5th September QF Announcement
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If Jetstar took over all trans-tasman flying off Jetconnect would the operation still loose money? Or would its lower cost base make it profitable.
The travelling public would still select a widebody flown by EK over an narrowbody 320/737 flown by JQ or QF when they know the service they can get on the former. Thats a big issue both NZ/VA and QF face on the Tasman.
The travelling public would still select a widebody flown by EK over an narrowbody 320/737 flown by JQ or QF when they know the service they can get on the former. Thats a big issue both NZ/VA and QF face on the Tasman.
The only problem I see with that is it assumes Jetstar takes over the Jetconnect customer base but that probably wouldn't happen, many of the customers would go to Air NZ or another major carrier. You mentioned EK but they don't have the frequency to suit trans Tasman passengers. They could run more flights I guess but it's hard to imagine it's worth getting more of their widebody aircraft tied up on 3 hour sectors. I think Jetconnect will stay. It fits with the leaner operation they are aiming for and is also potentially useful in the future for larger aircraft on longer routes with a lower cost base.
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Qantas will be split up and sold off at a "rock-bottom price"
Emirates deal will be end of Qantas
In my view, Stephen Bartholomeusz, historically, has been pretty much a conduit for Qantas PR in the Business Spectator.
we just knew this would be coming......
Qantas will be split up and sold off at a "rock-bottom price" within four years if its proposed tie-up with Emirates goes ahead, the transport union says.
Flying kangaroo boss Alan Joyce announced on September 5 that his airline had inked a deal with Dubai-based Emirates which would see the two airlines sharing routes, frequent flyer programs, IT systems, airport facilities and other key parts of the businesses.
The tie-up, which replaces Qantas's close relationship with British Airways, is yet to receive the green light from the Australian Competition and Consumer Commission (ACCC), which is examining the proposal and has final approval.
But Transport Workers' Union (TWU) boss Tony Sheldon says the deal could lead to Qantas falling into foreign hands and ceasing to exist in its current format - and even risk national aviation security.
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Mr Sheldon said Qantas had already sold its Adelaide-based catering business to Emirates, and he predicted more parts of the airline would be sold in coming years.
"I've no doubt in my mind whatsoever that the strategy that's been adopted by the present board and the CEO is a strategy that will mean the absolutely demise and breakup of Qantas," Mr Sheldon said.
The TWU has put its arguments in a submission to the ACCC.
The commission has said it will take about six months to analyse the deal and make a decision whether or not to permit it.
Qantas has previously argued that its international operations are in decline and the deal with Emirates will help stabilise the business and be good for competition.
The domestic financial markets wel
Read more: Emirates deal will be end of Qantas: TWU
Flying kangaroo boss Alan Joyce announced on September 5 that his airline had inked a deal with Dubai-based Emirates which would see the two airlines sharing routes, frequent flyer programs, IT systems, airport facilities and other key parts of the businesses.
The tie-up, which replaces Qantas's close relationship with British Airways, is yet to receive the green light from the Australian Competition and Consumer Commission (ACCC), which is examining the proposal and has final approval.
But Transport Workers' Union (TWU) boss Tony Sheldon says the deal could lead to Qantas falling into foreign hands and ceasing to exist in its current format - and even risk national aviation security.
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Mr Sheldon said Qantas had already sold its Adelaide-based catering business to Emirates, and he predicted more parts of the airline would be sold in coming years.
"I've no doubt in my mind whatsoever that the strategy that's been adopted by the present board and the CEO is a strategy that will mean the absolutely demise and breakup of Qantas," Mr Sheldon said.
The TWU has put its arguments in a submission to the ACCC.
The commission has said it will take about six months to analyse the deal and make a decision whether or not to permit it.
Qantas has previously argued that its international operations are in decline and the deal with Emirates will help stabilise the business and be good for competition.
The domestic financial markets wel
Read more: Emirates deal will be end of Qantas: TWU
we just knew this would be coming......
"A Qantas no-brainer for the ACCC
i
Published 1:18 PM, 11 Sep 2012
You’ve got to wonder why the Australian Competition and Consumer Commission thinks it will take up to six months for it to review the proposed alliance between Qantas and Emirates.
