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Senate Inquiry, Hearing Program 4th Nov 2011

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Senate Inquiry, Hearing Program 4th Nov 2011

Old 7th Nov 2011, 23:19
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The word is out

Received this chain email asking me to pass it on,
Subject: Why QANTAS is being trashed - Senator Xenophon’s Speech

Please don't believe all of what is currently being portrayed in the media. The media is being manipulated to achieve their ultimate goal.



Someone is going to make a fortune out of this at the expense of our Aussie icon. The Senator says it all.

Basically, they are driving the share price down by not paying a dividend and antagonising its workforce. The current board & CEO still represent the same interests that were around at the last takeover attempt.

Why drive it down? To finish off what they started 5 years ago. Takeover, then split and sell-off the seperate divisions.

It is very sad and the Australian public need to know the truth about what the current management are up to.

____________________________________________________________ __________

Subject: Senator Xenophon’s Speech in Parliament - Hansard 23Aug11

Senator XENOPHON (South Australia) (19:37):

I rise to speak tonight on an issue that is close to the hearts of many Australians, and that is the future of our national carrier, Qantas. At 90, Qantas is the world's oldest continuously running airline. It is an iconic Australian company. Its story is woven into the story of Australia and Australians have long taken pride in the service and safety standards provided by our national carrier. Who didn't feel a little proud when Dustin Hoffman uttered the immortal line in Rain Man, 'Qantas never crashed'? While it is true that Qantas never crashes, the sad reality is that Qantas is being deliberately trashed by management in the pursuit of short-term profits and at the expense of its workers and passengers. For a long time, Qantas management has been pushing the line that Qantas international is losing money and that Jetstar is profitable. Tonight, it is imperative to expose those claims for the misinformation they are. The reality is that Qantas has long been used to subsidise Jetstar in order to make Jetstar look profitable and Qantas look like a burden. In a moment, I will provide detailed allegations of cost-shifting that I have sourced from within the Qantas Group, and when you know the facts you quickly see a pattern. When there is a cost to be paid, Qantas pays it, and when there is a profit to be made, Jetstar makes it.

But first we need to ask ourselves: why? Why would management want Qantas to look unprofitable? Why would they want to hide the cost of a competing brand within their group, namely Jetstar, in amongst the costs faced by Qantas?

To understand that, you need to go back to the days when Qantas was being privatised. When Qantas was privatised the Qantas Sale Act 1992 imposed a number of conditions, which in turn created a number of problems for any management group that wanted to flog off parts of the business. Basically, Qantas has to maintain its principal place of operations here in Australia, but that does not stop management selling any subsidiaries, which brings us to Jetstar.

Qantas has systematically built up the low-cost carrier at the expense of the parent company. I have been provided with a significant number of examples where costs which should have been billed back to Jetstar have in fact been paid for by Qantas. These are practices that I believe Qantas and Jetstar management need to explain. For example, when Jetstar took over the Cairns-Darwin-Singapore route, replacing Qantas flights, a deal was struck that required Qantas to provide Jetstar with $6 million a year in revenue. Why? Why would one part of the business give up a profitable route like that and then be asked to pay for the privilege? Then there are other subsidies when it comes to freight. On every sector Jetstar operates an A330, Qantas pays $6,200 to $6,400 for freight space regardless of actual uplift. When you do the calculations, this turns out to be a small fortune. Based on 82 departures a week, that is nearly half-a-million dollars a week or $251Ž2 million a year.

Then there are the arrangements within the airport gates. In Melbourne, for example, my information from inside the Qantas group is that Jetstar does not pay for any gates, but instead Qantas domestic is charged for the gates. My question for Qantas management is simple: are these arrangements replicated right around Australia and why is Qantas paying Jetstar's bills? Why does Qantas lease five check-in counters at Sydney Terminal 2, only to let Jetstar use one for free? It has been reported to me that there are other areas where Jetstar's costs magically become Qantas's costs. For example, Jetstar does not have a treasury department and has only one person in government affairs. I am told Qantas's legal department also does free work for Jetstar.

