MERGED: Alan's still not happy......

[Solomons Son]

Australian subsidy for automobile manufacturing is/was? 18 cents per capita whereas in Germany it is 96 cents per capita and in the United States it is $2.70 per capita.As for China we will never know but it does happen but we don't hear about it. Go figure! When the dollar drops to 50 cents we will have NO skills to take advantage of this and we will need to import workers. What a dumb country and getting dumber!

[Tankengine]

It is clear that Qantas has too many employees.

Too many pilots? Cabin crew? Engineers? Ground staff to check in passengers, drive aero bridges etc? Baggage handlers? - no!

To many levels of management? Too many people sitting in officers and NOT producing anything? - YES!

[ohallen]

Suspect that the damage inflicted on the company by this management far exceeds internal inefficiencies that should have been progressively sorted by this and previous management. I have seen no denial of need for internal restructuring by staff but they cannot fix it without management direction and engagement.
That clearly puts all balls back into managements court in my view.

[Vorsicht]

I try and tell my kids that they have to see things how they really are, not how you wish them to be.

On it's current trajectory Qantas is going broke, that is how it really is. Qantas is being hammered by smarter, leaner and more flexible airlines.

Pointing the finger at management or unions is futile. What's done is done and you cannot change the past (i.e. bang on about whether 777's should have been ordered or if Borghetti should have been appointed). There is only two ways out of this. Government protection/support or cost cutting (or a combination of the two).

So far the Government is indicating it is not going to offer support and recent actions would suggest they are not bluffing. That leaves cost cutting. It will come, and it will come across the board because no particular group in isolation is the problem, but no particular group is immune either, and that obviously includes management.

The first and most important step will be to get rid of Joyce and Clifford. Until they go, there is no chance of getting employee support for any significant change. And without employee engagement the Company is doomed.

[PW1830]

Summary and solution in 4 paragraphs.
it's not that hard.

[FYSTI]

Really, he left out the entire "Asian appendage"!
Listen, the employees could work for FREE for six months, do know where that money will go? Not into the international business, not into domestic but to the Asian Franchies.

What, in effect Vorsicht is advocating is a direct wealth transfer from the employees to those Asian businesses, and their beneficiaries. That's right, the money will be taken out of the employees pocket and into the likes of Denis Choo, Stanely Ho, not to mention the Vietnamese & Japanese crony capitalists. We haven't even mentioned the leasing arrangements for the 110 aircraft (or up to 400 eventually by 2020), and who might be behind that.

By Vorsicht is absolutely correct in one sense, the money has gone, looted, and cannot come back. That is why it is crony capitalism, those that make the f#ckup don't pay the price, someone else does.

[nitpicker330]

If ANZ can run a successful Airline across the ditch then surely Qantas could if they really wanted to.........and that's it in a nutshell they don't want to....

[cattletruck]

The car analogy is a good one. Wouldn't it be grand if Qantas employees could hire/fire their managers like they do in the German auto industry.

[Australopithecus]

Why is it that every arm chair expert prescribes cost cutting as the sole answer? One of the big problems with Qantas is that it has been shrinking while the population, wealth and market are all increasing. So we have a declining market share in relative terms, but most critically, a reducing fleet size!

REVENUE is the other term in the profit equation. You can cut costs to zero if you like...no revenue still results in zero profit.

QF (international) has lost whatever economies of scale it once enjoyed and has failed to adequately serve any nearby Asian cities, let alone most Australian ones.

Having had that little rant...there IS plenty of scope for cost cutting...I wonder why our idiot management have failed to action it?

[Ollie Onion]

Meanwhile all the competitors move onwards and upwards:

Air NZ signs Singapore deal | Stuff.co.nz

[moa999]

Vorsicht,

While I agree with you on the solution, I think Joyce and Clifford (who was a known cutter in former days) are the ones who need to do the cutting - swift and hard as part of their final period.
Then sweep in a new broom, new management to get things right. No point getting a new CEO if the first thing they do is cut -they will be as popular as Joyce.

I think the other big issue is QF is whether they can actually afford to cut in some of the areas that need cutting - where you have some very long serving employees with some very generous severance packages.

[SpannerTwister]

I'm not as smart as you

Originally Posted by Vorsicht

There is only two ways out of this. Government protection/support or cost cutting (or a combination of the two).

Now maybe I'm not as smart as you, my educational qualifications only amount to lessons learnt in the school of hard knocks, but without using too much of your obvious MBA talent, could you explain for simpletons like me why increasing your revenue would not also be helpful?

SpannerTwister

[moa999]

SpannerTwister,
Simply because apart from a bit of marketing fluff (food, loyalty etc) the airline business is a commodity and QF is pretty much (albeit not always) a price taker that is often the highest priced airline already.

[maui]

I will join Spanner Twister here. I have long pondered the same question. Damned if I can see any reason why increasing the potential market, and then marketing properly, isn't a better way to go.


