Qantas and Its Appalling Brand Management
You can only pull so many bricks out of the wall until the whole lot comes tumbling down.
There are not too many bricks left for Qantas to be able to pull, in fact a few bricks need to be shoved back in pretty darn quickly!
There are not too many bricks left for Qantas to be able to pull, in fact a few bricks need to be shoved back in pretty darn quickly!
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Share prices do not always reflect reality. As Alan himself has said the sum of the parts do not equate to the whole. The value on all the individual parts of the QF group would add up to a far greater sum than Qantas current market capitalisation.
Why is this so?
I believe it is because of current and previous executives mismanagement. It's hard to see an upside to the share price without cleaning out the people who got us here in the first place.
Essentially current Qantas management are the reason why the company is performing poorly and why the share price is underperforming. Investors do not have confidence in current management.
If Alan Joyce himself were a company and you could buy shares in Alan Joyce the returns to date would be remarkable, year on year profit increases (wages), with no capital investment. However questions would start to be asked about how long term viability of AJ inc. How can AJ inc keep producing massive increases in profit when essentially the service it provides is bad for the customer (QF). About now would be a good time to divest of AJ inc.
This in turn would provide a boost to QF share price and profitability as Qantas would no longer have the anchor that is AJ inc.
Why is this so?
I believe it is because of current and previous executives mismanagement. It's hard to see an upside to the share price without cleaning out the people who got us here in the first place.
Essentially current Qantas management are the reason why the company is performing poorly and why the share price is underperforming. Investors do not have confidence in current management.
If Alan Joyce himself were a company and you could buy shares in Alan Joyce the returns to date would be remarkable, year on year profit increases (wages), with no capital investment. However questions would start to be asked about how long term viability of AJ inc. How can AJ inc keep producing massive increases in profit when essentially the service it provides is bad for the customer (QF). About now would be a good time to divest of AJ inc.
This in turn would provide a boost to QF share price and profitability as Qantas would no longer have the anchor that is AJ inc.
Well said - the only way QANTAS can survive is to get away from the Dixon/Joyce style of management.
Why aren't the institutional investors approaching the board to force change??
Why aren't the institutional investors approaching the board to force change??
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The reason that this conglomerate approach (ie: The Idea of the Qantas Group) never works is that it asks too much of the Board and CEO. It asks too much because ultimately the Board will have to decide on competing investment priorities and cannot give all their time to understanding just one business. - ie: Jetstar wants this aircraft, Mainline wants that aircraft, regional wants this, etc., etc. ???
Many people are quick to say that the Qantas Group concept is not working. Well let's see.... some Qantas staff hate Jetstar, some customers hate Jetstar, some Qantas mainline routes and markets have been cannablised by Jetstar. But in the broader picture the strategy has worked better for the past 7 years than any LCC set up by any legacy carriers worldwide.
What these people have forgotten is that in fact the strategy was so successful (and also due to the fact Godfreys had reached the end of his useful life in Virgin Blue) that Virgin Blue had to react (and is doing so now) in its game-changing strategy. The twist? JB has an excellent grasp of Qantas's SWOT (Strengths/Weaknesses/Opportunities/Threats) so he knows how to customise Virgin Blue's strategy against Qantas.
The shareprice do not necessarily only reflect on management incompetence, it actually tells you a lot more about the market (And are we conveniently forgetting about Virgin Blue share prices ($2 to 29c)?)
Overall the aviation industry is volatile (dogs breakfast) and highly susceptible to external shocks. If some investors have only now realised airline shares are worthless they probably shouldn't invest in shares at all. In the scale of share returns I am sure airline shares are right at the bottom of the list.
Current senior Qantas management lack fresh ideas to reinvigorate the company. Everythings about cost but what about customer retention and making customer and employees happy?
Last edited by runesta; 2nd May 2011 at 11:43.
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Everythings about cost but what about customer retention and making customer and employees happy?
Some costs seem to be treated differently......What about the bonus driven culture, reimbursement for tax effect changes, retentions payments and post employment consultancy and spin doctors?
Some costs seem to be treated differently......What about the bonus driven culture, reimbursement for tax effect changes, retentions payments and post employment consultancy and spin doctors?
