Fallacy or Fact - Qantas International losses
Oh this is going to hurt Qantas's bottom line
http://www.qantas.com.au/infodetail/...0HYResults.pdf
Ouch, another US$26.5 million
Ouch another $2.1 million
http://www.qantas.com.au/infodetail/...0HYResults.pdf
Note 6. Other Financial Assets and Liabilities
Other financial assets and liabilities includes derivative instruments used to hedge financial exposures. The movement is
driven by changes in market variables, including foreign exchange and fuel price, as well as changes in underlying hedge
positions. During the half-year ended 31 December 2010, significant fluctuations in foreign exchange rates and crude oil
prices resulted in substantial changes in other financial assets and liabilities. As a result, the net other financial assets and
liabilities have increased from a net liability of $138 million at 30 June 2010 to a net liability of $507 million at
31 December 2010.
Other financial assets and liabilities includes derivative instruments used to hedge financial exposures. The movement is
driven by changes in market variables, including foreign exchange and fuel price, as well as changes in underlying hedge
positions. During the half-year ended 31 December 2010, significant fluctuations in foreign exchange rates and crude oil
prices resulted in substantial changes in other financial assets and liabilities. As a result, the net other financial assets and
liabilities have increased from a net liability of $138 million at 30 June 2010 to a net liability of $507 million at
31 December 2010.
Note 11. Contingent Liabilities
Other than as outlined below, there have been no material changes to contingent liabilities since 30 June 2010.
Freight regulatory fines and third party actions
Qantas continues to co-operate with regulators to finalise their investigations into alleged price fixing in the air cargo
market.
Since 30 June 2010, Qantas resolved its liability to the European Commission and paid a fine of EUR8.9 million. This
amount had been provided for at 30 June 2010.
Other than as outlined below, there have been no material changes to contingent liabilities since 30 June 2010.
Freight regulatory fines and third party actions
Qantas continues to co-operate with regulators to finalise their investigations into alleged price fixing in the air cargo
market.
Since 30 June 2010, Qantas resolved its liability to the European Commission and paid a fine of EUR8.9 million. This
amount had been provided for at 30 June 2010.
In addition, Qantas is a party to a number of third party class actions. In January 2011, Qantas reached a settlement,
subject to court approval, to resolve its liability under a class action in the United States. The amount of the US settlement
was recognised during the half-year ended 31 December 2010. Qantas continues to have a number of defences to the
remaining actions. Qantas expects the outcome of any remaining third party class actions will be known over the course
of the next few years.
subject to court approval, to resolve its liability under a class action in the United States. The amount of the US settlement
was recognised during the half-year ended 31 December 2010. Qantas continues to have a number of defences to the
remaining actions. Qantas expects the outcome of any remaining third party class actions will be known over the course
of the next few years.
A class action claim was made against Qantas and other airlines by a number of travel agents as a result of travel agents
not being paid commission on fuel surcharges.
Qantas was successful in the initial action heard in the Federal Court, but was unsuccessful on appeal to the full Federal
Court and was subsequently denied leave to appeal to the High Court of Australia.
As such, Qantas has recognised the expense in relation to the full Federal Court decision in the half-year ended 31
December 2010.
not being paid commission on fuel surcharges.
Qantas was successful in the initial action heard in the Federal Court, but was unsuccessful on appeal to the full Federal
Court and was subsequently denied leave to appeal to the High Court of Australia.
As such, Qantas has recognised the expense in relation to the full Federal Court decision in the half-year ended 31
December 2010.
I posted this in another thread, but it belongs here as well.
Qantas ONLY profitability. EBITAR based on Revenue
2007 $906million EBITAR on $13519million Revenue or 6.7% profit
2008 $1033.8million EBITAR on $12717million Revenue or 8.1% profit
2009 $1363million EBITAR on $11710million Revenue or 11.63% profit
2010 (half year) $710million EBITAR on $5295million Revenue or 13.4% profit
That is the Qantas segment only.
All figures taken from the annual reports of the respective years.
Even the hugely successful Singapore Airlines in their 2011 annual report
http://www.singaporeair.com/pdf/Inve...report1011.pdf
Across the entire group, they have an EBIT of $1418million on revenue of $14524 or only a 9.7% return
The airline segment only has an EBIT of $1342million on revenue of $12405million or only a 10.8% return
So Qantas, by itself, is more profitable then Singapore Airlines and has been increasing its profitability consistently over the last 4 years, yet Qantas is in a dire financial position ?
