Qantas back to earth with a thud
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Qantas back to earth with a thud
Tues "Sydney Morning Herald"
Qantas back to earth with a thud
April 25, 2006
It was flying above $4 not long ago, up there with Santa Claus, the Easter Bunny and pigs.
QANTAS'S share price is looking decidedly shaky after Macquarie Equities became the first broker to take a machete to the airline's profit outlook, thanks to the recent surge in oil prices.
Shares in the airline fell 7c to $3.49 yesterday and are now 19 per cent down from their February high. Barely a month after Macquarie slashed its full-year net profit forecasts for Qantas by 15 per cent to $626.3 million, the broker has slashed the figure another 2 per cent.
But for 2006-07, Macquarie has cut its $732 million net profit forecast by 26 per cent to $542 million.
The broker has based its forecasts on "the forward jet fuel curve … disclosed hedging and … the [estimated] yield increase that can be digested in each segment of the market, along with the estimated demand response".
While most in the market expect Qantas to lift its $26 one-way domestic and $75 international fuel surcharges any day now, the airline will no doubt be mindful of the effect of rising prices on demand. This has already be shown with its low-cost Jetstar offshoot, like Virgin Blue, capping domestic surcharges at $19.
But Qantas - and Jetstar - may be left with no choice given its fuel bill, at current prices, is expected to rise another $1 billion in 2006-07.
Virgin Blue will be under increasing pressure to maintain its profitability, especially when Toll Holdings takes over Patrick and becomes the airline's 62.4 per cent owner. Toll has already said it will push for higher prices.
Virgin Blue had only just started to show signs it was emerging from its two-year profit slump. The recent surge in oil prices could change that.
===================================================
Qantas back to earth with a thud
April 25, 2006
It was flying above $4 not long ago, up there with Santa Claus, the Easter Bunny and pigs.
QANTAS'S share price is looking decidedly shaky after Macquarie Equities became the first broker to take a machete to the airline's profit outlook, thanks to the recent surge in oil prices.
Shares in the airline fell 7c to $3.49 yesterday and are now 19 per cent down from their February high. Barely a month after Macquarie slashed its full-year net profit forecasts for Qantas by 15 per cent to $626.3 million, the broker has slashed the figure another 2 per cent.
But for 2006-07, Macquarie has cut its $732 million net profit forecast by 26 per cent to $542 million.
The broker has based its forecasts on "the forward jet fuel curve … disclosed hedging and … the [estimated] yield increase that can be digested in each segment of the market, along with the estimated demand response".
While most in the market expect Qantas to lift its $26 one-way domestic and $75 international fuel surcharges any day now, the airline will no doubt be mindful of the effect of rising prices on demand. This has already be shown with its low-cost Jetstar offshoot, like Virgin Blue, capping domestic surcharges at $19.
But Qantas - and Jetstar - may be left with no choice given its fuel bill, at current prices, is expected to rise another $1 billion in 2006-07.
Virgin Blue will be under increasing pressure to maintain its profitability, especially when Toll Holdings takes over Patrick and becomes the airline's 62.4 per cent owner. Toll has already said it will push for higher prices.
Virgin Blue had only just started to show signs it was emerging from its two-year profit slump. The recent surge in oil prices could change that.
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I think the falling share price is a reflection of the disgust felt by the public to the treatment of Australian pilots by Geoff Dick-son, regarding wages and conditions.
Obviously the average punter has forgotten all about being stranded for months way back... you know... by the pilots and now feels we are getting butt-flogged unfairly.
Dumping the shares in a gesture of sympathy is about all they can do, short-term.
But over the next 2-3 weeks you will see all of Quantas's flights become completely empty, everywhere, as punters take their money elsewhere or just stay at home until that tw@t stops fcuking with the pilots...
Ahhh, such a nice dream.
Obviously the average punter has forgotten all about being stranded for months way back... you know... by the pilots and now feels we are getting butt-flogged unfairly.
Dumping the shares in a gesture of sympathy is about all they can do, short-term.