The ACCC has a lot of experience in evaluating proposals for alliances between airlines. Apart from its 17-year history of assessing and endorsing the Qantas/British Airways joint service agreements on the Kangaroo route in the past two years, the commission has reviewed, and approved, alliances between Virgin Australia and Delta, Air New Zealand, Etihad and Singapore Airlines.
It would appear a reasonable understanding that the commission has a solid working knowledge of how the industry operates and what the impacts of alliances are on the Australian market for international travel.
The Qantas/Emirates deal appears a no-brainer. Qantas is going out of the international industry backwards. It lost $450 million in its international business last year after losing the $216 million a year earlier. It has been lopping routes and frequencies in a desperate attempt to reduce the haemorrhaging.
As Qantas said in its submission to the ACCC, its international business is unable to compete or operate profitably in its current configuration and is in terminal decline.
It has cut back its flights to Europe from five a day six months ago to three a day and will withdraw its services to Frankfurt regardless of the ACCC’s decision. It has also said it may also withdraw one of its two services to London in the short term.
Absent the deal with Emirates, the losses and the shrinking of its network will inevitably place a question mark over the continued existence of even its truncated international route network. Qantas can’t justify investing in new and more efficient and competitive product while it is losing money so the business is in a self-reinforcing and quite destructive spiral.
Virgin Australia has demonstrated one blue-print for a diminished Qantas future by creating a virtual international network. Qantas could do the same.
The reason for Qantas’ woes is the structural change that has occurred in the industry in this region, and indeed globally, over the past decade or so as the Middle Eastern carriers like Emirates, Etihad and Qatar have emerged.
Already confronted with competition from hub carriers like Singapore and Cathay, the new hubs in Dubai and Abu Dhabi with their easy reach into a multitude of European ports have steadily stripped market share from Qantas.
Those airlines have a natural advantage from their location, which allows them to feed traffic into their hubs and then aggregate it. As relatively new airlines they have younger and more efficient fleets, they receive some support in the form of favourable tax regimes and government-funded infrastructure and they have significantly lower labour costs.
The Qantas submission said that Emirates’ labour costs, for instance were $US47,000 per employee per year in 2009-10. Singapore’s were $US45,000. Qantas’ were $US92,000.
Looked at from another perspective, Emirates’ labour costs represented 13 per cent of total revenue. Qantas’ were 25.1 per cent of its revenue.
Thus it isn’t surprising that over the past decade Qantas has steadily lost market share. The Qantas brand’s market share has almost halved, from 36 per cent to 19 per cent. Even if Jetstar’s international services are included it has lost nine percentage points of market share, mainly to the Middle Eastern carriers.
If the Qantas group share were aggregated with Emirates’ eight per cent of the market, they would have a combined 35 per cent market share. If this were a conventional merger (which it isn’t, given that there are no equity holdings involved) that level of share in a highly-competitive market with a very significant and growing number of competitors wouldn’t be an obstacle to a deal.
In fact, the ACCC has signed off on Virgin Australia’s four alliances which has created the virtual international network for Qantas’ main domestic rival. Between them Virgin and its allies have a combined market share of almost 30 per cent.
Given that the "counterfactual," as competition lawyers would put it, is the continued marginalisation of Qantas as an international airline and potentially its complete withdrawal to its domestic base the status quo isn’t likely to maintain current levels of competition.
Australia’s "open skies" policy, the entry of not just the Middle Eastern carriers but more recently three big Chinese airlines and regional low-cost carriers to the market means the market will continue to be fiercely contested regardless of whether the ACCC approves the tie-up between Qantas and Emirates.
The Emirates alliance isn’t a complete solution to Qantas’ challenges but it is an important element of the strategy the group is pursuing to stem the losses and get its international business to the point where it can again invest in it and improve the competitiveness of its product.
For a variety of historical reasons, some of which have to do with nationalism, while the global aviation industry is structurally flawed the normal remedy of consolidation isn’t easily pursued conventionally. Alliances and co-operation are the closest substitute.
If Australia is to hope to retain a national flag carrier of any substance Qantas has to be able to complete a deal with Emirates that, while it will improve Qantas’ competitiveness and financial position, doesn’t appear to have meaningful implications for the overall competitive intensity of the international dimension of the Australian aviation market. "
i
Published 1:18 PM, 11 Sep 2012
You’ve got to wonder why the Australian Competition and Consumer Commission thinks it will take up to six months for it to review the proposed alliance between Qantas and Emirates.