Then there is the area of disruption handling where flights are cancelled and people need to be rebooked. Here, insiders tell me, Qantas handles all rebookings and the traffic is all one way. It is extremely rare for a Qantas passenger to be rebooked on a Jetstar flight, but Jetstar passengers are regularly rebooked onto Qantas flights. I am informed that Jetstar never pays Qantas for the cost of those rebooked passengers and yet Jetstar gets to keep the revenue from the original bookings. This, I am told, is worth millions of dollars every year. So Jetstar gets the profit while Qantas bears the costs of carriage. It has also been reported to me that when Qantas provides an aircraft to Jetstar to cover an unserviceable plane, Jetstar does not pay for the use of this plane.

Yet another example relates to the Qantas Club. Jetstar passengers can and do use the Qantas Club but Jetstar does not pay for the cost of any of this. So is Qantas really losing money? Or is it profitable but simply losing money on paper because it is carrying so many costs incurred by Jetstar? We have been told by Qantas management that the changes that will effectively gut Qantas are necessary because Qantas international is losing money but, given the inside information I have just detailed, I would argue those claims need to be reassessed.

Indeed, given these extensive allegations of hidden costs, it would be foolish to take management's word that Qantas international is losing money. So why would Qantas want to make it look like Qantas international is losing money? Remember the failed 2007 private equity bid by the Allco Finance Group. It was rejected by shareholders, and thank goodness it was, for I am told that what we are seeing now is effectively a strategy of private equity sell-off by stealth.

Here is how it works. You have to keep Qantas flying to avoid breaching the Qantas Sale Act but that does not stop you from moving assets out of Qantas and putting them into an airline that you own but that is not controlled by the Qantas Sale Act. Then you work the figures to make it appear as though the international arm of Qantas is losing money. You use this to justify the slashing of jobs, maintenance standards and employment of foreign crews and, ultimately, the creation of an entirely new airlines to be based in Asia and which will not be called Qantas. The end result? Technically Qantas would still exist but it would end up a shell of its former self and the Qantas Group would end up with all these subsidiaries it can base overseas using poorly paid foreign crews with engineering and safety standards that do not match Australian standards. In time, if the Qantas Group wants to make a buck, they can flog these subsidiaries off for a tidy profit. Qantas management could pay the National Boys Choir and the Australian Girls Choir to run to the desert and sing about still calling Australia home, but people would not buy it. It is not just about feeling good about our national carrier—in times of trouble our national carrier plays a key strategic role. In an international emergency, in a time of war, a national carrier is required to freight resources and people around the country and around the world. Qantas also operates Qantas Defence Services, which conducts work for the RAAF. If Qantas is allowed to wither, who will meet these strategic needs?

I pay tribute to the 35,000 employees of the Qantas Group. At the forefront of the fight against the strategy of Qantas management have been the Qantas pilots, to whom millions of Australians have literally entrusted their lives. The Australian and International Pilots Association sees Qantas management strategy as a race to the bottom when it comes to service and safety. On 8 November last year (2010), QF032 experienced a serious malfunction with the explosion of an engine on an A380-800 aircraft. In the wrong hands, that plane could have crashed. But it did not, in large part because the Qantas flight crew had been trained to exemplary world-class standards and knew how to cope with such a terrifying reality. I am deeply concerned that what is being pursued may well cause training levels to fall and that as a result safety standards in the Qantas Group may fall as well. AIPA pilots and the licensed aircraft engineers are not fighting for themselves; they are fighting for the Australian public. That is why I am deeply concerned about any action Qantas management may be considering taking against pilots who speak out in the public interest.

A lot of claims have been made about the financial state of Qantas international but given the information I have presented tonight, which has come from within the Qantas Group, I believe these claims by management are crying out for further serious forensic investigation. Qantas should not be allowed to face death by a thousand cuts—job cuts, route cuts, quality cuts, engineering cuts, wage cuts. None of this is acceptable and it must all be resisted for the sake of the pilots, the crews, the passengers and ultimately the future of our national carrier.




Please forward this onto all Australians & all your contacts. As I will not & won't let this happen as a current PROUD staff member of Qantas Airways Ltd... So bring it on Alan Joyce & all other management involved..



