Where Jetstar earns its money
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Where Jetstar earns its money
Today's AFR on page 52 carries a report of an interview with Jet* CEO after he had delivered a speech to a travel industry meeting. The report says
" ...central to Jetstar's operations, as its profit was derived entirely from add on revenues, such as food rental cars and hotel reservations."
Make of this what you will but if Buchanan has been correctly reported, why couldn't Qantas have sold food, rental cars and hotel bookings just as effectively as apparently has Jetstar and therefore averted the cannibilisation of its brand?
In addition, one wonders how this view comapres with other statements made by Buchanan and others on the profitability of Jetstar?
" ...central to Jetstar's operations, as its profit was derived entirely from add on revenues, such as food rental cars and hotel reservations."
Make of this what you will but if Buchanan has been correctly reported, why couldn't Qantas have sold food, rental cars and hotel bookings just as effectively as apparently has Jetstar and therefore averted the cannibilisation of its brand?
In addition, one wonders how this view comapres with other statements made by Buchanan and others on the profitability of Jetstar?
why couldn't Qantas have sold food, rental cars and hotel bookings just as effectively as apparently has Jetstar and therefore averted the cannibilisation of its brand?
Just my uneducated 'line driver' thoughts. I too lament the loss of service.
What ive always wondered is how much of these supposed savings (and remember a large part of an airline costs are fixed) go into running a second organisation. ie the AOC, Chiefpilot and seperate training organisation, the seperate CEO, CFO and all the accounting section, HR department, Safety Dept, Medical Dept to name just some. But hang on maybe Jetstar doesnt have those last 3 they just use the QF ones for nothing. Just a thought.
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Given airlines have managed yield for years and the the red e deals Q have are testament to that, they could have easily sold a percentage of seats at deep discount or even transferred old aircraft to the "Q lite". Given the small (very small) contribution crewing is to operating overhead one wonders why..oh hang on that would thwart the "industrial strategy" that sees an industrial consultant run Qantas making millions for himself in the process whilst duplicating all the systems just to save a few %
But thats the big unanswered question, at the end of the day if all the true costs are accounted for for is it really a cheaper option. Personally i doubt it.
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Dragonman,
I posed a similar statement back in March on Pprune.
I posed a similar statement back in March on Pprune.
An example of sacrificing a successful product to protect the main / core brand is Estee' Lauder.
Estee' set up a lower cost product & re-branded these products which they distrubute thru Target stores nationally. The product has been & continues to be very profitable at the lower end of the market.
However Estee' has decided to scrap the lower cost / budget brand to reduce costs for the entire Estee' group even though the budget brand has been hugely successful.
The result being reduced costs via employment,advertising, duplication processes, distrubution costs & consolidation on the main or premium products.
Estee' set up a lower cost product & re-branded these products which they distrubute thru Target stores nationally. The product has been & continues to be very profitable at the lower end of the market.
However Estee' has decided to scrap the lower cost / budget brand to reduce costs for the entire Estee' group even though the budget brand has been hugely successful.
The result being reduced costs via employment,advertising, duplication processes, distrubution costs & consolidation on the main or premium products.
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Long term it will be,wages alone is huge and once they have majority of staff numbers as Jokestar and minimal as QF they will eventually rebrand Jokestar as QF in someway.There will be a role reversal once the numbers add up and a leaner meaner Qantas will exist.. Oh the thought of it hurts...
I don't think that there has been a cannibalisation of brands because they have been largely separated - Qantas as the premium brand and Jetstar as the low cost brand. Somehow, I think there may have been some cannibalisation if Qantas started selling insurance, car rentals etc as much as Jetstar does because it wouldn't then be as business focused.
QFInsider, I hear what you're saying about yield management but that can only be at best a tactical type fix. It's no use adjusting the yield curve to allow for some fares to be ridiculously lower if your costs are still going to be higher than the competition. The punters will soon realise that they have a greater chance of getting a low fare with the LCC and so will go with them accordingly.