The ACCC has a lot of experience in evaluating proposals for alliances between airlines. Apart from its 17-year history of assessing and endorsing the Qantas/British Airways joint service agreements on the Kangaroo route in the past two years, the commission has reviewed, and approved, alliances between Virgin Australia and Delta, Air New Zealand, Etihad and Singapore Airlines.
It would appear a reasonable understanding that the commission has a solid working knowledge of how the industry operates and what the impacts of alliances are on the Australian market for international travel.
The Qantas/Emirates deal appears a no-brainer. Qantas is going out of the international industry backwards. It lost $450 million in its international business last year after losing the $216 million a year earlier. It has been lopping routes and frequencies in a desperate attempt to reduce the haemorrhaging.
As Qantas said in its submission to the ACCC, its international business is unable to compete or operate profitably in its current configuration and is in terminal decline.
It has cut back its flights to Europe from five a day six months ago to three a day and will withdraw its services to Frankfurt regardless of the ACCC’s decision. It has also said it may also withdraw one of its two services to London in the short term.
Absent the deal with Emirates, the losses and the shrinking of its network will inevitably place a question mark over the continued existence of even its truncated international route network. Qantas can’t justify investing in new and more efficient and competitive product while it is losing money so the business is in a self-reinforcing and quite destructive spiral.
Virgin Australia has demonstrated one blue-print for a diminished Qantas future by creating a virtual international network. Qantas could do the same.
The reason for Qantas’ woes is the structural change that has occurred in the industry in this region, and indeed globally, over the past decade or so as the Middle Eastern carriers like Emirates, Etihad and Qatar have emerged.
Already confronted with competition from hub carriers like Singapore and Cathay, the new hubs in Dubai and Abu Dhabi with their easy reach into a multitude of European ports have steadily stripped market share from Qantas.
Those airlines have a natural advantage from their location, which allows them to feed traffic into their hubs and then aggregate it. As relatively new airlines they have younger and more efficient fleets, they receive some support in the form of favourable tax regimes and government-funded infrastructure and they have significantly lower labour costs.
The Qantas submission said that Emirates’ labour costs, for instance were $US47,000 per employee per year in 2009-10. Singapore’s were $US45,000. Qantas’ were $US92,000.
Looked at from another perspective, Emirates’ labour costs represented 13 per cent of total revenue. Qantas’ were 25.1 per cent of its revenue.
Thus it isn’t surprising that over the past decade Qantas has steadily lost market share. The Qantas brand’s market share has almost halved, from 36 per cent to 19 per cent. Even if Jetstar’s international services are included it has lost nine percentage points of market share, mainly to the Middle Eastern carriers.
If the Qantas group share were aggregated with Emirates’ eight per cent of the market, they would have a combined 35 per cent market share. If this were a conventional merger (which it isn’t, given that there are no equity holdings involved) that level of share in a highly-competitive market with a very significant and growing number of competitors wouldn’t be an obstacle to a deal.
In fact, the ACCC has signed off on Virgin Australia’s four alliances which has created the virtual international network for Qantas’ main domestic rival. Between them Virgin and its allies have a combined market share of almost 30 per cent.
Given that the "counterfactual," as competition lawyers would put it, is the continued marginalisation of Qantas as an international airline and potentially its complete withdrawal to its domestic base the status quo isn’t likely to maintain current levels of competition.
Australia’s "open skies" policy, the entry of not just the Middle Eastern carriers but more recently three big Chinese airlines and regional low-cost carriers to the market means the market will continue to be fiercely contested regardless of whether the ACCC approves the tie-up between Qantas and Emirates.
The Emirates alliance isn’t a complete solution to Qantas’ challenges but it is an important element of the strategy the group is pursuing to stem the losses and get its international business to the point where it can again invest in it and improve the competitiveness of its product.
For a variety of historical reasons, some of which have to do with nationalism, while the global aviation industry is structurally flawed the normal remedy of consolidation isn’t easily pursued conventionally. Alliances and co-operation are the closest substitute.
If Australia is to hope to retain a national flag carrier of any substance Qantas has to be able to complete a deal with Emirates that, while it will improve Qantas’ competitiveness and financial position, doesn’t appear to have meaningful implications for the overall competitive intensity of the international dimension of the Australian aviation market. "
Last edited by TIMA9X; 21st Sep 2012 at 17:23.
