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Bye Bye Qantas Hello Jetstar

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Old 23rd Aug 2014, 11:07
  #41 (permalink)  
 
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Although the management must take some blame, surely the employees have had their snouts in the trough as well?

Folks seemed perfectly happy to accept the LWOP situation, if they could go off an fly someone else's shiny metal. Folks were happy to be cruise pilots, not building any "real" stick time.
And so sayeth someone with a QF managers perspective and absolutely no understanding whatsoever about why or how any of the 'real staff' joined or felt about first working for QF.

And neatly demonstrates why loyal QF staff simply cannot get their point across. Actually believing in something greater than personal greed is so far beyond a vast amount of the population as to be laughable.....
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Old 23rd Aug 2014, 11:17
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And when redundancies are announced there is no suggestion of "hey let's all take a payout so that everyone can stay in a job".
If you mean paycut, all the redundancies were voluntary amongst pilots (mostly Captains), none compulsory, so technically they did take a payout so others could stay in a job.

In 2009 when there was talk of S/O's being made redundant many pilots (mostly S/O's) took reduced hour lines (effective paycuts) in order to save jobs
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Old 23rd Aug 2014, 11:58
  #43 (permalink)  
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Great... Another Qantas thread...
Yes it is, but with a difference. Page two and I'm still awake!

An observation: The profit component as a percentage of total revenue, from Singapore Airlines second quarter results in 2013, profit $87 mill, total revenue $3,901 mill = 2.23% profit margin. Slim pickings indeed.

I guess any margin an airline can carve off it's wage bill and other costs will cause a significant bottom line improvement. And a Board should be increasing revenue by growing the business, not competing with itself and undercutting it's fares.

Source: https://www.singaporeair.com/pdf/Inv...r-q2fy1314.pdf
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Old 23rd Aug 2014, 12:36
  #44 (permalink)  
 
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...another Qantas thread

Yeah, it is. Read the title, genius. If you don't want to contribute anything meaningful, then stay mute.
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Old 23rd Aug 2014, 13:04
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Yes, I did mean pay cut, not payout.

The rise of Jetstar, ( or should I call it the Orange cancer?), will continue, because it is cheaper.

Many, many lines have been written here stating that people will pay a premium to fly with Qantas......it just isn't so.

And sadly, while you sit at your computer blaming AJ and the board as the sole reason for Qantas's fall from grace, many people around the world will give you little sympathy until you actually make cuts in your own remuneration.

AJ, and the costs of running a legacy airline whose employees do not embrace the need for change, are the reasons Qantas will fail.
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Old 23rd Aug 2014, 13:47
  #46 (permalink)  
 
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Tallest Poppy, as has been pointed out, QF pilots have taken pay cuts in the past. Post-GFC, a figure of $8M savings from Flt Ops was quoted in order to avoid redundancies. About 250 pilots (and not just the ones under threat) worked reduced lines, and the required savings were achieved. The very next thing that happened was that Dixon was handed $11M for his last 6 months as CEO.

Further back, around the time of SARS or 9/11, management requested a pay freeze (effectively a pay cut in real terms), with the promise that 'we'd really appreciate this, and don't worry, you'll be looked after when things pick up'. Well, the pay freeze was duly agreed to, and we all know what happened after that.

Your comments about 'being happy to accept the LWOP situation' are just drivel.
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Old 23rd Aug 2014, 20:01
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Smoke and mirrors

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Old 23rd Aug 2014, 20:44
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Many, many lines have been written here stating that people will pay a premium to fly with Qantas......it just isn't so.
This seems to be the case -

Having been a long time QF Platinum FF, there was a definite "not happy Jan" moment when my company booked me on Tigerair a few months back, but bugger me, the flight was on time, nice clean new aircraft, and great friendly happy cabin crew... and only $49 (plus an extra $14 to get a better seat)!
And it looks like he stayed!

Flights since have been the same all good and nothing over $119.
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Old 23rd Aug 2014, 21:48
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TallestPoppy

Further to your comments re Employees that do not embrace change, one thing that comes to notice with the current situation is that the airline is being run by those who have total disengagement with the workforce, since taking over the Board and AJ's only priority is a return to shareholders at the expense of all else. If you look at other airlines say, ANZ and the then CO one thing they did was to empower their employees with change, that is they were are part of the evolution. Sadly this has not happened at QF with an adversarial Board with little or no interest at what the employee thinks. I have no doubt that if the employees were integral components of the change process they would happily make the necessary sacrifices. AJ, when taking over from GD did say that he would engage with staff however we all no where that has gone.
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Old 23rd Aug 2014, 22:41
  #50 (permalink)  
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Danger


Many, many lines have been written here stating that people will pay a premium to fly with Qantas......it just isn't so.
It seems that Alan Joyce, Strambi, Evans, the demonstrated behaviour of the travelling public and the QF domestic results for the last decade would indicate you're wrong. Quite obviously people actually do pay a premium.

Whether that premium is enough to cover costs or to make an acceptable profit is another discussion entirely but your baseline premise is fundamentally flawed.
Of course, whether they will continue to pay the necessary premium for domestic to remain in profit when there is no difference in product with the retirement of the 767 and the proliferation of 737s on the triangle is also a different discussion but one worth having.

I do like the subsequent straw man of AJ being solely to blame. That's a nice bit of verballing of the staff at Qantas but as ignorant as your comment about people not paying a premium. That you follow it up with yet another one about Qantas staff not 'embracing change' is also great work.