And let's not forget too that the Group benefits flow both ways - Qantas gains from the added buying power of the Jetstar operation. Together there are scale efficiencies which make both companies more efficient. At the end of the day, it all comes down to the Group bottom line, which is what the shareholders care most about.
QFInsider, I hear what you're saying about yield management but that can only be at best a tactical type fix. It's no use adjusting the yield curve to allow for some fares to be ridiculously lower if your costs are still going to be higher than the competition. The punters will soon realise that they have a greater chance of getting a low fare with the LCC and so will go with them accordingly.
And let's not forget too that the Group benefits flow both ways - Qantas gains from the added buying power of the Jetstar operation. Together there are scale efficiencies which make both companies more efficient. At the end of the day, it all comes down to the Group bottom line, which is what the shareholders care most about.
Amazing how Jetstar with its seperate Chief Pilot and CFO, (albeit with subsidised safety and Medical dept..........) made $137 mill profit this year.
Qantas made how much?
Qantas made how much?
Sure they made a few dollars but if I cut off my right arm and sold that I reckon I could make a bit of money too.
Amazing how Jetstar with its seperate Chief Pilot and CFO, (albeit with subsidised safety and Medical dept..........) made $137 mill profit this year.
Qantas made how much?
Qantas made how much?
And the following ONE OFF costs....
$130 million in engineers dispute (which had the support of the techies
)$152 million in aircraft write downs... (bye bye classics and 1 400)
$18 million goodwill write down......
$164 million in frequent flyer estimates
A nice time for these when the market was expecting a low result
So for anyone out there thinking Qantas is not making money, and jetstar is the saviour....look at the financials in a bit more detail.
Cheers
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goodonyamate
I would like to see a complete breakdown on the Geoffstar figures to see exactly where the money comes from as well as the uncooked figures of how QFs money is spent.
It's been said before but if Geoffstar was a stand alone airline,I wonder what the results would be.
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Its actually called JETSTAR....it is a legitimate company and part of the Qantas Group. Please use its correct name. If I were for example to refer to the sharp end drivers at Qantas as Pampered Precious Tarts instead of pilots I am sure you would criticize me and you would be correct for doing so. Leave the slanging matches to lesser being eh?
There is a key point which Jelly sort of alludes to here and it centres around two questions: First, what would the QF Group profits be if it hadn't started Jetstar but had simply lowered its costs in accord with the long term trend it has shown and with the steadily declining yields it has faced for years?
Second question: what would the Qantas Group profits and route structure be if it acted as in Question 1 but someone else had started an airline the size of Jetstar? Say a 50 aircraft Tiger?
Just wondering.....
There is a key point which Jelly sort of alludes to here and it centres around two questions: First, what would the QF Group profits be if it hadn't started Jetstar but had simply lowered its costs in accord with the long term trend it has shown and with the steadily declining yields it has faced for years?
Second question: what would the Qantas Group profits and route structure be if it acted as in Question 1 but someone else had started an airline the size of Jetstar? Say a 50 aircraft Tiger?
Just wondering.....
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genex, what the P&L profile for the two companies would have been if j* had used old 747-300/400's for international ops & old 767's for domestic & the new aircraft had gone to qf? Lets compare apples with apples.
...just wondering
...just wondering
What would VB look like now had JQ not been started?
I think your perspective plays a fairly strong role in how you view JQ, if you are a shareholder it probably looks like a good move in ensuring the groups ability to capitalize on different economic environments.If you're a QF mainline employee it probably looks like the start of the end.
I think your perspective plays a fairly strong role in how you view JQ, if you are a shareholder it probably looks like a good move in ensuring the groups ability to capitalize on different economic environments.If you're a QF mainline employee it probably looks like the start of the end.
G'day genex,
all about perceptions of associated costs.......