Runesta:
I'm sorry, but it isn't "utter crap". There are many examples of conglomerates who survive but none to my (or McKinseys) knowledge that produce returns commensurate with the assets employed in the long term.
That, my friend, is why so many mergers and acquisitions go tits up. That is where the phrase "not a good organizational fit with our company" comes from as executives seek to explain why they are selling a business they paid $650 million for is now being sold for $200 million.
The reality is that each business is different and that difference extends all the way to Board level. It is a fallacy to assume that all companies can be managed exactly the same way at senior level - they can't.
Then there is the idea of "synergies" which is BS, and its why Fosters is splitting its brewing and wine businesses. In theory there were "synergies" - they both use fermentation, glass bottles, and that is all they have in common. Remember Southcorp and Adsteam? - packaging, water heaters and wine? That was a classic case of a conglomerate mess.
The differences extend even to HR - how to attract, remunerate and hold a perhaps temperamental genius of a winemaker in a business whose HR practices are tailored to brewery staff? I speak from bitter experience. My first really, really senior management role was in a division of Email Ltd., a manufacturing company famously known for its penny pinching cost consciousness. I had to try an integrate a computer software business it had acquired by accident into its operations. It proved impossible because Email could not get its head around the idea that there were Twenty something kids who pecked at terminals,spoke Unix and needed to be paid a lot of money if we were to keep them.
To put it simply, the Board and Management of Jetstar need to be totally separated from the Board and Management of Qantas, and I mean really separated as in ownership because over time they will want to go in diverging directions and keeping them handcuffed together (eg common aircraft types) just hampers both of them.
The economists worked out that conglomerates were a waste of money by about 1980 after the failure of some big ones. They reasoned that if I want exposure to the textile, aerospace and wine industry then I was better off buying shares in companies that specialised in each of those markets, not in one company trying to do all Three.
To put it another way, why doesn't Qantas sell,operate or hire Cessnas and Cirrus aircraft or start a business jet division? After all, they all have wings and fly? There must be "synergies" right?
Sunfish that's utter crap. There are many examples of successful conglomerate approaches in the business world where corporations own many different areas or facets of business. The key to success is in how you manage the business.
That, my friend, is why so many mergers and acquisitions go tits up. That is where the phrase "not a good organizational fit with our company" comes from as executives seek to explain why they are selling a business they paid $650 million for is now being sold for $200 million.
The reality is that each business is different and that difference extends all the way to Board level. It is a fallacy to assume that all companies can be managed exactly the same way at senior level - they can't.
Then there is the idea of "synergies" which is BS, and its why Fosters is splitting its brewing and wine businesses. In theory there were "synergies" - they both use fermentation, glass bottles, and that is all they have in common. Remember Southcorp and Adsteam? - packaging, water heaters and wine? That was a classic case of a conglomerate mess.
The differences extend even to HR - how to attract, remunerate and hold a perhaps temperamental genius of a winemaker in a business whose HR practices are tailored to brewery staff? I speak from bitter experience. My first really, really senior management role was in a division of Email Ltd., a manufacturing company famously known for its penny pinching cost consciousness. I had to try an integrate a computer software business it had acquired by accident into its operations. It proved impossible because Email could not get its head around the idea that there were Twenty something kids who pecked at terminals,spoke Unix and needed to be paid a lot of money if we were to keep them.
To put it simply, the Board and Management of Jetstar need to be totally separated from the Board and Management of Qantas, and I mean really separated as in ownership because over time they will want to go in diverging directions and keeping them handcuffed together (eg common aircraft types) just hampers both of them.
The economists worked out that conglomerates were a waste of money by about 1980 after the failure of some big ones. They reasoned that if I want exposure to the textile, aerospace and wine industry then I was better off buying shares in companies that specialised in each of those markets, not in one company trying to do all Three.
To put it another way, why doesn't Qantas sell,operate or hire Cessnas and Cirrus aircraft or start a business jet division? After all, they all have wings and fly? There must be "synergies" right?
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Every thing is about cost
"Everything is about cost"
This has been the management "style" for the last 10 years. Unfortunately this is the most short-sighted way to run a business . The constant cost cutting may have improved short term profitabilty (=management bonuses) but it has been pursued to such an extent that it has degraded the product significantly.
You have to spend money to make money but they wont spend any money on long haul because its not making any money because they haven't spent any money on it. Catch 22.