I believe this inquiry will gain a lot interest from the general public unlike the last one.... I note the media trolls working overtime in the press this week, an indication that the Q PR machine are a little concerned.

example http://www.smh.com.au/travel/blogs/travellers-check/will-you-accept-qantass-apology-

Just read the comments section,



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Old 8th Nov 2011, 07:24
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Following the other thread on the exodus of QF pilots it occurs to me there may be another matter that may interest the Senators.

Is this yet another unplanned or planned consequence of this management team that failed to disclose the possible effect of their strategy on the Brand and its operations?

The PIA with the pilots was very much tokenism, but it seems this is the final group that the Rat is indirectly declaring war on by disengaging them.

The senators should be concerned that this executive is dismantling by stealth a technical group of excellence that has served the public and the nation well and all to save a few dollars per passenger.

I can hear the words now affordable safety and all for the sake of bonuses for a few.

Where was this disclosed at the AGM or in any strategy disclosure to shareholders.

If the favoured few institutionalised shareholders were not nervous before, they should be now.

This is surely one for Senator Xenaphon??
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Old 8th Nov 2011, 08:16
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From Clive Dorman in the SMH:

There are 22 million different opinions about the national carrier and many of them miss the point: Qantas’s costs are too high, especially on long-haul international routes, and must be reduced if it is to survive.
Obviously Mr Dorman believes that "many miss the point" ... because they don't agree with his point.

He is entitled to his point, and it may very well have worth ... however, there are many others that make the point that Qantas doesn't HAVE to reduce its costs to survive.

Mr Dorman tends to forget that ... to survive ... you need to either have costs less than income ... OR income greater than costs.

To date, Qantas has only been harping on about the need to take the easy, short term option.
Perhaps, if they got some of their MBAs (or Mr Maths) working on a strategy to increase income, they may be more successful in moving towards a more sustainable long term future.
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Old 8th Nov 2011, 08:27
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I would say that the initial plan is to lower the cost base, get rid of the dead wood (according to the little man) etc etc.

Once this is complete, increase the revenue.

Great in theory, but the grand Asian plan is flawed.

Bring your staff with you, they will agree to cut costs, sell them the dream and then grow and increase revenue.

Not hard!
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Old 8th Nov 2011, 10:53
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It is hard if you cannot admit you are wrong and you are incompetent.

I have run some complex small businesses. I used to think these management guys knew way more than me, but they don't. My business management skills came from the school of hard knocks. I am here to tell anyone (including them) they are simply way out of their depth.

When I buy companies I look for the guy who has lost weight, running around like a headless chook, blaming staff, the ATO etc etc. If the place is close to succeeding and can deal with a leader like that then I'm away and am pretty sure I can make the place work. I then make an offer and usually you can see the stress leave them as you finish the sentence.

That guy is AJ and the board.

I would happily buy an airline from them. They show ALL the hallmarks of being out of their depth. The symptoms are the same, be it cafe's, hairdressers or even a childs paper run.

I would never buy an airline from Borghetti. He reeks confidence and 'can-do' attitude. He is relaxed, in charge and has a plan. Additionally, he is a competitor I would be deeply nervous of.

Like a feral farm cat backed against a wall, AJ is panicky, he is unpredictable and therefore dangerous. As he sees it he is fighting the entire company, the board (at least anxious he has to perform to their expectations) the government and probably drinking too much and arguing about who leaves the top of the toothpaste off with his boyfriend.

The Senate would have rattled him. A lot. he breezed through stage one by focussing on minutiae on subjects he was comfortable with. There are numerous sleepers in there lying dormant that he will be nervous as hell about. I am utterly convinced the 'delightful' Ms Wirth has come up with a number of Qf's recent PR 'wins'. If you understand the subject, they are like the ALP running a federal govt on their ability to get a headline the next day, like batts, school halls, solar etc etc. If you don't, he came out a champion.

No one knows what FWA will come up with. It may be toothless, pander to the vote getter of fixing F/A's schedules and leave it at that, but it may not.

The chess board is out, there are a few more moves on it, but win lose or draw I congratulate ALL the unions involved.

I spent an entire day reading through the Senate hearing. It is in the hands of the government (desperate to be seen to have a win at something) what they do with the information in there. There are some absolute clangers in there that even a money no object legal team would find daunting.

