Qantas will be dead in 6 months

[Ngineer]

Both brands (JQ and QF) complement each other through good times and bad. One could not survive without the other. Upper brass have publicly stated this, and it is a clever stratergy.
There will always be budget travellers, and travellers that want to fly the full service brand.

[Gingerbread]

Paxing's statement: [quote]...QF wants the QF sales act amened so they can more easily go for a merger... [quote]

Is close to the bone I believe.

Australia's Aviation Policy Green Paper released in December 2008 states in part that a liberalisation agreement could:

....Remove many if not all existing regulatory limitations...Australia has increasingly sought to move towards a bilateral ownership founded upon Principle Place of Business based on who has regulatory oversight of the airline, rather than who owns the equity of the company...

Nonetheless, with Whom and How QF Group will globalise, is far from clear and is unlikely to be answered until sometime after the National Aviation Policy Review has resulted in new legislation being passed by the Parliament. Whenever that may be.

In the meantime can only hope that AJ’s Team understand that any Sale Act changes QF would like to see will only be possible if Government, Unions, Shareholders and the Travelling Public come to a consensus view that any such change will be to their benefit.

[Captain.Que]

Qantas and JetStar Symbiotic ?

Jetstar was setup to deal with Virgin in the domestic arena.It has been successful in stopping the Virgin march.
It has not however been successful in the international arena.It has threes faces and no direction.
Qantas survival does not rely on Jetstar.Jetstar's survival relies on Qantas.
From TG's reasoning any major carrier that does not have a low carrier version in its stable is doomed to failure.Thats a stretch.
The relationship between LCCs and their mainline parent is generally parasitic.The LCC relying on the parent for everything from a Res system to maintenance.
It will be interesting to see where these relationships go

[RAD_ALT_ALIVE]

I'm sick and tired of people throwing profit figures around that they've probably only heard bandied around second-hand. So I decided to have a look at the 2008 annual report and nut out some figures myself.

Firstly, if someone starts out by saying that JQ contributed 10% to the group's income, they're already misrepresenting their own argument - the comparison has to be between Qantas and Jetstar. The rest of the group's income is meaningless to the QF v. JQ debate; it includes (amongst other parts) catering, frequent flyers scheme, etc.

So...

QANTAS (which, by the way, includes mainline, Qlink, engineering and ground services - the latter two of which, in the 2008 year, received income from JQ) had an after tax profit of $653.6M.
Jetstar's was $80.1
That's not 10%, it's 12.3%, or 23% greater than was first suggested.

QANTAS fleet - at the end of the fiscal year - comprised 188 aircraft (I used conservative seat estimates to come up with 35313 seats in the fleet). This gave a profit per seat of $18509.
Jetstar fleet - at the end of the fiscal year - comprised 36 aircraft with an accurate seating availability of 7194 seats. This gave a profit per seat of $11134.

QANTAS revenue was about $12.7B.
Jetstar revenue was about $1.56B, or 12.3% that of mainline.

Now what I think is the important point amonst all this is that the percentage revenue and percentage profit are, effectively, identical.

What makes this important is that during the fiscal year;

Jetstar grew it's narrow-body fleet by 25% - with all the inherent cost in that scope of growth,
Jetstar had no premium passengers to help add to the bottom line,
Jetstar had no third-party income similar to that which was added to QANTAS bottom line from income received by engineering and ground handling,
Jetstar operate almost exclusively in a low-yield/high competitive route environment, whereas QANTAS received income from a percentage of high yield/low competitive sectors flown by international longhaul and Qlink,

With all that in mind, it's clear that if JQ had some of the benefits of QANTAS income, then it follows that it's percentage profit (seeing how it's identical now) would have to be potentially far greater.

That's probably why it's a foregone conclusion that JQ will continue to get more of the 'weaker' mainline flying. It is probably also the reason why it will indeed get some of the 'stronger' mainline flying - to increase it's brand-exposure to all markets.

JQ is already marketing StarClass as it's '...International Business Class...' in the printed media. It wouldn't take much to change the marketing blurb to refer to it as BusinessClass should JQ be given some of the more 'premium-patronised' routes in the future.