Frozen food.
Yes j and y class food is prepared in Bris, frozen and trucked as far away as Perth. Google snap fresh.
This has been the management "style" for the last 10 years. Unfortunately this is the most short-sighted way to run a business . The constant cost cutting may have improved short term profitabilty (=management bonuses) but it has been pursued to such an extent that it has degraded the product significantly.
You have to spend money to make money but they wont spend any money on long haul because its not making any money because they haven't spent any money on it. Catch 22.
Frozen food.
Yes j and y class food is prepared in Bris, frozen and trucked as far away as Perth. Google snap fresh.
Last edited by ciport; 2nd May 2011 at 20:53. Reason: the letter y
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To diverge from the current discussion just a bit;
The 'Today' show weather reports this morning were used to conduct a Qantas Wallabies promotion, in front of a 737 painted up in Wallabies colours.
Said 737 had a ZK rego, and will be flown by Kiwi crew.
The 'Today' show weather reports this morning were used to conduct a Qantas Wallabies promotion, in front of a 737 painted up in Wallabies colours.
Said 737 had a ZK rego, and will be flown by Kiwi crew.
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They must have forgotten it was a NZ business
.
fancy putting a Wallabies sticker on a kiwi jet
.fancy putting a Wallabies sticker on a kiwi jet
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All good points Sunfish and I am sure (and as a shareholder I certainly hope) that these thoughts will be on the Board's minds as they ponder the future.
But not that many years back that same Board had to confront a world where deregulation was well under way, and there was the potential for the double whammy of rapid growth accompanied by rapid yield reductions. Impulse presented an ideal opportunity and the Board would have been derelict to overlook the opportunity. This is a fact and they did the right thing to protect mainline yields, however imperfect the execution, however much collateral damage has come from an ideological bias and from groups like AIPA failing to see the new future and embrace the Impulse pilots.
The job is only half done however as we can all see....having a fleet mix that is truly horrific, having a management structure that has to administer way too many contracts, brand names, EBAs and transfer prices, having embedded a truly cruel "us vs them" industrial relations strategy.....these need to be on the table too. Even if JQ were parcelled up and sold tomorrow, and that done in a way that did continue to protect mainline yields, these other problems would remain.
I wish them all well....this is too big a set of issues not to address and slogans/hates/ideology/mantras/amateurism/hubris/negligence/ignorance should have no place in the solution paradigms.
But not that many years back that same Board had to confront a world where deregulation was well under way, and there was the potential for the double whammy of rapid growth accompanied by rapid yield reductions. Impulse presented an ideal opportunity and the Board would have been derelict to overlook the opportunity. This is a fact and they did the right thing to protect mainline yields, however imperfect the execution, however much collateral damage has come from an ideological bias and from groups like AIPA failing to see the new future and embrace the Impulse pilots.
The job is only half done however as we can all see....having a fleet mix that is truly horrific, having a management structure that has to administer way too many contracts, brand names, EBAs and transfer prices, having embedded a truly cruel "us vs them" industrial relations strategy.....these need to be on the table too. Even if JQ were parcelled up and sold tomorrow, and that done in a way that did continue to protect mainline yields, these other problems would remain.
I wish them all well....this is too big a set of issues not to address and slogans/hates/ideology/mantras/amateurism/hubris/negligence/ignorance should have no place in the solution paradigms.
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h.o.t.a.s. - I don't think you have diverged from this thread's topic.
Didn't AJ just promote Olivia to head up this type of public relations exercise? Just like last week's "Qantas 737 emergency landing", QF management are confused as to whether Jetconnect is run by QF management or operates as a seperate entity owned by Qantas. Hopefully, Fair Work Australia will be able to give the QF board and management some guidance on this "confusing" issue. Obviously by today's mistake, Olivia doesn't understand that the Wallabies are an Australian team!!
Didn't AJ just promote Olivia to head up this type of public relations exercise? Just like last week's "Qantas 737 emergency landing", QF management are confused as to whether Jetconnect is run by QF management or operates as a seperate entity owned by Qantas. Hopefully, Fair Work Australia will be able to give the QF board and management some guidance on this "confusing" issue. Obviously by today's mistake, Olivia doesn't understand that the Wallabies are an Australian team!!