The Qantas submission said that Emirates’ labour costs, for instance were $US47,000 per employee per year in 2009-10. Singapore’s were $US45,000. Qantas’ were $US92,000.
Emirates pay for the housing/education/health of many of its staff. There is NO WAY that everything was factored in the QF submission.
If QF offered a EK deal in Australia, it would be 400k+ package per pilot easy.
I can give you exactly what an EK 777 (or 330/340 or 380 as we have fleet pay) Captain would cost QF thanks to the calculator on the ATO website. My package would need to be $395k without taking into account school fees-if I include them for 2 kids + medical it bumps it up to just shy of 450k-and then there is the tax free provident fund and the J upgradeable F Staff Travel. BUT I live in the Middle East....... it is what you make of it, personally I like being an expat-but I come from an expat family.
Last edited by clear to land; 21st Sep 2012 at 09:12.
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Where does QF get its figures regarding EK and SQ's staff costs? Cross referencing to a post I made some months back
http://www.pprune.org/dg-p-reporting...about-aud.html
SQ's labour cost per employee is US$83,000 per annum not US$45,000 based on their 2010/2011 annual report.
http://www.pprune.org/dg-p-reporting...about-aud.html
SQ's labour cost per employee is US$83,000 per annum not US$45,000 based on their 2010/2011 annual report.
Sure, CTL, but the question is the comparitive cost to the employer, not how much ends up in our pockets rather than the ATOs.
Direct cost to EK for me as a 6 year line Captain would be only a little over 220K- less than just about any QF Captain.
The fact that I keep it all is why I stay and they don't have to pay more.
Direct cost to EK for me as a 6 year line Captain would be only a little over 220K- less than just about any QF Captain.
The fact that I keep it all is why I stay and they don't have to pay more.
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Well yeah, but this just goes to prove that high taxes are inflationary. Don't get me wrong- I like living in an egalitarian society with a robust safety net, but it is expensive.
If the Australian government had a brain they'd realise that exporting all of the highly paid PAYE jobs is idiocy and would have limited access by foreign carriers years ago. You cannot have a socialist society and cold economic rationalism in the same body of policy. Not for long, at any rate.
QF is complaining about the same thing that's vexing retailers, manufacturers and in fact everyone who employs an Australian to do a job that can be done by a foreigner. Extremely high housing costs, very high taxes, very high prices across the consumer spectrum all contribute to wages growth pressure.
But, its the market that we "serve", and since everyone is similarily economically pinched, often unduly price sensitive. This is why a constrained access to local markets policy worked so well for so many decades. Ask Canada why they limit the route approvals for Emirates...its all about local jobs and protectionism.
If the Australian government had a brain they'd realise that exporting all of the highly paid PAYE jobs is idiocy and would have limited access by foreign carriers years ago. You cannot have a socialist society and cold economic rationalism in the same body of policy. Not for long, at any rate.
QF is complaining about the same thing that's vexing retailers, manufacturers and in fact everyone who employs an Australian to do a job that can be done by a foreigner. Extremely high housing costs, very high taxes, very high prices across the consumer spectrum all contribute to wages growth pressure.
But, its the market that we "serve", and since everyone is similarily economically pinched, often unduly price sensitive. This is why a constrained access to local markets policy worked so well for so many decades. Ask Canada why they limit the route approvals for Emirates...its all about local jobs and protectionism.
Last edited by Twin Beech; 21st Sep 2012 at 22:57.
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And on second thought, the " free jet fuel" BS that you hear from time to time is not true. But what IS true is that a national treasury funded by free oil negates the reason for high taxes.
EK may not get free fuel, but they do get very low income taxes, which may amount to a similar thing in an industry with historically poor returns and profit margins, executive renumeration notwithstanding.
EK may not get free fuel, but they do get very low income taxes, which may amount to a similar thing in an industry with historically poor returns and profit margins, executive renumeration notwithstanding.
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I try not to, but I have no first hand knowledge of how the progressive tax structure shakes out for other staff. Maybe over the 32,000 (ish) staff the effect is less dramatic, but the discussion was focusing on pilot costs.
Whats true however is that Australian wages generally do mirror the high cost of living here, expressed as a total of all factors including taxes.