Qantas ONLY profitability. EBITAR based on Revenue
2007 $906million EBITAR on $13519million Revenue or 6.7% profit
2008 $1033.8million EBITAR on $12717million Revenue or 8.1% profit
2009 $1363million EBITAR on $11710million Revenue or 11.63% profit
2010 (half year) $710million EBITAR on $5295million Revenue or 13.4% profit
That is the Qantas segment only.
All figures taken from the annual reports of the respective years.
Even the hugely successful Singapore Airlines in their 2011 annual report
http://www.singaporeair.com/pdf/Inve...report1011.pdf
Across the entire group, they have an EBIT of $1418million on revenue of $14524 or only a 9.7% return
The airline segment only has an EBIT of $1342million on revenue of $12405million or only a 10.8% return
So Qantas, by itself, is more profitable then Singapore Airlines and has been increasing its profitability consistently over the last 4 years, yet Qantas is in a dire financial position ?
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This from Letters in The Fin Review:
"The cost base comparison(quoted fromMerrill Lynch estimates)between Emirates and Qantas are grossly inaccurate.The net underlying costs in the audited annual reports for both airlines indicates a differential of 1.12 cents per available seat kilometre or 25%,not 228% as reported.It does not account for significant differences in network and fleet structure which flow through o demand for labour and shaping an airline's cost base.
Our 39000 staff are competitively remunerated.
Emirates incurs significant socialcosts to retain the high proportion of staff recruited on expatriate terms and conditions.On average every year,Emirates has to bear a total cost of more than $US500 million for expatriate employee benefits-including accommodation for employees and children's education for management,pilots,engineers and other staff--costs Qantas do not incur"
Andrew Parker
Emirates Airline.Dubai UAE
"The cost base comparison(quoted fromMerrill Lynch estimates)between Emirates and Qantas are grossly inaccurate.The net underlying costs in the audited annual reports for both airlines indicates a differential of 1.12 cents per available seat kilometre or 25%,not 228% as reported.It does not account for significant differences in network and fleet structure which flow through o demand for labour and shaping an airline's cost base.
Our 39000 staff are competitively remunerated.
Emirates incurs significant socialcosts to retain the high proportion of staff recruited on expatriate terms and conditions.On average every year,Emirates has to bear a total cost of more than $US500 million for expatriate employee benefits-including accommodation for employees and children's education for management,pilots,engineers and other staff--costs Qantas do not incur"
Andrew Parker
Emirates Airline.Dubai UAE
It is interesting that the other day a news article reported that BB eaned $1.1 million last financial year. Yet industry rumour has it that he earned an additional $4.1 million from consultancy costs plus up to a further $3.0 million from leasing and other associated endeavours, putting his earnings at over $8.0 million for a 12 month period. I stress that this is just a rumour. Other rumours have been circulating that AJ earned close to $20.0 mil, and that Darth used to pull the same sort of coin. Makes you wonder doesn't it ?
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Why is it tat whilst Qantas mainline must impose an ever slowly increasing fuel surcharge "levy" to keep pace with the price of gas, J* do not? Infact they do not at all, saying that they are able to "adjust prices accordingly".
Do they add a few extra sheckles to the price of a muffin or tin of VB? Or is dear old Auntie footing that bill as well?
Do they add a few extra sheckles to the price of a muffin or tin of VB? Or is dear old Auntie footing that bill as well?
Any truth in the suggestion that Qantas allegedly pay Jetstar a fixed sum for every flight operated by Jetstar to "guarantee" freight capacity?
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Strongly suggest that if anyone has any details of alleged Rat Exec consultant fees and/or arrangements re leasing, then now may be a good time to put that out there via AIPA.
These rumours have been around for ages but no one has been very specific, so time to play the cards given the destruction that is going on around the place at the moment.
These rumours have been around for ages but no one has been very specific, so time to play the cards given the destruction that is going on around the place at the moment.
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Strongly suggest that if anyone has any details of alleged Rat Exec consultant fees and/or arrangements re leasing, then now may be a good time to put that out there via AIPA.
These rumours have been around for ages but no one has been very specific, so time to play the cards given the destruction that is going on around the place at the moment.
These rumours have been around for ages but no one has been very specific, so time to play the cards given the destruction that is going on around the place at the moment.
