Qantas to Decline as Jetstar Soars
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A much much younger Sherm for his sins studied economics at some length. And depth. So much beer undrunk, so many hours alone with but a 100 watt globe and many books to keep said Sherm company in his lonely hotel room.
It seemed to this young Sherm then, from those studies, that an entrenched operator, in any business, had an advantage in that it could extend its business by say 10% much more cheaply than could a competitor (wanting to start up a business equal to that 10%) starting from scratch.
That is, properly used, a powerful competitive advantage.
Qantas, (and I am but a lowly shareholder licking my wounds but thankful its not worse) seems to have used this paradigm well. A stand alone Jetstar, completely independent, might have costs per ASK 10% higher. Enough to sink it. But in the process of going under it could, and would (a la Compass Mk1) wound the parent QF by yield reductions an amount way, way more than the cost of starting up a wholly owned LCC subsidiary. The directors of QF would be liable if they chose not to use this sound business option simply to keep current QF employees in their comfort zone.
Then again, Sherm did study those economics a looooooooooooong time ago. On the other hand, so did Keynes.....and Sherm can remember enough of his "General Theory" to reflect that perhaps old economics is not necessarily bad economics. Keynes did after all make a pot of money for the Kings College endowment fund.
It seemed to this young Sherm then, from those studies, that an entrenched operator, in any business, had an advantage in that it could extend its business by say 10% much more cheaply than could a competitor (wanting to start up a business equal to that 10%) starting from scratch.
That is, properly used, a powerful competitive advantage.
Qantas, (and I am but a lowly shareholder licking my wounds but thankful its not worse) seems to have used this paradigm well. A stand alone Jetstar, completely independent, might have costs per ASK 10% higher. Enough to sink it. But in the process of going under it could, and would (a la Compass Mk1) wound the parent QF by yield reductions an amount way, way more than the cost of starting up a wholly owned LCC subsidiary. The directors of QF would be liable if they chose not to use this sound business option simply to keep current QF employees in their comfort zone.
Then again, Sherm did study those economics a looooooooooooong time ago. On the other hand, so did Keynes.....and Sherm can remember enough of his "General Theory" to reflect that perhaps old economics is not necessarily bad economics. Keynes did after all make a pot of money for the Kings College endowment fund.
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It would appear (according to the ABC) that QF is really suffering loss of PAX in P and J classes and job losses will be announced today. It would appear to most, that QF is set to become more a "boutique" airline, as its rough and tumble joey ofspring takes over slowly but surely and is now basically unstopable, "across the pond" now in its clutches as well, interesting times ahead for aviation as a whole.
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Here's what Moodys are saying about QF . . .
Moody's lowers Qantas' rating status
February 20, 2009
Ratings agency Moody's Investor Service has downgraded its outlook for Qantas Airways Ltd due the carrier's high debt and strained profitability.
Moody's downgraded the long-term senior unsecured rating of Qantas from Baa1 to Baa2.
It said Qantas had about $US1.5 billion ($A2.33 billion) in debt securities outstanding.
The agency also affirmed Qantas' Prime-2 short-term rating.
"The downgrade reflects deterioration in Qantas' credit profile over a period of time, which has significantly diminished the available cushion within the previous Baa1 rating," Moody's senior analyst Ian Lewis said.
"Qantas' credit profile has been adversely impacted by relatively high debt and strained profitability and cash flow, putting pressure on the rating at a time of worsening industry fundamentals."
Moody's said Qantas had taken a number of measures to mitigate these pressures including capacity reductions, reallocation of routes between Qantas and Jetstar, and the recent equity raising of $500 million.
"However, the sharp fall-off in consumer demand for air travel, as a result of the global economic crisis and which is to a large extent beyond Qantas' control, has outweighed the beneficial effect of these actions, placing material challenges that are more manageable at the Baa2 rating."
The agency said the outlook for the rating was stable.
Moody's lowers Qantas' rating status
February 20, 2009
Ratings agency Moody's Investor Service has downgraded its outlook for Qantas Airways Ltd due the carrier's high debt and strained profitability.
Moody's downgraded the long-term senior unsecured rating of Qantas from Baa1 to Baa2.
It said Qantas had about $US1.5 billion ($A2.33 billion) in debt securities outstanding.
The agency also affirmed Qantas' Prime-2 short-term rating.
"The downgrade reflects deterioration in Qantas' credit profile over a period of time, which has significantly diminished the available cushion within the previous Baa1 rating," Moody's senior analyst Ian Lewis said.
"Qantas' credit profile has been adversely impacted by relatively high debt and strained profitability and cash flow, putting pressure on the rating at a time of worsening industry fundamentals."
Moody's said Qantas had taken a number of measures to mitigate these pressures including capacity reductions, reallocation of routes between Qantas and Jetstar, and the recent equity raising of $500 million.
"However, the sharp fall-off in consumer demand for air travel, as a result of the global economic crisis and which is to a large extent beyond Qantas' control, has outweighed the beneficial effect of these actions, placing material challenges that are more manageable at the Baa2 rating."
The agency said the outlook for the rating was stable.
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Big Picture Persective
These so called ratings agencies have so little credibility as to be irrelevant.
Qantas is one of the more profitable airlines.
The market in general is falling and is very risk averse.
Airlines are capital intensive and are usually the first stocks to get hammered when the market is spooked.
All companies are being caught in the downdraft so why should QF be any different?
Dont forget QF is still profitable and is travelling a lot better than JAL or BA and certainly a lot better than all the American Carriers.
So a little perspective folks.
Dont be members of the same sheep herd
Qantas is one of the more profitable airlines.
The market in general is falling and is very risk averse.
Airlines are capital intensive and are usually the first stocks to get hammered when the market is spooked.
All companies are being caught in the downdraft so why should QF be any different?
Dont forget QF is still profitable and is travelling a lot better than JAL or BA and certainly a lot better than all the American Carriers.
So a little perspective folks.
Dont be members of the same sheep herd
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Media spin... don't listen to it.
Media can't be trusted.
They spread Fear, Uncertainty and Doubt about things they know nothing or very little.
Suggest you draw your own conclusions and not listen to mass media or Moodys.
Media can't be trusted.
They spread Fear, Uncertainty and Doubt about things they know nothing or very little.
Suggest you draw your own conclusions and not listen to mass media or Moodys.
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Originally Posted by VH-JJW
If you think you have proof of these accusations, then post it here. Not anecdotes but real hard evidence.
Post the "proof" on a pilot rumour mill message board. That will really achieve something won't it? And I'm sure the HNL and BNE Managers have standby jobs to go to in these tough times.
Originally Posted by genex
Or......some of you "Jetstar is sucking Qantas dry" group could go out into the real world for a bit and see that if it weren't for JQ the mothership would have gone the way of the battleship.....elegant, formidable, expensive and doomed
Well, apart from the minor....oh....half billion dollar (plus or minus a couple of hundred million depending on good times or bad times) profit QF mainline makes. But let's not get into that. How about we just ignore it in the hope it will go away?