But over the next 2-3 weeks you will see all of Quantas's flights become completely empty, everywhere, as punters take their money elsewhere or just stay at home until that tw@t stops fcuking with the pilots...
Ahhh, such a nice dream.
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Wishful thinking indeed. The only people who give a damn about the way GD treats pilots is the pilots! I don't think we'll ever see much sympathy from the public at large; as far as they're concerned, life's just peachy if you're a Pilot! If only they knew...
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One of the contributing factors to the share price is that every time the CEO opens his trap it is doom and gloom and finally the market is listening to him.
So what do you expect.
The share price is a reflection of the Qantas management!,
or maybe the market knows something the CEO does not. I suspect not!
So what do you expect.
The share price is a reflection of the Qantas management!,
or maybe the market knows something the CEO does not. I suspect not!
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Nah, it's just the price of fuel.
Most people don't know that the pilts are about to be reamed.
But then again i've have heard of a few people now (ex enineers in fact )that would rather fly on a new Vietnam Airlines 777 than risk an avalon maintained 747.
In which case Qantas is losing it's public good will and therefore it will really have to compete on even terms...thus the drop in share price.Maybe.
Most people don't know that the pilts are about to be reamed.
But then again i've have heard of a few people now (ex enineers in fact )that would rather fly on a new Vietnam Airlines 777 than risk an avalon maintained 747.
In which case Qantas is losing it's public good will and therefore it will really have to compete on even terms...thus the drop in share price.Maybe.
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GD should have resigned last year when he was thinking on it, sold his shares and options and satisfied himself that he could retire to a nice house overlooking Sydney harbour, and never have to work again.
Now the price is dropping he's taking a haircut on paper. Tough.
Now the price is dropping he's taking a haircut on paper. Tough.
What QF needs is some balls to take on slightly riskier routes and try something different. I'm sick of hearing GD whine about EK and SQ because they play hard and make routes work. In my opinion, the 'softly, softly' approach both Dixon and Strong have taken has really held back Qantas.
This drop is square and fair about the price of oil, and there are no doubt many people making lots of money out of it!
This drop is square and fair about the price of oil, and there are no doubt many people making lots of money out of it!
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Originally Posted by inthefluffystuff
Webber1
Do you work at Avalon? if not why do you make silly statements such as your's?
Do you work at Avalon? if not why do you make silly statements such as your's?
Its no wonder QF wanted the CROSS reporting system in place. Lets do our best to sweep this sh!t under the carpet before CASA gets it.
I spent some time looking at the annual report, in particular the executives remuneration plans. The following words below are culled from a report that was not about Qantas, but another entity. I wonder if they might apply?
"A scenario repeatedly described.........includes an ambitious transitory manager, marginally skilled in in the complexities of his duties - engulfed in producing statistical results, fearful of personal failure, too busy to listen or talk to his subordinates and determined to submit acceptably optimistic reports reflecting flawless completion of projects at the expense of the sweat and frustration of his subordinates"
"there is widespread feeling that the firm has generated an environment that rewards relatively insignifigant short term indicators of success and disregards or discourages the long term qualities of moral and ethical strength on which the futrure of the business depends.
Communication between junior and senior managers are tenuous on this as well as other matters. There appears to be inadequate upward communication of reliable data to keep the senior management accurately informed and both inadeaquate and unfeeling downward communication to keep junior management contented.
Senior managers appear to be isolated, perhaps willingly, from reality."
"A scenario repeatedly described.........includes an ambitious transitory manager, marginally skilled in in the complexities of his duties - engulfed in producing statistical results, fearful of personal failure, too busy to listen or talk to his subordinates and determined to submit acceptably optimistic reports reflecting flawless completion of projects at the expense of the sweat and frustration of his subordinates"
"there is widespread feeling that the firm has generated an environment that rewards relatively insignifigant short term indicators of success and disregards or discourages the long term qualities of moral and ethical strength on which the futrure of the business depends.
Communication between junior and senior managers are tenuous on this as well as other matters. There appears to be inadequate upward communication of reliable data to keep the senior management accurately informed and both inadeaquate and unfeeling downward communication to keep junior management contented.