In the start up of Jetstar International, you might remember that qantas mainline 330 pilots were being sent all over the world, coupled with the addon cost of accom and allowances, to complete sim cyclics due to the fact that the qantas sim was being utilised by jetstar candidates. How could this possibly be the most cost effective way for 'the group' to operate? And how much did jetstar pay for this time in the qantas sim?
Maybe a call to Group flight training to get the real truth hey?
It's simple, you blokes have backed the right horse and are reaping the rewards. And good luck to you. But don't start with the company propaganda about how good jetstar is for the brand etc,etc.
The reality is, had the mainline pilots not availed themselves to reduced lines, had their leave entitlements assigned then qantas pilots would have had redundancies advised to them now. This would have included not only so's but some junior fo's as well. As it stands, the junior 767 fo's have more than 7 years in the company are going to be demoted. So when your 2.5 year jetstar international fo starts complaining that he has to wait a bit longer for his command opportunity, it really pisses people off. The fact is he is in that position as result of decisions made by the ceo and the jpc at the time. The jobs and aircraft were given to jetstar international because they were cheaper. Again perceived costs.
Shame really, as no ones job was on the line at the time. Just another opportunity for some opportunist to shaft qantas blokes purely for self greed. The hall marks of another era seeping through but done in a more subtle way.
all about perceptions of associated costs.......
In the start up of Jetstar International, you might remember that qantas mainline 330 pilots were being sent all over the world, coupled with the addon cost of accom and allowances, to complete sim cyclics due to the fact that the qantas sim was being utilised by jetstar candidates. How could this possibly be the most cost effective way for 'the group' to operate? And how much did jetstar pay for this time in the qantas sim?
Maybe a call to Group flight training to get the real truth hey?
It's simple, you blokes have backed the right horse and are reaping the rewards. And good luck to you. But don't start with the company propaganda about how good jetstar is for the brand etc,etc.
The reality is, had the mainline pilots not availed themselves to reduced lines, had their leave entitlements assigned then qantas pilots would have had redundancies advised to them now. This would have included not only so's but some junior fo's as well. As it stands, the junior 767 fo's have more than 7 years in the company are going to be demoted. So when your 2.5 year jetstar international fo starts complaining that he has to wait a bit longer for his command opportunity, it really pisses people off. The fact is he is in that position as result of decisions made by the ceo and the jpc at the time. The jobs and aircraft were given to jetstar international because they were cheaper. Again perceived costs.
Shame really, as no ones job was on the line at the time. Just another opportunity for some opportunist to shaft qantas blokes purely for self greed. The hall marks of another era seeping through but done in a more subtle way.
hotnhigh
Brilliant...right on the money
Genex, this is exactly why there is ill feeling towards the Geoffstar, oops sorry Jetstar brand.
As it stands, the junior 767 fo's have more than 7 years in the company are going to be demoted. So when your 2.5 year jetstar international fo starts complaining that he has to wait a bit longer for his command opportunity, it really pisses people off. The fact is he is in that position as result of decisions made by the ceo and the jpc at the time. The jobs and aircraft were given to jetstar international because they were cheaper. Again perceived costs.
Brilliant...right on the money Genex, this is exactly why there is ill feeling towards the Geoffstar, oops sorry Jetstar brand.
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Its actually called JETSTAR....it is a legitimate company and part of the Qantas Group. Please use its correct name
It shows a sense of humour and is nothing more than saying who 's idea it was in the first place for another airline.
Others have said as I was attempting to be subtle about and that was the huge set up costs that Jetstar would have had to pay for if it was a stand alone airline.
Thats not counting the running costs and other help that it gets from it's parent.
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An audited set of stand alone accounts would lay waste to any theories on transfer pricing, cross subsidisation and the whole litany of crap that permeates from the likes of Buchanan (boston consulting group) et al.
Jetstar was and always will be an industrial lever. It is not replicated by any other airline. Previous experiments have very quickly led to management discarding the erosion of yield..Financial aviation writers talk of the erosion of yield of the mainline business. That may be so. What yield does J* generate? Very little, it is a volume business targeting a market that is price sensitive. So if mainline yield erodes in a downturn, what happens to J*?