I haven't a clue what Moa is on about. Guess that is because I am not MBA, nor university trained. My bad.


Maui

[SpannerTwister]

Originally Posted by moa999

QF is pretty much ...... a price taker that is often the highest priced airline already.

Thanks, I told you that I wasn't that smart !

Silly me, I would have thought that as Qantas is (often) the highest priced airline that by carrying more passengers they would gain more revenue.

So I've learnt from the smart people here that carrying more passengers (when you're apparently already the highest priced) doesn't lead to more revenue but less !!

Obvious solution then to gain more revenue is to fly less passengers.

Logical extension.....Carry less and less passengers and watch your revenue grow and grow until eventually you carry no passengers and have more revenue than you can cope with ?

Originally Posted by moa999

bit of marketing fluff ....loyalty ...

You should write for the AFR, seems like they need good journalists, a few days ago they were valuing the airline at around the $2.5b mark and the FF Program around the $3.0b mark, that's a lot for a bit of "fluff".

SpannerTwister

[TIMA9X]

Good summary here, without all the MBA mumbo jumbo, easy to follow

Key words Fresh Eyes at the top,

How Qantas can turn it around

Every man and his dog have a view about the problems facing Qantas but little has been said about the strategies that can turn the business around.
The first ten things that I would do are as follows.

Fresh Eyes
The business needs fresh sets of eyes on both the Board and Executive Committee. Airline finances are so complex and pivotal to earnings that the top jobs should go to persons with a strong finance background and deep insights into aviation strategy.
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I would have Peter Gregg or Colin Storrie as CEO’s. I’ve worked for both and they are the smartest aviation financiers and strategists going around. I suspect the horse has bolted for both.
Market Share Target
Qantas should bite the bullet and admit that its 65% market share target is wrong.
Removing the market share target will free-up the airline’s capacity decisions and enable it to better align its capacity with the economic cycle.

Jet Fuel Prices
In the 80’s and 90’s the oil and jet fuel prices cycled around a fixed mean of US$20. In this world capacity grew profitably at 5 per cent per annum.
Since early 2000, jet fuel prices have cycled around an upward trend of 14 per cent per annum yet airlines have continued to grow at 5 per cent.
Most airlines worldwide have focussed their capacity decisions on expectations about demand but they have ‘dropped the ball’ in relation to how capacity responds to surges in cost. Qantas can lead the way in adopting processes that will enable it to better adjust capacity to both costs and demand.

International Business
The airline should give up on the notion that the international business will return to profitability in private hands. The only thing that international airlines are consistently good at is destroying shareholder value.
Outside of nationalising the international business which is unlikely to happen, Qantas should replicate Virgin Australia by creating a virtual international network. This involves Qantas selling onto international services operated by carriers that have an equivalent if not superior product.

Jetstar Domestic
Jetstar domestic capacity expansion is hurting the mainline carrier. The Qantas group needs significantly greater analytical rigour in understanding the optimal mix of Qantas and Jetstar. There is a place for Jetstar in the Qantas group but this shouldn’t be at the expense of Qantas mainline.

Jetstar in Asia
This venture has been a failure for the Group. Jetstar Japan and Hong Kong have an enormous amount of capital tied up in aircraft that are sitting idle, while Jetstar Asia and Jetstar Pacific haven’t made sufficient returns.
While underlying demand for air travel is growing quickly in Asia the competition is too aggressive. The airline should re-focus its energy on the domestic business and minimise the Asian distraction.

Ageing Demographic
Qantas’ core demographic is an older business-purpose traveller that has ‘grown-up’ travelling with Qantas. This segment of the market is slowly dying.
In its place a younger, hip, tech-savvy, convenience-driven demographic is emerging that has grown into an aviation sector with a wider variety of choice. This new demographic is not a natural fit to the current Qantas product, which must change.
Yield Management
A 2 per cent improvement in revenue can earn the company $300m per annum. One of the ways to achieve this involves de-complicating and improving yield management systems.
Current systems have resulted in planes that are flying full but at poor yields. One of the reasons for this is that the forecasts on which the systems rely are not tied to the economic environment and competitor capacity decisions.
Integrated Strategies
Yield management won’t work effectively if there is excess capacity. The network planners and yield management analysts must work closely to ensure capacity decisions meet yield targets. Qantas should be targeting yield growth of 2 to 3 per percent per annum.
The analysts working on yield management need to be the ‘rock stars’ of Qantas. They must be highly analytical and in touch with how external economic forces and competitors influence the demand and supply dynamics. This needs to be mixed with experienced aviation people.
Workforce
The Qantas workforce is heavily disengaged. The bad news cycles every 3 to 6 months has weighed heavily on their productivity. When your workforce is not in a good headspace the result is a lack of information sharing, job-rivals ‘white-anting’ each other, and people looking for other jobs while trying to do their own.


