, aren't the business strategies supposed to drive the tactics?
Got me.
VHCU
So surely they would by now have implemented their recommended strategies, wouldn't they?
I mean, McKinsey & Co couldn't get the stratgey wrong would they?
Didn't John Elliott start off at McKinsey which was where he got the idea to buy up Henry Jones IXL, a small Tasmanian jam-maker? He did pretty well, didn't he? Got himself a small jet of his own painted like a blue beer can. Haven't heard much about him lately though.
Back to QF. QFInsider, SunFish, surely QF would have a clear way of communicating their strategy to all employees, otherwise, if everyone didn't know what the strategy was, how would they know what they were supposed to be doing each day?
I mean, aren't the business strategies supposed to drive the tactics?
Got me.
VHCU
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VH-Cheer Up
From my experience in both aviation, corporate world, government etc, strategy is often the last thing the workers know about.
From my observations, management don't want the workers thinking, they want them doing what they are told.
I think this is the wrong way to go about it, because how can an employee sell an idea, a service or a product if it is not fully explained to them.
Management just want to sit in back rooms and get the employees to work and let them deal with strategy. In general, management don't think much of workers anywhere.
If you involved employees more, and made them as part owners of a business idea or direction, you might find more success.
From my experience in both aviation, corporate world, government etc, strategy is often the last thing the workers know about.
From my observations, management don't want the workers thinking, they want them doing what they are told.
I think this is the wrong way to go about it, because how can an employee sell an idea, a service or a product if it is not fully explained to them.
Management just want to sit in back rooms and get the employees to work and let them deal with strategy. In general, management don't think much of workers anywhere.
If you involved employees more, and made them as part owners of a business idea or direction, you might find more success.
Last edited by TurbineDreamer; 5th Feb 2005 at 02:37.
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From my limited view, all I can see is a once mighty Airline being reduced to scrap by nasty little men.
My best call on this would be for management to pull their heads in, leave a successful model in place, pay commissions so you are not ignored for others that do and get on wih it.
I am totally over the Rat, and will stay that way until such time as they grow up.
EWL
My best call on this would be for management to pull their heads in, leave a successful model in place, pay commissions so you are not ignored for others that do and get on wih it.
I am totally over the Rat, and will stay that way until such time as they grow up.
EWL
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Marginal routes should be marginal costed. The fixed costs per aircraft are there whether 1 or 51 or 101 hours are flown. If you can cover direct operating costs on marginal routes (if other routes are profitable) on a long term basis - your fixed costs reduce per hour the more hours flown... so keep the marginal routes.
Mind you - if you could do it cheaper with a subsidiary...............
Mind you - if you could do it cheaper with a subsidiary...............
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Ron and Edna, it certainly doesn't suprise me, the ship is rudderless. I'm certainly no cadet basher, but the flight operations management is permeated by a bunch of "class of XX". these people are QF born and bred, most of them can't get an external perspective because they never have been external. That fact disempowers flight operations. They have no perspective. Whilst they may be talented pilots, it doesnt necessarily mean they are talented managers, the two aren't co-dependant. Find any of the management stream and ask them where they will be in 10 years, all the bean counters will be somewhere else
- it is merely a ticket punch. With Flight Ops management mere babes in the woods, it's no wonder that the lack of direction continues without intervention.
It is where the A330-200 debarcle came from(all $100m of it), it means that we as the flight crew have minimal input of the flying operation, by the time decisions get to flight operations it is long ago sealed. You only need look at the corporate heirachy to see where the CP and the flight operations management sit...It wouldn't be tolerated by CASA in a GA company!
All information flows down hill...The management provides lip service to improvements and changes submitted to them from the shop floor. This is not just in flight operations..
The "door might always be open" but they ain't listening. Nor do they care, they count thier bonuses.
anyway back to the topic
Exactly Borg...
These are the type of conjuring tricks I refer to. Everything gets loaded back to mainline!! I'll bet my last buck on the fact that an AO F/O is costed in such a way as to protect "the small profit" AO makes. After all, QF trained and paid for him/her in his initial
767 endorsement. The sim belongs to Qf, so do the buildings in which they are housed, the maintenance techies...etc LCC will always stay low cost why the bean counters and thier slick suits prepare statements with so much chaff, they become impossible to dissect.
Want me to beleive the cr@p, then produce financial results for each of the segmented businesses entities.. They told the market they wanted to identify profit centres..Let the market (and us employees) see them. Show me what the training costs at AO are, or what price J* pays for borrowed infrastructre and people (ie scheduling people from QF to help J*-bet we still paid the salaries??)
Then maybe, once it is transparent you will have me believe that mainline is a legacy carrier, once of course i have checked the "accounting treatment" of items costed to mainline.
- it is merely a ticket punch. With Flight Ops management mere babes in the woods, it's no wonder that the lack of direction continues without intervention.
It is where the A330-200 debarcle came from(all $100m of it), it means that we as the flight crew have minimal input of the flying operation, by the time decisions get to flight operations it is long ago sealed. You only need look at the corporate heirachy to see where the CP and the flight operations management sit...It wouldn't be tolerated by CASA in a GA company!
All information flows down hill...The management provides lip service to improvements and changes submitted to them from the shop floor. This is not just in flight operations..
The "door might always be open" but they ain't listening. Nor do they care, they count thier bonuses.
anyway back to the topic
Exactly Borg...
These are the type of conjuring tricks I refer to. Everything gets loaded back to mainline!! I'll bet my last buck on the fact that an AO F/O is costed in such a way as to protect "the small profit" AO makes. After all, QF trained and paid for him/her in his initial
767 endorsement. The sim belongs to Qf, so do the buildings in which they are housed, the maintenance techies...etc LCC will always stay low cost why the bean counters and thier slick suits prepare statements with so much chaff, they become impossible to dissect.