I am confidant that if there is any hard evidence produced it would likely be provided to the right person for use in the appropriate circumstance.
Pprune would be a risky place to 'dump' such evidence, and after all, Pprune is merely a 'rumour network'. Besides, Tailwheel tends to get a tad cranky when we go beyond the bounds of what is acceptable to post and encroach upon any legal minefield !
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Emirates incurs significant socialcosts to retain the high proportion of staff recruited on expatriate terms and conditions.On average every year,Emirates has to bear a total cost of more than $US500 million for expatriate employee benefits-including accommodation for employees and children's education...
All well and good for people to ask questions but when are the big end of town and the mainstream media going to wake up from their dream and have a dose of reality with respect to the performance of the Qantas group?
The peace pipe passed around at investor briefings must have some pretty special stuff in it for the major investors to walk away confident in the boards approach to everything from fleet selection to IR strategies. (After all, all employees can and must be wrong. Just ask Alan, Bruce, Thomas or Harbison)
The lack of dividends and the future looking pretty dire with the continued Mcdonaldsdisation of Qantas and lack of real plans for promoting and growing an Australian airline soundly and smartly, must sound alarm bells.
One can only hope.............
The peace pipe passed around at investor briefings must have some pretty special stuff in it for the major investors to walk away confident in the boards approach to everything from fleet selection to IR strategies. (After all, all employees can and must be wrong. Just ask Alan, Bruce, Thomas or Harbison)
The lack of dividends and the future looking pretty dire with the continued Mcdonaldsdisation of Qantas and lack of real plans for promoting and growing an Australian airline soundly and smartly, must sound alarm bells.
One can only hope.............
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The cost of attempting to treat people like people
"Emirates incurs significant social costs to retain the high proportion of staff recruited on expatriate terms and conditions.On average every year,Emirates has to bear a total cost of more than $US500 million for expatriate employee benefits-including accommodation for employees and children's education for management,pilots,engineers and other staff--costs Qantas do not incur"
That is half a billion U.S. to polish the proverbial and roll it in glitter and it still ends up being a Henry the Third. Surely this makes a case for overseas crew basings?
That is half a billion U.S. to polish the proverbial and roll it in glitter and it still ends up being a Henry the Third. Surely this makes a case for overseas crew basings?
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Umm, der aussie_herb, who gives you the money to pay the income tax?
EK gross salaries are way below QF gross salaries because EK don't give you dosh to pay tax because there is none. The net amount is pretty much the same.
Employment with EK wins out because the company puts you in a house, pays for your kids education etc, so you have more spending money in the end.
Only problem is you have to live in a sandpit.
EK gross salaries are way below QF gross salaries because EK don't give you dosh to pay tax because there is none. The net amount is pretty much the same.
Employment with EK wins out because the company puts you in a house, pays for your kids education etc, so you have more spending money in the end.
Only problem is you have to live in a sandpit.
Captain Peacock said:
Truly mind boggling, isn't it? I mean, aircraft fly themselves ("you just press the autopilot button, don't you") and now I learn that Qantas should be paying paying my $70,000 income tax bill, not me!
We really have no hope when there is such ignorance out there.
In fairness to Captain Peacock, perhaps he was trying to make a clumsy comparison of net wages. I have no idea. But in case it continues to escape comprehension amongst some, the figures usually bandied around for Australian pilot are GROSS salaries. Take away tax and mortgage/rent payements and the numbers don't appear so big anymore - indeed they sit around the EK net salary levels.
p.s. I see Capt P has clarified. Yes, as I thought.
Now, to work on the "plane flies itself" thing. What a waste of bandwidth today....
To be fair to QF, QF has to pay the income tax of all its employees.
We really have no hope when there is such ignorance out there.
In fairness to Captain Peacock, perhaps he was trying to make a clumsy comparison of net wages. I have no idea. But in case it continues to escape comprehension amongst some, the figures usually bandied around for Australian pilot are GROSS salaries. Take away tax and mortgage/rent payements and the numbers don't appear so big anymore - indeed they sit around the EK net salary levels.
p.s. I see Capt P has clarified. Yes, as I thought.
Now, to work on the "plane flies itself" thing. What a waste of bandwidth today....
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It was stated at an EK roadshow recently that there will never be bases away from Dubai.
The facilitator said that if they gave you extra to pay local taxes in order to have the same take home pay as a Dubai based pilot, it would cost EK too much.