Our management persists, aided by those who spit the vitriol.
I will bet most who spit that sort of venom were somehow denied advancement during a recruitment process, if not we all have choices. Seeing the growth of J* NZ and next J* Asia seeing commands slipping away from Australia at a growing rate, J* Australia pilots now see what has happened to us at mainline. Globalisation is great when you have your period in the sun, J* Australia's is passing.
If somehow yield and margin don't matter anymore, then point me in the direction of the new textbook/practice. I fail to see how selling a seat for less makes more profit, it doesn't. Qantas always acts in isolation, ignoring competitor behaviour and indeed staff behaviour. Want to lever staff watch them get more disengaged and disinterested. You had better hope J* makes all the money you claim. Want to work for less, more often then you have the recipe for J*. It is not a stand alone business. It is not cheaper than mainline. Fixed costs are that.
It is an entity created for the "workchoices" period, still embraced by the Fabian society wankers from the labour party. It's reality created in QCA. It would not survive scrutiny of a trained analyst, someone who could get their hands on the real figures. Those real figures will never surface, until of course the business is truly laid to waste and imports like Joyce parachute out back to the bog from where he left.
The accounting is so creative it defies logic.
the scary bit is the staff of Jetstar enmasse are yet to realise their day in the sun is passing and the travelling public better get used to more substituted flights, operated by group airlines not even trained by Qantas, nor holding an australian passport.
Jetstar was and always will be an industrial lever. It is not replicated by any other airline. Previous experiments have very quickly led to management discarding the erosion of yield..Financial aviation writers talk of the erosion of yield of the mainline business. That may be so. What yield does J* generate? Very little, it is a volume business targeting a market that is price sensitive. So if mainline yield erodes in a downturn, what happens to J*?
Our management persists, aided by those who spit the vitriol.
I will bet most who spit that sort of venom were somehow denied advancement during a recruitment process, if not we all have choices. Seeing the growth of J* NZ and next J* Asia seeing commands slipping away from Australia at a growing rate, J* Australia pilots now see what has happened to us at mainline. Globalisation is great when you have your period in the sun, J* Australia's is passing.
If somehow yield and margin don't matter anymore, then point me in the direction of the new textbook/practice. I fail to see how selling a seat for less makes more profit, it doesn't. Qantas always acts in isolation, ignoring competitor behaviour and indeed staff behaviour. Want to lever staff watch them get more disengaged and disinterested. You had better hope J* makes all the money you claim. Want to work for less, more often then you have the recipe for J*. It is not a stand alone business. It is not cheaper than mainline. Fixed costs are that.
It is an entity created for the "workchoices" period, still embraced by the Fabian society wankers from the labour party. It's reality created in QCA. It would not survive scrutiny of a trained analyst, someone who could get their hands on the real figures. Those real figures will never surface, until of course the business is truly laid to waste and imports like Joyce parachute out back to the bog from where he left.
The accounting is so creative it defies logic.
the scary bit is the staff of Jetstar enmasse are yet to realise their day in the sun is passing and the travelling public better get used to more substituted flights, operated by group airlines not even trained by Qantas, nor holding an australian passport.
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I am led to believe that there is now substantive proof of what you have claimed.
The figures for Japan show that Jetstar carried the same number of passengers as Qantas did prior to handing over the routes.
The difference however is that those passengers were carried for $1000 LESS per passenger than when carried by Qantas.
Same passengers, $1000 less revenue for QF Group per passenger.
Doesn't make sense, does it.
The figures for Japan show that Jetstar carried the same number of passengers as Qantas did prior to handing over the routes.
The difference however is that those passengers were carried for $1000 LESS per passenger than when carried by Qantas.
Same passengers, $1000 less revenue for QF Group per passenger.
Doesn't make sense, does it.