Much will change before it all settles down again. I have no doubt at all that QF will still be around. Nor do I doubt that JQ will be a much bigger part of the group at that time. Don't forget that NJS, Eastern, Sunstate and (in the past) Impulse have all flown QF liveried aircraft on behalf of QF. There'll be nothing stopping JQ from doing it in the future if the executive deem it will result in a stronger bottom line in the tougher environment ahead.

Good luck to all.

Capt.Q

Just read your post. Nonsense more than fact. JQ does not rely on QF for things like Reservations, nor for maintenance (the 'temporary' A330 situation aside).

Any parasitic suggestion would be limited to routes. And that is the whole reason for having a LCC; to fly routes that are unprofitable for the mainline element.

It's all sh#ts and giggles to say that international JQ ops are not making money - but I never see any proof. Come up with proof! Oh, my apologies, I know what the reply will be - something along the lines of "...it's not shown as a loss, because QF is propping it up so that it looks like its making a profit...".

I think that there would be several government agencies who would be very interested in that kind of behaviour if it were true.

[struggling]

All the JQ/QF arguement in the world may not save the Qantas Group from what is going down in GM right now. Ie:

DETROIT/NEW YORK - The Obama administration has directed General Motors Corp to prepare a new restructuring plan that would pay off bondholders and the automaker's major union in stock in exchange for $US48 billion in debt, people briefed on the plan have said.

The US Treasury, which has provided $US13.4 billion in emergency funding to keep GM operating since the start of the year, has indicated that it could also convert those taxpayer-backed loans into GM stock, the sources told Reuters.
GM, which is working to complete a restructuring that could include a bankruptcy filing, plans to make the new proposals to bondholders and the United Auto Workers union within the next two weeks, the sources said.

Unless the Company can come up with an innovative plan to offsett the havic the GFC will continue to impose on the entire global aviation industry for sometime yet. The aviation policy quote by Ginger is on the money I reckon.

As for Harbison's quote:

QANTAS will no longer exist in its current form if the downturn that is crippling the industry lasts another six months

The words in its current form are most significant.

[firepussy]

RAD Which JetStar?

The one in Melbourne?
The one in Singapore?
Or the one in Vietnam?
Please advise who does the maintenance and who provides the Res System

[RAD_ALT_ALIVE]

There's only one Jetstar.

It's res system is provided by Navitaire (called New Skies).

It's maintenance is proudly brought to you by the Jetstar Maintenance team currently headquartered in Newcastle.

As the A330 is - currently - considered an interim fleet, it was decided not financially/operationally expedient to train JQ's engineers to be A330 qualified. So a LOA was reached with QF Engineering to supply our engineering needs while that type is in our fleet.

No idea about Jetstar Asia - I'd assume it was the Singaporean engineering company.

No idea about Jetstar Pacific - I'd assume it was the Vietnam Airlines engineering company.

I'm pretty sure they use the Navitaire system for res as well.

I hope that's answered your queries.

[firepussy]

One JetStar?

You mean the domestic version?.
Navitaire?Correct
It services the entire Qantas Group.
So Guess who pays the bills.Qantas not JetStar
Who built the JetStar Maintenance facility in Newcastle?
Qantas Group
Where did they get their LAMEs? and who trained them?
Any one like to Guess?
Who provides the SIM time?
Where are the CC trained?
JetStar pays for Zip.Its all down to the parent.
JetStar as a startup would have required hundreds of millions of dollars to commence operation.
The initial capital was stumped up by Qantas Airways LTD.
Access to gates and slots?..... courtesy of QAL.
Look at Japan.
There is a Q to obtain slots in NRT.JetStar goes straight to the front of the line.
Boy did that piss a few airlines off
Cost of fuel?Courtesy of QAL hedging
Brian Gray tried this on his own and failed.
When you have a big Bro' like QAL lets just say your future is guaranteed
Cost apportioning ...ever heard of it?.Its akin to money laundering
Jet Star is a protected species

[RAD_ALT_ALIVE]

Domestic version? What is the domestic version?

I thought I made it clear to you - there is only one Jetstar! If that is the company you mean; the company that flies domestic and international in narrow body and wide body aircraft, then we're talking the same language.

That's where we stop talking the same language!

Everything is paid for by the Qantas Group? Yes, you're right: everything (for mainline, QLink, catering, engineering, holidays, etc, etc) is paid for by the Qantas Group. Why? Because every element is part of the Qantas Group. They each leverage off the buying power of the group to pay for their own out-goings.