The opposition is rattled, they are not strong in their game. To anyone with an understanding of business they are on shaky ground and desperate for wins.

I do have hope that Qantas may yet survive.
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Old 8th Nov 2011, 11:10
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The Senate would have rattled him.
And it was evident for all staff & passengers to see (getting off his flight) at Sydney domestic on friday.
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Old 8th Nov 2011, 11:19
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V-Jet

I do have hope that Qantas may yet survive.
QANTAS will survive. With or without AJ and the board. Preferably the latter.

If you were to go by earlier news reports, AJ came out smelling like roses after the "inappropriate" grilling by Doug Cameron and Bob Brown, neither of which I am a fan of, but they asked questions that AJ didn't like and made comments AJ didn't like. Boohoo to him.

There is a growing resentment amongst the "peasants" out there that something smells badly inside the board of QANTAS. Hopefully, this hearing can be upgraded to an enquiry, but I doubt that will happen.

Enough pressure has to be put on AJ and the board to step aside. AJ alone won't cut it. You still have Clifford and Strong in there, who are no doubtedly pulling the strings on AJ and will do so to the next person. If you're removing cancer, remove the lot.
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Old 8th Nov 2011, 11:24
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It's also a very unusual government at the moment with an extremely tenuous claim to the title. They're one defection, heart attack or retirement away from a by election and a possible/probable (depending on the seat) change of government. The country is not exactly pro government at the moment, but nor is it pro the opposition; the mood is basically 'you all suck' and largely has been in both state and federal politics for the last decade or so. The federal government's recent debacles must surely be eating away at what little confidence they had to start with.

The current fashion for anti corporate protests is undeniably wanky, but I believe they do illustrate the current public sentiment against companies who claim they're too poor to give cost-of-living pay rises or employ Australians rather than Thai serfs, but still seem to find the coin for 5 million dollar executive salaries (at Australian rather than Thai levels of exec renumeration) and 500 million dollar profits. When it becomes apparent that all those companies seem to be run by the same twenty people (with a million dollar kicker per company), it all looks a bit suss, even to middle of the road obsevers who thought Joh had the right idea about student protests.

Any person or board who runs a transport company and would cheerfully inconvenience that number of customers when they had other means is a cad. That's my non academic, non executive, non renumerated with 5 million dollars opinion. Innocent people who have no horse in the Qantas vs Workers race missed funerals, weddings, business meetings, international connections and countless other important commitments because of the Qantas Board's action. That's what they think of their customers, that's what they think of the transport service they provide. So the TWU used to do it? Sure they did, and that's why a lot of people still hate them. It's really hard for Qantas to claim the moral high ground when they pulled the biggest ever snap strike without a hint of notice. Clifford wants to bag out the alleged Union Heavies? He's now shown himself to be just as much of a wildcat. In this dispute, the ALAEA and TWU gave ample notice of their intended actions, so the customers were aware and didn't find out the hard way on Fookbook mid Saturday afternoon. Spirit Of Australia my arse. They should be made to paint it out like Golden Circle had to hastily remove 'Australian Grown' from their trucks with black spray paint.

Ironically enough, Corrigan's airline is now looking like the reliable way to fly. Strange times indeed!