Senior managers appear to be isolated, perhaps willingly, from reality."
Further to the SMH article, this from today's Crikey:
Analyst tips rapid Qantas profit descent – share price to follow
Michael Pascoe writes:
The latest hike in Qantas's fuel surcharge hasn't been enough to stop ABN AMRO slicing a sharp 25% off its profit forecast for the airline this year and whacking a $3.06 target price on the shares. Qantas shares were trading at $3.51 this morning.
And according to ABN transport analyst Anthony Srom, it all could get worse:
We believe further earnings risk is possible should additional cost savings (above and beyond those in the Sustainable Future Programs) not materialise. We estimate that QAN needs to generate an extra A$550m of synergies in FY07 in order to maintain our current earnings projection. However, with the revenue environment softening we do not hold much hope for a yield recovery and suspect the cost position will have to be re-examined.
It's not just the oil price that's threatening the airlines. Srom reckons the jet fuel refining margin will rise as the region's surplus refining capacity is rapidly disappearing with minimal new capacity on the horizon until at least 2008.
The ABN downgrade follows a similar call from Macquarie Equities and comes amidst a general re-rating of transport stocks as the threat of sustained higher fuel prices sinks in.
Interestingly, an American aviation newsletter is arguing that higher fuel charges will actually help restructured legacy airlines in their battle with new low-cost carriers. (Un-restructured legacies are dead in the water anyway.) In part, the Boyd Group argues:
Legacies have reduced their operating costs, so they aren't wildly at variance with LCCs any longer.
Higher fuel costs will lead to higher fares. Higher fares will hit discretionary, price-driven passenger segments first. Passengers who in the past were created by low fares to Orlando will think twice with higher ticket prices and $3-per-gallon gas for the SUV.
Most importantly, legacies are not as vulnerable to traffic down-turns as are LCCs. That's because several legacies have significant fleets they can quickly park, and have limited aircraft on order, unlike most LCCs. In fact, the new-airliner orderbook may well be the Achilles Heel of the LCC segment in the next 18 months.
Qantas, the restructuring legacy airline, has plenty of new planes on order, but they are more fuel efficient? Meanwhile, it certainly has some old planes ready to park. Anyone want a Boeing 767 for the backyard?
But where Qantas the company could be hurt is on some of its Jetstar routes and where it's already suffering – the haemorrhaging Jetstar Asia, as Eric Ellis reported in yesterday's Smage. It's not a good time to be wanting another capital injection:
The $S60 million ($A50.7 million) injected when Dixon merged Jetstar Asia with Temasek's other Singapore-based start-up Valuair in July has just about run out. Singapore's mostly good-news-only paper, the Straits Times was uncharacteristically muscular when it described Jetstar Asia as facing a cash crunch. Jetstar-Valuair has had five CEOs in two years, and the latest – Madame Chong – has no aviation experience.
Analyst tips rapid Qantas profit descent – share price to follow
Michael Pascoe writes:
The latest hike in Qantas's fuel surcharge hasn't been enough to stop ABN AMRO slicing a sharp 25% off its profit forecast for the airline this year and whacking a $3.06 target price on the shares. Qantas shares were trading at $3.51 this morning.
And according to ABN transport analyst Anthony Srom, it all could get worse:
We believe further earnings risk is possible should additional cost savings (above and beyond those in the Sustainable Future Programs) not materialise. We estimate that QAN needs to generate an extra A$550m of synergies in FY07 in order to maintain our current earnings projection. However, with the revenue environment softening we do not hold much hope for a yield recovery and suspect the cost position will have to be re-examined.
It's not just the oil price that's threatening the airlines. Srom reckons the jet fuel refining margin will rise as the region's surplus refining capacity is rapidly disappearing with minimal new capacity on the horizon until at least 2008.
The ABN downgrade follows a similar call from Macquarie Equities and comes amidst a general re-rating of transport stocks as the threat of sustained higher fuel prices sinks in.