If you're saying that JQ pays for nothing in the sense that auditors would be able to confirm that JQ pays for nothing, then you are indeed an idiot of biblical proportions. The 2008 (and the previous 4 or 5) annual report shows revenue v. profit. How do you account for the difference? It's the outgoings that JQ have to pay to various service/product providers. As a member of the QF Group, I'm sure we do get the benefits of the Groups hedging policy - but so do the regionals and probably Jetconnect too.

Perhaps I can concede that the start up costs were footed by the Group. But then again, any start up has to have start up costs footed by someone - it doesn't come free. As for the "...hundreds of millions of dollars..." of start up costs?! Perlease... What was the figure that Sir R put up when he started DJ? Half of one of those hundreds of millions.

As for the rest of your fiscal assertions? Each division of the Group has to sink or swim on P & L that each submits at the end of the fiscal year. If you think that a publicly listed company can cook the books in such a cavalier fashion, in a way that regulators can't see through, then perhaps the best you should aspire to is to stick to writing badly written posts on public forums.

[firepussy]

Cooking the Books?

Large companies like QF using cost apportioning with subsidiaries is not naughty or illegal.So calm down.
The Jetstar in Singapore has other owners apart from QAL.Likewise the Vietnamese version.The Melbourne version is a wholly owned subsidiary.Its the same company in name only.
You think there is only one JetStar?.Well then I have an antique coathanger for sale.
As an accountant and googler you make a good pilot.
Stick to the prong big boy.Oh,you do have a prong...... dont you?

[longjohn]

Rad,

Nice try, but in this forum, on this topic, logic has no friends.

Better to say:

"Your right hotpants, thanks for the free ride, keep up the good work."

[kotoyebe]

Navitaire?Correct
It services the entire Qantas Group.

FP, I'm sorry to say that you are completely wrong about this one. Big Brother has never used Navitaire. That POS system can't handle what Qantas does. Qantas uses Amadeus in recent times, and used Qube before that.

Now I won't argue about who pays for JQ's use of Navitaire!! But of course, QF wouldn't exist if JQ wasn't around for the synergies, blah blah blah BS.

[teresa green]

Forget about who paid for what, or JQ V QF, it is now all in the past, what is important for you all is what happens now, where does it all go from here ?? It is becoming increasingly obvious that Virgin is teetering, and blind freddie could see some fairly audacious changes ahead for the whole industry, if you could see 12 months down the track, I suspect you would be gobsmacked, time to make your unions strong, stand united, and tighten seatbelts, it is going to be one hell of a ride for a year or so and I don't envy you one bit, but the QF Group will survive I am sure, any Govt, that allowed Qantas to die, would be shown the door, as they well know, as does AJ, one small comfort for those worried about future employment in Pilot and Engineer ranks. Its pointless stating AN's case, different times, different problems, the demise of TAA and AN was distressing to say the least, but THE RAT is moving up the food chain bigtime, and Australians lazy and laid back as they can be, would be be disturbed from their apathy, when QF's last rites were read, and there would a roar from the masses, and some hurried Parliment House meetings as MP's were besieged by their constituents, "whadya mean ya selling off the freckin airline, over my freckin dead body" it would be equal to selling off the AFL,NRL and flogging the War Memorial to the Japanese, it just ain't going to happen , not in my lifetime anyway.

[RAD_ALT_ALIVE]

Longjohn,

Thanks indeed. If I can, I'll just back you 100% in what you said.

Koyotebe,

I wasn't willing to 'assertively' push what I wasn't 100% certain about, so thanks for the Amadeus info.

TG,

I haven't always agreed with your posts, but on this one, I'm with you all the way. Let's all hang on, look after one another as best as we (and the federal workplace legislation) can and just enjoy the ride!

[firepussy]

Navitaire

Navitaire must be misrepresenting itself.
There on its website under customers is Qantas Airways.
Gosh an aviation company telling porkies.
All the Qantas Group tails are there.Someone should inform them of their error.
Kotoyebe its down to you.Sort them out babe

[genex]

firepussy you have unwittingly hit the nail on the head with your comment about "protected species".

As a major airline Group you would really hope that Qantas could start and nurture an LCC better and cheaper than could a stand-alone competitor. In fact it would be absolutely appalling if it couldn't do so. So Qantas is "protecting" JQ by effectively allowing it to operate at the QF Group's marginal cost. (big simplified generality but you get the drift).