Last edited by Worrals in the wilds; 8th Nov 2011 at 11:42.
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Old 8th Nov 2011, 13:32
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Interesting clip regarding JAL, leading by example. Hope the link works http://video.l3.fbcdn.net/cfs-l3-snc...f7ee14ca7d6c66
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Old 8th Nov 2011, 17:53
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Interesting to sit back and watch the question time in the senate hearing. I think AJ answers the questions well, but the senators on the other hand seem to get so wound up and end up making some very poor "personal" remarks in response. I would be very surprised if it is a negative outcome for the Qantas management, and the poor sportsmanship from the senators will only help AJ's team.
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Old 8th Nov 2011, 21:21
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When is aj back on before the senate?
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Old 8th Nov 2011, 21:37
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I've said it once before. Qantas via Joyce and Clifford have offered the gillard government a life line. Through their actions of attempting to trash fair work and unions, they have opened up the whole ir issue which is not what Abbott and Abetz wanted.
Abbott and Abetz have been evasive when trying to outline what their alternative ir platform is. Work Choices mark 2 doesn't sound good nor does it wash with many.
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Old 8th Nov 2011, 22:04
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One thing that you guys might find surprising is this. Ian Oldmeadow was working on Federal Election day last year. Handing out how to vote cards for the Labor party. I know it seems strange but is very true.
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Old 8th Nov 2011, 22:19
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My old mate Ian, a beacon of integrity!
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Old 8th Nov 2011, 22:49
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One thing that you guys might find surprising is this. Ian Oldmeadow was working on Federal Election day last year. Handing out how to vote cards for the Labor party. I know it seems strange but is very true.
Steve, I find nothing surprising anymore. For instance who would have thought Australia would have an atheist, orange haired Welsh woman with a Hairdresser partner who promotes 'mens sheds' as Prime Minster???

As for the never-ending bizzare theatrics of QF Management and Labor's mish mash/love hate/mates rates relationship, that also 'takes the cake'.
As Doc Holliday once said 'my hyprocrisy has no bounds'.
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Old 9th Nov 2011, 03:23
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One thing that you guys might find surprising is this. Ian Oldmeadow was working on Federal Election day last year. Handing out how to vote cards for the Labor party. I know it seems strange but is very true.
Of course he would be! A pro-worker party keeps anti-union people in business. He has a livelyhood to protect!

Last edited by BrissySparkyCoit; 9th Nov 2011 at 04:12.
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Old 9th Nov 2011, 04:03
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Here's today's example of Qantas failing to have the right strategy.

Qantas the big loser as China Southern comes to Perth | Plane Talking

The SMH stories by Paul Sheehan and Clive Dorman were pathetic. And the Australian is so dull I couldn't read it to the end.

From Plane Talking.

Here we have China Southern wasting its time and money flying to somewhere in Australia without making them transfer between the international sides and domestic sides of Sydney Airport, and in their own quaint colors, while Qantas puts all its eggs into hip brands like Jetstar and Red Q, which sound like a video game and a dating agency in Asia, thus cunningly avoiding addressing the leisure and business markets of China with anything that actually uses the word ‘Australia’ or the image of something as universally recogniseable as Australian as a kangaroo.
The genius of the Joyce plan for Qantas continues to set my hair on fire. Hey, were going to get rich by not being Australian. Freeking brilliant. Can’t wait for the imminent announcement of the location of Red Q, the A320 airline with sleeper seats bigger than those on an A380 that is going to rip up those old fogy national carriers like Singapore Airlines and Cathay Pacific and indeed, struggling poor old China Southern (third largest airline in the world by head count) as their customers rush to book Fair Q or whatever it is called, and wherever it is based, and with whomever is supposedly going to bankroll the 51% stake that will ensure that it can be legitimately called a Singaporean or Malaysian flag carrier.
The institutional investors in Qantas are officially superbly entranced by the brilliance of the Joyce strategy, which will see them without dividends for how many more years, with a shrunken international Qantas brand that will diminish the attractiveness of its loyalty program and the synergies with the domestic full service brand which is under siege by that other bunch of losers at Virgin Australia.
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Old 9th Nov 2011, 05:04
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denabol You don't say who you are quoting from Plane Talking. Is this from a contributor to the blogg? It certainly doesn't use journalistic terms and language.
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Old 9th Nov 2011, 05:20
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Flying Fox. Just a cut from a sarcastic post by Ben. I should have pasted it in full. Meant to mention too there is a curious mix of stories on Business Spectator today as well including one that argues that the problems are almost entirely management failures.
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Old 9th Nov 2011, 05:21
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Now that a few days have passed it occurred to me watching the complete hearing is a nightmare, So I decided to break it up and add some relevant background to the many issued discussed. Over the next few days, when I get the time, I will do some more. Trust these videos will help the cause, and I hope people with a legal mind on here can see something that may be of importance.

Jetstar Crewing issue MK2



Accounting at Q



support clips






.

Last edited by TIMA9X; 9th Nov 2011 at 05:52.
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