So much for their US$500 mill socialcosts.
The facilitator said that if they gave you extra to pay local taxes in order to have the same take home pay as a Dubai based pilot, it would cost EK too much.
So much for their US$500 mill socialcosts.
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Sorry Peacock didn't see your former posts, the reality is in Australia a mortagage , utilities and school fees leave what I pay in Income tax for dead and if I was living in Sydney it would be even worse . Its not a tit for tat thing though . We all way up what is on offer out there and work towards the job we would prefer . What is becoming abundantly clear in here though that market forces will have to eventually push wages and conditions up if these airlines wish to attract the crews they will need in the future.
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What is becoming abundantly clear in here though that market forces will have to eventually push wages and conditions up if these airlines wish to attract the crews they will need in the future.
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QANTAS has managed to destroy 43% of it's brand value in just 2 short years.
Copied from Another person from Qrewroom:
In the 7 July issue of BRW it was stated that QANTAS has managed to destroy 43% of it's brand value in just 2 short years.
90 years to build a brand, 2 years to destroy 43% of it.
I would love to take credit for the following reply to one of Ben Sandilands blogs. I don't know who wrote it, and I apologise if it has been posted on here before, but I hadn't seen it until today. It provides a very inciteful synopsis of how we have found ourselves in this position of fighting for our very existence, and pulls no punches on who is to blame.
Read on.
----------
Some of you may be aware of the media attention recently coming upon Qantas- especially from it's CEO, Alan Joyce.
Joyce came to the Qantas Group to run Jetstar, and had a small stint in Ansett, and a large stint in Ryanair previous to joining Qantas. Joyce has in past few months called Qantas pilots "Recalcitrant", "Kamikaze", and "Rogue", as well as accusing them of "Living on cloud cuckoo land". The reason- Qantas pilots are asking to ensure Qantas pilot jobs remain in Australia, as there is gathering evidence that Qantas wants to move more of it's operations offshore. Qantas Engineers are also asking for the same guarantees. So far, Qantas has refused to negotiate at all on these asks from the pilots and engineers.
Joyce was the golden haired boy of the previous CEO Geoff Dixon, the man who masterminded the attempted private Equity buyout of Qantas in 2007. Thankfully that did not get through. If it did, Qantas would have defaulted on the debt it was going to be loaded with, and would most certainly not exist anymore. Dixon stood to make $60m out of the deal, and Joyce in excess of $20m.
In the Dixon/Joyce years, decision have been made that have severely damaged the Qantas brand, including forcing passengers onto Jetstar without choice, closing in-house maintenance of engines which has resulted in a 180% increase in engine failures in the past 5 years, and not buying the right aircraft to modernise Qantas and allow route expansion. To add, Qantas has subisided the Jetstar operation from the start including paying for maintenance, payment of landing fees, fuel and terminal charges, and seat subsidies.
As a result, Qantas share prices are below their 1995 issue price of $2.00.
Joyce was in Singapore recently for the International Air Transport Association (IATA) conference and blasted the pilots and engineers as being to blame for the tanking share price. He also stated that there would be no more investment in Qantas until it "started to return it's cost of capital". As one commentator put it, this is akin to "not spending any money on your car to make it run until it starts".
To put some of this into context and to show how badly Qantas management have stuffed up, here is some quotes from Qantas management and what has subsquently happened:
"Jetstar will not operate more than 15 aircraft" G.Dixon 2004. It now operates more than 70 aircraft.
"Jetstar will never operate internationally" G Dixon 2004. It has taken many Qantas routes from it's parent company to Hawaii, Japan, Bali and other ports.
"Emirates is not a threat as it is not a growth model" G Dixon 2001. Emirates now operates more than 60 services per week to Australia and flies to 26 destinations in Europe.
"The B777 is an old technology aircraft" G Dixon 2006. The B777 could fly 90% of the routes currently flown by the B747 with a 30% reduction in fuel burn and is flown by every major airline in the world.
"There is no money in freight" G Dixon 2004. Qantas now operates a full freighter B767 aircraft flown by contract pilots as well as full time contracts with Atlas Air Cargo.
All the while Qantas pilots get assigned Long Service Leave because of a surplus in pilot numbers due to the outsourcing of flying previously done by Qantas pilots to Jetstar, Atlas cargo, Jetconnect across the Tasman, and Jetstar Asia.