In the same way JQ is "protecting" Qantas. If you have the time and wits, get a calculator and see what happens to the QF books if you take a JQ sized chunk of revenue and costs out of the Groups results. Not pretty at all. Then go the one step further that, firepussy, marks the professional vs the amateur analyst, and imagine that a stand-alone LCC was stealing QF traffic and that as a result QF yields and Load Factor fell by say 3%. Throw in high fuel prices and a sagging world economy if you're good at scenario analysis.

That would be, for the Qantas Group the China Syndrome, a real meltdown. Yes....happened to United, Delta, Northwest, American. Pension plans headed south, planes parked, wages ruthlessly cut, routes folded etc etc. Not even vaguely pretty.

The essence of symbiosis, synergy, collective strength, economies of scope or whatever you call it is that the QF Group's two brand strategy secures all Group jobs to the benefit of all. It is not perfect.....it has been poorly handled....it is executed by some folks with way too much wide-eyed naivety and ideology.....but it works and for that all QF Group employees should be thankful.

And back to the scenario analysis....add to your thoughts a near future sceanrio with Tiger flying 30 aircraft domestically feeding into a Singapore Airlines operation on Pacific routes with the A380 and the 777-300ER. Virgin dying or contracting and desperately running "two for one" deals that slash yields.....at that time a QF Board that didn't have already have in place a mature Jetstar strategy would be criminally derelict.

[firepussy]

Genex:2 Questions

Do you wear a pointy hat with a half moon on it?
Do you own a Nimbus 2000?

[packrat]

Jetstar Not the Saviour

QANTAS chief executive Alan Joyce concedes Jetstar has limited capacity to relieve its parent of profit pressure, after the national carrier downgraded its full-year 2009 profit forecast by 80 per cent.
Mr Joyce told ABC TV that the company was approaching the limit of its ability to transfer capacity to Jetstar in order to cushion the profit and yield squeeze that led to last week's profit downgrade.
"We have done a lot of that in the last year. There is a limit to what we can do and I think we're getting to that limit," he said yesterday.
"A lot of the problem markets now for Qantas are probably markets that Jetstar's not the right model for: the Los Angeles market as an example."
Qantas slashed its 2008-09 pre-tax profit guidance from $500million to between $100 and $200million last Wednesday, and said it would retrench up to 1750 staff -- about 5 per cent of its workforce.
The airline will also ground planes and defer aircraft orders as heavy discounting takes its toll on yields amid a nose-dive in demand for air travel since the collapse of Lehman Brothers last September.
While Qantas Frequent Flyer, Jetstar and regional operations are still profitable, international operations -- its biggest divisional earner -- is leaking cash, especially at the front end of the planes.
"In the business class and first class -- the premium cabins -- we're seeing a drop internationally of over 20 per cent," Mr Joyce said.
"In economy, the volumes are actually holding. It's the yields that's the problem, so that we're actually getting less in terms of airfares because there's a lot of discounting."
In a separate interview on Sky News, Mr Joyce said the airline's previous market forecast had allowed for a drop in premium traffic of between 20 and 30 per cent, but the latest profit downgrade was due to fare discounts.
"Even in the last two weeks we've seen our competitors taking a 50 per cent discount on fares and we've matched (this) to remain competitive and that's causing our revenue to take a hit," he said.

[Buster Hyman]

"In economy, the volumes are actually holding. It's the yields that's the problem, so that we're actually getting less in terms of airfares because there's a lot of discounting."

You'd think that after all those years of gouging the eyes out of punters on the virtual duopoly that was the Pacific Route, they'd have a few dollars in the kitty... Perhaps Mr Joyce can send me some money as part of a stimulus package & I'll buy a ticket or two?

[wingnut69]

I'm just glad jetstar negotiated good rates for aircraft, fuel, shared (ie use of Qantas) training facilities and staff, (and who do we bill Jim?),(that's right, we don't, as these shared employees that deliver security training etc, are qantas emplyees! They'll pick up the tab.) engineering back ups when it turnes to S#$t, the great booking system that it delivers to the qantas group and the phenomenal support it delivers to Qantas mainline.
Hell, when I think travel to anywhere in the world, I think jetstar.
Look forward to chairman Harbisons next prophecy.