I have to sign off now and go do my clothing/eyeglasses/tool shopping on this layover because its all so much cheaper than at home.
D18S
Whats true however is that Australian wages generally do mirror the high cost of living here, expressed as a total of all factors including taxes.
I have to sign off now and go do my clothing/eyeglasses/tool shopping on this layover because its all so much cheaper than at home.
D18S
Don't forget there are plenty of non-pilot employees in an airline
Same over here where I work, low taxes (10% of my income) means the company gets to pay less for me to nett an acceptable take home.
Staff get paid what the market says they're worth, not what the union demands.
Sensible government policies recognizing aviation as a key area have ensured continued growth.
Looking at Australia with it's sky high taxes, union strangle hold and stifling government regulation, it's not surprising Qantas can't compete internationally.
Staff get paid what the market says they're worth, not what the union demands.
Sensible government policies recognizing aviation as a key area have ensured continued growth.
Looking at Australia with it's sky high taxes, union strangle hold and stifling government regulation, it's not surprising Qantas can't compete internationally.
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Same over here where I work, low taxes (10% of my income) means the company gets to pay less for me to nett an acceptable take home.
No company board worth their own salary would agree to an outcome that is detrimental, therefore business practices ,good or bad,beyond that is their responsibility.
Qantas lost the competition edge because they alienated their own customers and estranged their employees. Those are the critical factors and their employee relations practices would do well in a John Cleese training video about what NOT to do.
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Agreed Neville, but the vast majority of Emirates employees don't live in the Silicon Oasis. Don't forget that although housing may be provided in many packages, the actual costs of providing that in Dubai is significantly different to what it might be in Australia - particularly when the corporation itself is tied up with other local organisations/government etc. Legoland/infrastructure is built by imported Indian workers (OHS rules? Superannuation?), the services are provided by imported Philippino workers... I'm generalising of course, but these underlying non-professional labour costs keep the overall cost of facilities and services down.
The employee value of the package is entirely different to the company cost of the package.
The employee value of the package is entirely different to the company cost of the package.
Yes I agree with that, and additional to the lower costs it also funds a local economy for the residents of Dubai.
The problem is that QF keep telling everyone that their labour costs are too high and look at Emirates and how cheap their labour costs are. The problem is that it is not a fair comparison and realistically one that cannot be made as the government and EK are working together for the betterment of Dubai. In Australia QF are being hamstrung by everybody and everything. Hence the high cost of doing business in OZ.
The problem is that QF keep telling everyone that their labour costs are too high and look at Emirates and how cheap their labour costs are. The problem is that it is not a fair comparison and realistically one that cannot be made as the government and EK are working together for the betterment of Dubai. In Australia QF are being hamstrung by everybody and everything. Hence the high cost of doing business in OZ.
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I will Accept Lower Wages If....
The Cost of living in Australia falls.
The problem is Australians live in a Country bigger than mainland USA but with a population smaller than California.Oz may have a pop of 22million people but it only has 9 million people in the workforce.The tax regime is accordingly punative.The black market in Australia thrive because of this.The internet has been an absolute boon.For far too long Australians have been overcharged for white goods,clothing.technology,shoes and food.The Scottish CEO of Coles could not believe the margins grocery chains were achieving.
World retailers for example have discovered Australia as their traditional home markets have shrunk.
Deflation will bring lower wages.If it costs less to live you need less income to live.DXB and SIN are perfect examples of countries where population compared to total land area equals a lower cost of infrastructure,lower tranport costs,lower food costs and an oustanding public transport network which means less cars and less money spent on fuel.
Australia suffers from the tyranny of distance,large landmass and small population .
Idiot governments haven't helped the circumstances
The problem is Australians live in a Country bigger than mainland USA but with a population smaller than California.Oz may have a pop of 22million people but it only has 9 million people in the workforce.The tax regime is accordingly punative.The black market in Australia thrive because of this.The internet has been an absolute boon.For far too long Australians have been overcharged for white goods,clothing.technology,shoes and food.The Scottish CEO of Coles could not believe the margins grocery chains were achieving.
World retailers for example have discovered Australia as their traditional home markets have shrunk.
Deflation will bring lower wages.If it costs less to live you need less income to live.DXB and SIN are perfect examples of countries where population compared to total land area equals a lower cost of infrastructure,lower tranport costs,lower food costs and an oustanding public transport network which means less cars and less money spent on fuel.