Want me to beleive the cr@p, then produce financial results for each of the segmented businesses entities.. They told the market they wanted to identify profit centres..Let the market (and us employees) see them. Show me what the training costs at AO are, or what price J* pays for borrowed infrastructre and people (ie scheduling people from QF to help J*-bet we still paid the salaries??)
Then maybe, once it is transparent you will have me believe that mainline is a legacy carrier, once of course i have checked the "accounting treatment" of items costed to mainline.
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FRA based head of European sales was on board heading back to FRA a couple of days ago.
He knew nothing of the rumour and pointed out that the operation was making "good" money at the moment.
J/C cabins full on the way up and 70% on the way back with no shortage of Saphire, Emerald ect.
FWIW LHR, [for sales and operational intents] is NOT considered to be a part of Europe.
It would be a very sad day to see the rat pull out of it's sole remaining European port..........
Jettlager
He knew nothing of the rumour and pointed out that the operation was making "good" money at the moment.
J/C cabins full on the way up and 70% on the way back with no shortage of Saphire, Emerald ect.
FWIW LHR, [for sales and operational intents] is NOT considered to be a part of Europe.
It would be a very sad day to see the rat pull out of it's sole remaining European port..........
Jettlager
"FRA based head of European sales was on board heading back to FRA a couple of days ago.
He knew nothing of the rumour......"
And the first time the Manager Shanghai knew of the Shanghai pullout (a few years back) was when he saw it on the news.
The flights to Shanghai were full, as were the Vancouver flights. That didn't stop them from going. Makes you wonder!
He knew nothing of the rumour......"
And the first time the Manager Shanghai knew of the Shanghai pullout (a few years back) was when he saw it on the news.
The flights to Shanghai were full, as were the Vancouver flights. That didn't stop them from going. Makes you wonder!
Nunc est bibendum
Everything gets loaded back to mainline!!
Of course, when the numbers are crunched, AO looks pretty slick whilst QF's costs are shown to not be as good as they could be. Thus, pressure can be applied to the mainline guys because they aren't 'competitive'.
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Keg my boy, you got it in one.
That is the point of this post. There are literally 1,000's of these little transfer pricing cost apportioning issues hidden in the accounts...If the markets start looking harder rather than the old fundamental analysis that most of the kids do, they may ask the questions!
The numbers are pretty rubbery, management know it. Which is why management will jump on heads if the troops start asking questions! (and they do)
They wont stop the questions though, it's legitimate it's of concern and it affects the longevity of the company.
I'm beginning to suspect that maybe they are looking at growing the other areas and sacrificing mainline. This will bring the unions to heel, drive down the costs by switching larger numbers of contractors to the new lower cost entities!
It aint a conspiracy if they are out to get you!
That is the point of this post. There are literally 1,000's of these little transfer pricing cost apportioning issues hidden in the accounts...If the markets start looking harder rather than the old fundamental analysis that most of the kids do, they may ask the questions!
The numbers are pretty rubbery, management know it. Which is why management will jump on heads if the troops start asking questions! (and they do)
They wont stop the questions though, it's legitimate it's of concern and it affects the longevity of the company.
I'm beginning to suspect that maybe they are looking at growing the other areas and sacrificing mainline. This will bring the unions to heel, drive down the costs by switching larger numbers of contractors to the new lower cost entities!
It aint a conspiracy if they are out to get you!
Last edited by QFinsider; 6th Feb 2005 at 09:26.
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Great post Keg.
Nice to see you not smoking managements pole for a change.
Insider - this is the most accurate thread I have seen for the last 12 months or so.
Keep up the good work
Nice to see you not smoking managements pole for a change.
Insider - this is the most accurate thread I have seen for the last 12 months or so.
Keep up the good work
If the accounts are being "managed" the way you say they are QFinsider, then QF management is in very deep trouble on a number of levels.
Not the least of these troubles could be an ACCC investigation into Jetstar for predatory pricing, although I don't give the ACCC much hope of succeeding unless a QF bean counter spills the beans.
This old conspiracy theorist suspects that Dixon is being allowed to do drive the company into the dirt, at which time the current investors will do their dough and a "white night" will suddenly appear to take the brand name (and not much else) off their hands for a pittance.
Dixon's current strategy J*Asia, J* itself, indiscriminate cost cutting, closing routes and focussing on London and Los Angeles seems to me to be highly risky and not very transparent.
Its generally regarded as a good strategy to stick to your knitting and build defendable competitive advantage.
QF's competitive advantages have been:
- Safety Record
- Government Guaranteed
- Monopoly
- National pride
- excellent Service
Three of those have disappeared and the other two are rapidly evaporating.
Not the least of these troubles could be an ACCC investigation into Jetstar for predatory pricing, although I don't give the ACCC much hope of succeeding unless a QF bean counter spills the beans.
This old conspiracy theorist suspects that Dixon is being allowed to do drive the company into the dirt, at which time the current investors will do their dough and a "white night" will suddenly appear to take the brand name (and not much else) off their hands for a pittance.
Dixon's current strategy J*Asia, J* itself, indiscriminate cost cutting, closing routes and focussing on London and Los Angeles seems to me to be highly risky and not very transparent.
Its generally regarded as a good strategy to stick to your knitting and build defendable competitive advantage.
QF's competitive advantages have been:
- Safety Record
- Government Guaranteed
- Monopoly
- National pride
- excellent Service
Three of those have disappeared and the other two are rapidly evaporating.
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Sometimes you need to spend money to make money. For a frequent flyer, limited destinations means more transfers through London, LA etc. No wonder several of my associates now travel with other airlines so as to get to their destination quicker (direct). These are people who used to loyally depart with their dollars to QF, but due to a shrinking network, now spend them elsewhere.