The problem with Qantas’ people strategies is that every earnings issue the airline encounters results in a headcount reduction. If the fuel price goes up, if yields are weak, or if the company wants to improve productivity, the headcount must fall.
The company has been far too aggressive on the headcount lever.
Returning the company to its former glory is not going to be easy and will take some time. But it’s possible

Read more: How Qantas can turn it around

[Prince Niccolo M]

the future

http://www.nytimes.com/2014/01/16/ny...temail0=y&_r=0

[lemel]

Prince,

That is a sobering article.

[airsupport]

For the love of Qantas, sack Alan Joyce

Nathan Bell


In December 2006, Airline Partners Australia, a consortium that included Allco Equity Partners and Macquarie Bank made a bid of $5.60 per share for Qantas. It was hard to believe then, and even harder now.

But for a hedge fund missing a deadline, the debt-laden airline may have folded when the GFC hit a year later. Instead, Qantas survived, only to endure a slow death under current management. Since the APA bid, the shares have now fallen about 80 per cent.

Value investors picking over the wreckage of a famed national icon may be tempted. The aim of the next few hundred words is to pour a bucket of cold water on any enthusiasm for that idea.

If you have to own an airline – and believe me, we’re not forcing you – Qantas, with a host of natural advantages, should make the shortlist.

The domestic airline industry is a natural oligopoly with the dice so loaded that any potential competitor would be mad to challenge the established players. Assuming ‘rational’ behaviour – yes, we’ll get to that – both incumbents should be able to eke out respectable returns.

The Sydney/Melbourne air corridor ranks as the world’s fifth busiest route. Our cities are a long way from each other and our roads, incredibly, are worse than our airports. If ever there was a country built for air travel, this is it.

Qantas also has an iconic brand, a part of the national identity, to the point where many still ache for its re-nationalisation, and an enviable safety record.

These factors make Qantas a high-quality airline business, at least domestically where it dominates. But in the airline industry, there’s rarely a price cheap enough to offset the ever-present risks.

There are simply too many things beyond an airline’s control – from fuel prices, the continual need to renew fleets, unionised labour, competitive irrationality, weather and economic downturns – for investors to get a respectable return on their capital.

Given these features, airlines need great management to produce average returns.

Unfortunately, Qantas has woeful management delivering worse than no returns at all.

The primary job of an airline is to get passengers safely from A to B. That’s taken for granted, which is why lost baggage, rude staff and faulty entertainment units leave such a bad impression. The small stuff matters because the big things, like arriving in one piece, are taken for granted.

On October 31, 2011, in an attempt to win an industrial dispute, Alan Joyce trashed the Qantas brand by grounding the airline entirely. Even Joyce described it as an ‘unbelievable’ decision. Passengers were stranded, the story made headlines worldwide and the episode cost Qantas shareholders $70 million.

Virgin Australia, already in the ascendant, saw its chance. Lounges and routes were expanded, attractive deals were made to frequent flyers and new alliances were announced.

Since losing out to Joyce in the race to lead Qantas, John Borghetti, CEO of Virgin Australia, has done a convincing job of proving the Qantas board made the wrong choice.

Virgin has been transformed into a full service airline, successfully targeting the business segment and stitching together an international alliance network with foundation shareholders. Joyce created the opportunity and Borghetti took it willingly.

Joyce’s second fatal error was to persist with his predecessor’s ‘line in the sand’ approach, insisting that Qantas would not let its domestic market share drop below 65 per cent (it’s now 64 per cent).

This locked Qantas into a deeply unprofitable capacity battle with an invigorated competitor with a lower cost base. Qantas’s famous declaration that ‘where Virgin puts on one aircraft we will put on two’ is a textbook definition of business irrationality, an MBA case study in the making.

At the October AGM, Joyce said that Qantas had the ‘right strategy for a bright, successful future’ but the recent half year pre-tax loss of $300m gives the lie to that.

Joyce recently declared a state of emergency, retrenched another 1000 jobs, made a rent-seeking appeal to Government that would shame everyone but a global carmaker and ‘put all options on the table’, except his own removal presumably.

In Asia, Jetstar seems to be a sinkhole and the idea of a premium Asian-based carrier called Red Q was a stupid idea to begin with. At home, Jetstar now competes with Qantas and Virgin in a pointless and expensive capacity war.

So much for a successful future. If one could locate the epicentre of shareholder unfriendly management, Alan Joyce would be standing atop it, middle finger raised at all beneath him.

Joyce will go, probably sooner rather than later, at which point we can expect a more rational, less confrontational approach. Some members might like to dip their toe in then but we’d advise against it.

Even with a more considered and well-executed strategy, Qantas, like almost all airlines, is a poor business.

Whilst the frequent flier business might be worth around $2 billion, the capital demands of continually having to renew an expensive airline fleet mean this shouldn't be the basis of valuing Qantas. The airline itself could have a negative value.

[limelight]

Candidate?

Guess who has just become available?

Last Ansett CEO, Gary Toomey, is 'absolutely' free | Plane Talking