Interestingly, an American aviation newsletter is arguing that higher fuel charges will actually help restructured legacy airlines in their battle with new low-cost carriers. (Un-restructured legacies are dead in the water anyway.) In part, the Boyd Group argues:
Legacies have reduced their operating costs, so they aren't wildly at variance with LCCs any longer.
Higher fuel costs will lead to higher fares. Higher fares will hit discretionary, price-driven passenger segments first. Passengers who in the past were created by low fares to Orlando will think twice with higher ticket prices and $3-per-gallon gas for the SUV.
Most importantly, legacies are not as vulnerable to traffic down-turns as are LCCs. That's because several legacies have significant fleets they can quickly park, and have limited aircraft on order, unlike most LCCs. In fact, the new-airliner orderbook may well be the Achilles Heel of the LCC segment in the next 18 months.
Qantas, the restructuring legacy airline, has plenty of new planes on order, but they are more fuel efficient? Meanwhile, it certainly has some old planes ready to park. Anyone want a Boeing 767 for the backyard?
But where Qantas the company could be hurt is on some of its Jetstar routes and where it's already suffering – the haemorrhaging Jetstar Asia, as Eric Ellis reported in yesterday's Smage. It's not a good time to be wanting another capital injection:
The $S60 million ($A50.7 million) injected when Dixon merged Jetstar Asia with Temasek's other Singapore-based start-up Valuair in July has just about run out. Singapore's mostly good-news-only paper, the Straits Times was uncharacteristically muscular when it described Jetstar Asia as facing a cash crunch. Jetstar-Valuair has had five CEOs in two years, and the latest – Madame Chong – has no aviation experience.
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Best description ever? Nah, this is the best description ever.
In my opinion, he's a F***1ng Tw@t. I'm not staff, I just hate the (in my opinion) slippery, smarmy, reptilian git. How about he takes a pay-cut before shafting employees and pax?
In my opinion, he's a F***1ng Tw@t. I'm not staff, I just hate the (in my opinion) slippery, smarmy, reptilian git. How about he takes a pay-cut before shafting employees and pax?
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I'm glad to see Michael Pascoe writing what I believe is the true underside risk to J* Int.
The most elastic of travellers are the leisure travellers..The rise in fuel prices will cost the average family between $15-$20 per week..The impact on that and the speculated increase in interest rates, will IMO slow the growth of not only J* Int but the LCC model in general. As Dixon stated, yield is much higher in mainline domestic...The yield cannot just be transferred to J*..(Mind you their accounting is highly creative)
I feel the threat posed by the J* Int needs to be viewed against a slowing economy, sustained high fuel prices and indeed a world environment that appears not too stable...
As such Dixon may actually have to earn some of his millions rather than starting airlines willy nilly...Time for a new generation CEO that works with rather than threatens the workforce in order to generate a sustainable future...I know I live in hope, but at $3.06
The most elastic of travellers are the leisure travellers..The rise in fuel prices will cost the average family between $15-$20 per week..The impact on that and the speculated increase in interest rates, will IMO slow the growth of not only J* Int but the LCC model in general. As Dixon stated, yield is much higher in mainline domestic...The yield cannot just be transferred to J*..(Mind you their accounting is highly creative)
I feel the threat posed by the J* Int needs to be viewed against a slowing economy, sustained high fuel prices and indeed a world environment that appears not too stable...
As such Dixon may actually have to earn some of his millions rather than starting airlines willy nilly...Time for a new generation CEO that works with rather than threatens the workforce in order to generate a sustainable future...I know I live in hope, but at $3.06
In my humble opinion, it will be interesting to see what Qantas does with Jetstar Asia. There is always a management temptation to throw good money after bad rather than admitting the whole idea was an expensive mistake and killing it.
I'm not sure which way Mr. Dixon is going to jump. I also wonder what the agreements Qantas would have signed when doing this deal would specify? I hope for your sakes that Qantas does not have some open ended contingent liability to J* Asia.
I'm not sure which way Mr. Dixon is going to jump. I also wonder what the agreements Qantas would have signed when doing this deal would specify? I hope for your sakes that Qantas does not have some open ended contingent liability to J* Asia.