Australia suffers from the tyranny of distance,large landmass and small population .
Idiot governments haven't helped the circumstances
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And therein lies the ultimate problem: the nature of the Australian business environment simply does not allow a local airline to compete effectively in an international market.
There are lots of reasons: employee costs are one, as is taxation (individual and company), the regulatory environment, business legacy, social normalisation... Unfortunately, these factors lead to a strategy to segment and offshore.
There are lots of reasons: employee costs are one, as is taxation (individual and company), the regulatory environment, business legacy, social normalisation... Unfortunately, these factors lead to a strategy to segment and offshore.
Last edited by *Lancer*; 22nd Sep 2012 at 04:25.
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I don't think that deflation, in real terms, is on the cards. Globally stagflation for individuals has been happening for quite some time now...or at least in North America. Europe is next. Then Australia. Wages will fall while prices for energy (any number over 10% of household spend is dire, and wildly inflationary), food, education, taxes (Swan is already tilling the ground for increases), and durable goods will drift upwards.
Anyone who was an adult in the 1970's will recall with dismay what that leads to: Ennui, despair,....disco.
Australian political parties try to buy their way into power with the voters' money. Election promises are sold as either more handouts or reduced taxes, depending on your bent (and your income bracket). Both are ultimately harmful, and expensive in the long run.
I will observe once again that a socialist government (or as near to that as we have) should eschew the economic rationalist model of unfettered competition because the home team is burdened with (legislated largesse) obligations while the foreigners are not, by virtue of either geological accident (EK and its neighbours) or critical mass (Chinese airlines) or bizarre bankruptcy laws (US carriers, for example).
While not an advocate of protectionism in general I do think that airlines, and QF specifically, are a special case given their iconic role as part of a nation's identity and reach. As such they should be given the benefit of a little protection from wholesale competition.
There ought to be a dialogue between Canberra and the airlines so that both sides are clear on the realities of the market, and of the market for regulation as evidenced in electoral liability. Realpolitik, in other words.
Anyone who was an adult in the 1970's will recall with dismay what that leads to: Ennui, despair,....disco.
Australian political parties try to buy their way into power with the voters' money. Election promises are sold as either more handouts or reduced taxes, depending on your bent (and your income bracket). Both are ultimately harmful, and expensive in the long run.
I will observe once again that a socialist government (or as near to that as we have) should eschew the economic rationalist model of unfettered competition because the home team is burdened with (legislated largesse) obligations while the foreigners are not, by virtue of either geological accident (EK and its neighbours) or critical mass (Chinese airlines) or bizarre bankruptcy laws (US carriers, for example).
While not an advocate of protectionism in general I do think that airlines, and QF specifically, are a special case given their iconic role as part of a nation's identity and reach. As such they should be given the benefit of a little protection from wholesale competition.
There ought to be a dialogue between Canberra and the airlines so that both sides are clear on the realities of the market, and of the market for regulation as evidenced in electoral liability. Realpolitik, in other words.
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And therein lies the ultimate problem: the nature of the Australian business environment simply does not allow a local airline to compete effectively in an international market.
There are lots of reasons: employee costs are one, as is taxation (individual and company), the regulatory environment, business legacy, social normalisation... Unfortunately, these factors lead to a strategy to segment and offshore.
There are lots of reasons: employee costs are one, as is taxation (individual and company), the regulatory environment, business legacy, social normalisation... Unfortunately, these factors lead to a strategy to segment and offshore.
I'd suggest a slight amendment to your statement: the nature of the Australian business environment simply does not allow a local airline to compete effectively in an international market based on price alone. That doesn't mean businesses can't compete, and be highly profitable in doing so. German manufacturers realised a long time ago they were never going to be able to compete on price alone, hence they have focussed on value ie offering premium products but charging premium prices for them; that represents better value to the consumer. Qantas was perfectly poised to position itself as a premium carrier that also represented value to an increasingly large segment of the market that buys on value and not merely price, particularly given Jetstar was able to fulfil the price sensitive end of the market. A win win situation if ever there was one. Instead years of disgraceful management, senseless "cost cutting" and manipulating the group such that it is a better take-over target has all but killed any premium aspirations the brand may have aspire to.