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Qantas is being deliberately ran into the ground by this management so the Directors of OrangeStar/ NewStar can put a bid together to purchase Qantas on the Cheap.
Very creative accountancy to make it happen but it will happen.
This enables the government to be saved the inconvenience of financing a bailout, and the embarrassment of QF failing.
It will allow management the ability to circumvent the Qantas sales act, then probably on sell Qantas to Singapore Airlines.
It also allows Qantas to be then based in Singapore, under Newstar/ orangeStar management.
Employment conditions can be based under Singapore terms and conditions, Aircraft depreciation can be reduced to three years and NO UNIONS!
No more pesky, expensive Australians, problem solved.
More needs to be researched by smarter people than me (any investigative reporters out there?) on who are the Directors of these companies based out of Singapore. I am finding it hard to compile a list for these entities.
I bet the grand picture will become clearer of Qantas's fate when these people are exposed.
Very creative accountancy to make it happen but it will happen.
This enables the government to be saved the inconvenience of financing a bailout, and the embarrassment of QF failing.
It will allow management the ability to circumvent the Qantas sales act, then probably on sell Qantas to Singapore Airlines.
It also allows Qantas to be then based in Singapore, under Newstar/ orangeStar management.
Employment conditions can be based under Singapore terms and conditions, Aircraft depreciation can be reduced to three years and NO UNIONS!
No more pesky, expensive Australians, problem solved.
More needs to be researched by smarter people than me (any investigative reporters out there?) on who are the Directors of these companies based out of Singapore. I am finding it hard to compile a list for these entities.
I bet the grand picture will become clearer of Qantas's fate when these people are exposed.
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Stalin, you have crystallized my thesis into a very plausible scenario. It's always had that pump'n'dump feel about it.
It may not play out exactly as you speculate, probably any one of a number of variations but I believe history will show you to be very close to the money.
Criminals.
It may not play out exactly as you speculate, probably any one of a number of variations but I believe history will show you to be very close to the money.
Criminals.
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I dont know if I agree with that scenario Ugly.
Do you really reckon Orangestar or whoever would delibately trash Qantas to the extent that you are saying, then resurrect it later just so it can do away with a unionised workforce? Im sure even they could think of simpler ways of cutting costs that destroying an iconic Australian brand like that.
Even though aussies love to hate Qantas, I dont think they would allow it to be run out of Singapore. Even the govt would baulk at that.
In my humble opinion, I really do think a successful 2 brand strategy was their intention, but, they got greedy. They saw the savings that could be made by "Jetstarising" Qantas and they have sadly gone too far with it.
The media is now running with that as per the article yesterday in the Fairfax papers and the our declining market share internationally speaks for itself.
We need a swift, wide broom. And it cant come a moment too soon.
Do you really reckon Orangestar or whoever would delibately trash Qantas to the extent that you are saying, then resurrect it later just so it can do away with a unionised workforce? Im sure even they could think of simpler ways of cutting costs that destroying an iconic Australian brand like that.
Even though aussies love to hate Qantas, I dont think they would allow it to be run out of Singapore. Even the govt would baulk at that.
In my humble opinion, I really do think a successful 2 brand strategy was their intention, but, they got greedy. They saw the savings that could be made by "Jetstarising" Qantas and they have sadly gone too far with it.
The media is now running with that as per the article yesterday in the Fairfax papers and the our declining market share internationally speaks for itself.
We need a swift, wide broom. And it cant come a moment too soon.
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Right along those lines, I heard the reason Borgetti didn't take the CEO job, was because, as he explained, he had no choice, the job description read
"Screw the Roo, light the star".
"Screw the Roo, light the star".
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I Wonder
I have yet to meet a Qantas Executive who is particularly bright.I tend to agree with the above post.Jetstar seemed like a good idea at the time but it has just gone too far and now the brightest men in the room dont know what to do about it
Had a look at the Great Crusade website as mentioned on the Today show: About The Great Crusade.
No mention of Jetconnect, but plenty of Qantas logos and sponsorship info. There is a Contacts listed, maybe some questions to them may enlighten us.
No mention of Jetconnect, but plenty of Qantas logos and sponsorship info. There is a Contacts listed, maybe some questions to them may enlighten us.