You will find below a succienct, precise, summary of where and why Qantas finds itself- losing money and losing market share. This was written as a response to a blog by Ben Sandilands on crikey.com.
------------------------------------------
Qantas pilots and engineers ask for your support and patience this year while we try to end the rot, keep Australian jobs in Australia and attempt to save a national icon from corporate greed.
--------------------------------------------
Of all the elements a board and a CEO must manage and protect, surely building and protecting the brand of a company must be their number one priority.
Clifford came out swinging on the weekend saying the focus of the board and CEO must be, and is, on the share price and return of capital. But it is the brand that drives the share price, not the other way around. Everything else flows from that.
If you followed that logic Jetstar never would have been started and Virgin wouldn’t be spending a fortune relaunching and building the brand. If Virgin can do that, why cant Qantas?
Let’s look at the facts. This is marketing and business studies 101.
Qantas from the inception of the very first brand surveys decades ago consistently and without exception, year in year out, always lead the pack as the NUMBER ONE BRAND in Australia. This was not just in terms of brand recognition but also in relation to the more significant drivers of financial success in the market place; trust and emotional attachment for the brand.
The Qantas brand was pure 100%, 24 carat, rolled gold.
This was Qantas’s number one asset. It still should be. Bigger than all the aircraft and other tangibles combined. Every airline has plant and equipment, but only Qantas had that number one position, the ultimate in brand power.
After sitting at number one for decades Qantas is no longer even in the top ten. But worse than that here’s a report from Readers Digest annual Most Trusted Brands survey way back in 2008.
” … the iconic flying kangaroo, Qantas, dropped 47 spots in consumer confidence.”
You read right. In 2008 Qantas dropped 47 spots.
That massive drop in the brand if quantified in dollar terms is so much more than the net worth Jetstar has added to the Qantas group.
So what happened. How did the best, most loved, number one brand in Australia for decades crash and burn. So quickly. So badly.
There are two main reasons for this. And they have names, the first being Dixon, the other Joyce. The destruction of the brand has zippo to do with the current biffo with the unions.
1/ When Dixon took over as CEO the Qantas brand was still riding high and proud at number one. It was untouchable. He was seen by many as marketing and PR genius. Yet the destruction of the Qantas brand can be traced back through these exact same brand surveys to having commenced during his tenure. It is no coincidence that this rapid decline coincides EXACTLY with the rise of Jetstar under the Qantas umbrella.
BA when they held seats on the board warned Dixon an in house low cost carrier would cannibalize the parent brand. Dixon thought he knew better.
We all know the story. As soon as Jetstar was launched Qantas ****ed off many local communities with the haste it pulled out of so many key domestic and international markets and forced people who were used to, and wanted full service, onto Jetstar with an appalling lack of service.
Everyone knows Jetstar is Qantas. Each and every time people feel ripped off or mishandled by Jetstar, which is often, the knife is dug deeper and twisted further into what is left of the Qantas brand.
Just ask any of the tens of thousands of passengers forced to fly Jetstar (because Qantas has pulled out) to destinations like the Gold Coast, Sunshine Coast, Tasmania, Hamilton Island, Bali or Japan. They don’t blame Jetstar, they blame Qantas.
2/ From the day Jetstar was conceived fleet renewal and investment in the mainline product ceased almost completely. While Jetstar got an entirely new fleet of fuel efficient A320/A330 aircraft “full fare” passengers on “full service” Qantas were stuck with clapped out, gas gusling, dirty and unreliable aircraft. The new Dallas debacle is a perfect example.
As you point out Ben, when Qantas could have, should have been renewing its mainline fleet, such as buying B777 as did all of its main competitors, there was no money or motivation as all the focus and cash were thrown at Jetstar.
Clifford and Joyce had already earmarked the first B787s for Jetstar, meaning Qantas mainline will not be seeing any new aircraft for many years. Just who has been subsidising who? This only serves to compound the destruction of the brand.
Joyce is now the biggest most vocal detractor of Qantas brand, constantly screaming hysterically that long haul is in serious trouble.
What would the books look like if Qantas had, as it should have as the premium brand, a fleet of all new and super efficient aircraft while the budget arm Jetstar was stuck with the old aircraft from the current mainline fleet.
A/ Jetstar would no longer be making money
B/ Qantas mainline would be making money
C/ Qantas would have a product people expect of a full service carrier and it would be growing its market share.
No one at Qantas management either remembers, nor understands, these important lessons from history.
The only player who appears to do so is John Borghetti. You can see he ‘gets it’ by his determination to invest substantially in a full service product, to grow markets such as this morning’s tie up with Singapore Airlines, the business and the Virgin brand.
He knows where Qantas is vulnerable and it is insightful too that he is branding Virgin Australia as the Australian airline and he is vocal about returning jobs to Australia service his aircraft here.
In the 7 July issue of BRW it was stated that QANTAS has managed to destroy 43% of it's brand value in just 2 short years.
90 years to build a brand, 2 years to destroy 43% of it.
I would love to take credit for the following reply to one of Ben Sandilands blogs. I don't know who wrote it, and I apologise if it has been posted on here before, but I hadn't seen it until today. It provides a very inciteful synopsis of how we have found ourselves in this position of fighting for our very existence, and pulls no punches on who is to blame.
Read on.
----------
Some of you may be aware of the media attention recently coming upon Qantas- especially from it's CEO, Alan Joyce.
Joyce came to the Qantas Group to run Jetstar, and had a small stint in Ansett, and a large stint in Ryanair previous to joining Qantas. Joyce has in past few months called Qantas pilots "Recalcitrant", "Kamikaze", and "Rogue", as well as accusing them of "Living on cloud cuckoo land". The reason- Qantas pilots are asking to ensure Qantas pilot jobs remain in Australia, as there is gathering evidence that Qantas wants to move more of it's operations offshore. Qantas Engineers are also asking for the same guarantees. So far, Qantas has refused to negotiate at all on these asks from the pilots and engineers.
Joyce was the golden haired boy of the previous CEO Geoff Dixon, the man who masterminded the attempted private Equity buyout of Qantas in 2007. Thankfully that did not get through. If it did, Qantas would have defaulted on the debt it was going to be loaded with, and would most certainly not exist anymore. Dixon stood to make $60m out of the deal, and Joyce in excess of $20m.
In the Dixon/Joyce years, decision have been made that have severely damaged the Qantas brand, including forcing passengers onto Jetstar without choice, closing in-house maintenance of engines which has resulted in a 180% increase in engine failures in the past 5 years, and not buying the right aircraft to modernise Qantas and allow route expansion. To add, Qantas has subisided the Jetstar operation from the start including paying for maintenance, payment of landing fees, fuel and terminal charges, and seat subsidies.
As a result, Qantas share prices are below their 1995 issue price of $2.00.
Joyce was in Singapore recently for the International Air Transport Association (IATA) conference and blasted the pilots and engineers as being to blame for the tanking share price. He also stated that there would be no more investment in Qantas until it "started to return it's cost of capital". As one commentator put it, this is akin to "not spending any money on your car to make it run until it starts".
To put some of this into context and to show how badly Qantas management have stuffed up, here is some quotes from Qantas management and what has subsquently happened:
"Jetstar will not operate more than 15 aircraft" G.Dixon 2004. It now operates more than 70 aircraft.
"Jetstar will never operate internationally" G Dixon 2004. It has taken many Qantas routes from it's parent company to Hawaii, Japan, Bali and other ports.
"Emirates is not a threat as it is not a growth model" G Dixon 2001. Emirates now operates more than 60 services per week to Australia and flies to 26 destinations in Europe.
"The B777 is an old technology aircraft" G Dixon 2006. The B777 could fly 90% of the routes currently flown by the B747 with a 30% reduction in fuel burn and is flown by every major airline in the world.
"There is no money in freight" G Dixon 2004. Qantas now operates a full freighter B767 aircraft flown by contract pilots as well as full time contracts with Atlas Air Cargo.
All the while Qantas pilots get assigned Long Service Leave because of a surplus in pilot numbers due to the outsourcing of flying previously done by Qantas pilots to Jetstar, Atlas cargo, Jetconnect across the Tasman, and Jetstar Asia.
You will find below a succienct, precise, summary of where and why Qantas finds itself- losing money and losing market share. This was written as a response to a blog by Ben Sandilands on crikey.com.
------------------------------------------
Qantas pilots and engineers ask for your support and patience this year while we try to end the rot, keep Australian jobs in Australia and attempt to save a national icon from corporate greed.
--------------------------------------------
Of all the elements a board and a CEO must manage and protect, surely building and protecting the brand of a company must be their number one priority.
Clifford came out swinging on the weekend saying the focus of the board and CEO must be, and is, on the share price and return of capital. But it is the brand that drives the share price, not the other way around. Everything else flows from that.
If you followed that logic Jetstar never would have been started and Virgin wouldn’t be spending a fortune relaunching and building the brand. If Virgin can do that, why cant Qantas?
Let’s look at the facts. This is marketing and business studies 101.
Qantas from the inception of the very first brand surveys decades ago consistently and without exception, year in year out, always lead the pack as the NUMBER ONE BRAND in Australia. This was not just in terms of brand recognition but also in relation to the more significant drivers of financial success in the market place; trust and emotional attachment for the brand.
The Qantas brand was pure 100%, 24 carat, rolled gold.
This was Qantas’s number one asset. It still should be. Bigger than all the aircraft and other tangibles combined. Every airline has plant and equipment, but only Qantas had that number one position, the ultimate in brand power.
After sitting at number one for decades Qantas is no longer even in the top ten. But worse than that here’s a report from Readers Digest annual Most Trusted Brands survey way back in 2008.
” … the iconic flying kangaroo, Qantas, dropped 47 spots in consumer confidence.”
You read right. In 2008 Qantas dropped 47 spots.
That massive drop in the brand if quantified in dollar terms is so much more than the net worth Jetstar has added to the Qantas group.
So what happened. How did the best, most loved, number one brand in Australia for decades crash and burn. So quickly. So badly.
There are two main reasons for this. And they have names, the first being Dixon, the other Joyce. The destruction of the brand has zippo to do with the current biffo with the unions.
1/ When Dixon took over as CEO the Qantas brand was still riding high and proud at number one. It was untouchable. He was seen by many as marketing and PR genius. Yet the destruction of the Qantas brand can be traced back through these exact same brand surveys to having commenced during his tenure. It is no coincidence that this rapid decline coincides EXACTLY with the rise of Jetstar under the Qantas umbrella.
BA when they held seats on the board warned Dixon an in house low cost carrier would cannibalize the parent brand. Dixon thought he knew better.
We all know the story. As soon as Jetstar was launched Qantas ****ed off many local communities with the haste it pulled out of so many key domestic and international markets and forced people who were used to, and wanted full service, onto Jetstar with an appalling lack of service.
Everyone knows Jetstar is Qantas. Each and every time people feel ripped off or mishandled by Jetstar, which is often, the knife is dug deeper and twisted further into what is left of the Qantas brand.
Just ask any of the tens of thousands of passengers forced to fly Jetstar (because Qantas has pulled out) to destinations like the Gold Coast, Sunshine Coast, Tasmania, Hamilton Island, Bali or Japan. They don’t blame Jetstar, they blame Qantas.
2/ From the day Jetstar was conceived fleet renewal and investment in the mainline product ceased almost completely. While Jetstar got an entirely new fleet of fuel efficient A320/A330 aircraft “full fare” passengers on “full service” Qantas were stuck with clapped out, gas gusling, dirty and unreliable aircraft. The new Dallas debacle is a perfect example.
As you point out Ben, when Qantas could have, should have been renewing its mainline fleet, such as buying B777 as did all of its main competitors, there was no money or motivation as all the focus and cash were thrown at Jetstar.
Clifford and Joyce had already earmarked the first B787s for Jetstar, meaning Qantas mainline will not be seeing any new aircraft for many years. Just who has been subsidising who? This only serves to compound the destruction of the brand.
Joyce is now the biggest most vocal detractor of Qantas brand, constantly screaming hysterically that long haul is in serious trouble.
What would the books look like if Qantas had, as it should have as the premium brand, a fleet of all new and super efficient aircraft while the budget arm Jetstar was stuck with the old aircraft from the current mainline fleet.
A/ Jetstar would no longer be making money
B/ Qantas mainline would be making money
C/ Qantas would have a product people expect of a full service carrier and it would be growing its market share.
No one at Qantas management either remembers, nor understands, these important lessons from history.
The only player who appears to do so is John Borghetti. You can see he ‘gets it’ by his determination to invest substantially in a full service product, to grow markets such as this morning’s tie up with Singapore Airlines, the business and the Virgin brand.
He knows where Qantas is vulnerable and it is insightful too that he is branding Virgin Australia as the Australian airline and he is vocal about returning jobs to Australia service his aircraft here.