In short, those who know little about the internal workings of Qantas, it's staff and what they have done in the past or have offered to do in the future, should keep their mouths shut lest the demonstrate to all their complete and utter ignorance.

The irony of course is you sitting at your computer blaming people for a multitude of alleged actions that you have no clue about whilst using a 'sitting at your computer' line to peddle a falsehood. You'll need to do better than that champ because those of us at the coal face can see right through you.
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Old 23rd Aug 2014, 22:42
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Good morning Mr Virginexcess


In my HSC in 1981 I scored a brilliant 23% for economics. So not a genius clearly. You said in an earlier post that with the Qantas international cost base, turning a profit "is just not possible."


But what has changed - its not many years ago that QF, with the same cost base was reporting half billion dollar profits. From the international flights I've been on they seem to be filling seats, particularly to the US. So it doesn't seem to be a competition issue - same cost base, filling seats, but no profits!!! Is it fares have not kept up with inflation, or is it too much loss of revenue and hence a reduction in scale? By that I mean, for instance, QF announced a reduction in off peak Tasman services as a way to save money. Well here's a tip QF, cut all Tasman services and you save 100%. It seems that all they do is cut to save money, but forget that to make money you need revenue.


Just curious to get opinions on what has changed in the last 10 years, besides management, that has sent the balance sheet down the toilet.
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Old 23rd Aug 2014, 23:51
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Trevor
Just curious to get opinions on what has changed in the last 10 years
1. Too much capacity defending the 65% "line in the sand"

2. The focus on product is not what it once was. My last QF flight a few months ago was the "City Flyer"... a clapped out B767 with surly cabin crew (on the day). The next flight on Tigerair was a shiny new Airbus, happy crew and 1/3 the price.

Take a look at the current QF domestic marketing's billboard coming off Southern Cross Drive at Sydney Airport... advertising "free food". Note: to their marketing gurus. The sign frequent flyers would rather see is "B787s on City Flyer services"... I'd give that a go!

Qantas have an outstanding new product in the 787 (that can potentially give them a significant domestic edge over VA), but they treat their customers with contempt by putting it into Jetstar.

Instead Qantas gives its domestic flight meals a fast food style makeover ...McDonalds style meal boxes! Pure genius!!!
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Old 24th Aug 2014, 03:31
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Another Angel spotted.
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Old 24th Aug 2014, 07:39
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Guys, thanks for the update. I didn't realise some of the actions that had been taken, without joy, by the employees. It is a bit hard to pick ones way through the hatred and vitriol on this forum to find the facts.

Good luck when the latest results announcement is made this week.
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Old 24th Aug 2014, 08:51
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G'day Trev

I'm not an economist either but I'll have a crack at a few things that I can work out that have changed.

Qantas had a monopoly on outbound traffic across the Pacific. Anecdotally, 25% of their profit came from that route. Subsequently, Virgin offered some competition, which was relatively small, but demonstrated to the public that Qantas was gouging. Qantas had to drop their fares to match Virgins (or thereabouts) resulting in the Pacific no longer being as profitable, or possibly not profitable at all. Add to that the poor choice of aircraft, delayed 787's which ultimately went to J* anyway, inefficient 747's and gas guzzelling 380's whose viability rely heavily on business traffic at a time when business class fares are under downward pressure. All this has resulted in the death of that cash cow.

Domestically they held an effective monopoly after the demise of Ansett. Virgin was not a competitor in the business market, where most of the profits are made, so Qantas had a seemingly endless stream of high yield traffic to fill the coffers from the domestic side and prop up the increasingly unviable international side of the business.

As for the rest of the international side, the demise of Qantas mainline international has broadly coincided with the rise of the middle east and chinese carriers.

15 years ago Emirates had 1 daily 777-200 flight to Melbourne, that was it. Today I think they have around 80 odd services a week to Australia. A large portion of that used to be Qantas passengers.

Add to that, Etihad and Qatar from the middle east, then a few Chinese carriers, Scoot, and Air Asia X, amongst others, and you can see that Qantas has come under extreme pressure to retain market share.

Qantas traded heavily on their safety record. As enviable as it was, it was also a product of a pretty benign flying environment, combined with good maintenance and good training. But as we know, accidents are called accidents for a reason, and eventually everyone has one. Qantas had theirs in Bangkok and it shattered the illusion. That one was particularly damning because it was unequivocally pilot error(albeit with plenty of other contributing factors).

So the Qantas pedestal had been lowered a little.

Following on from that was the A330 dirty dive, the oxgen bottle departure that could have easily been a hull loss, and the QF 32 in Singpaore. The QF 32 was no fault of Qantas and should have restored the status of Qantas pilots as the crew demonstrated the highest levels of professionalism. Unfortunately the 24 hr news cycle doesn't cover that bit too well. As a result of all of the above, Joe public has less reason to choose Qantas, and all the previously mentioned airlines are now viable choices, so price has become much more of a determining factor than it used to be. Qantas used to be able to charge a hefty premium because of its safety record and perceived quality, it no longer has that luxury and has to be more competitive with the new entrant carriers.

As more and more people chose to fly on other airlines based on price, word starts to get out that these cheaper airlines are actually OK, and in the case of some, like Emirates, actually provide a vastly superior product. Word of mouth spreads and more people are happy to fly on an Arabic or Chinese airline, putting more downward pressure on Qantas passenger numbers and revenue.

As Qantas revenue drops, they still have the same infrastructure to support, much of which was created during the good times when the business (like many others) became fat and lazy. Their fixed costs, many of which were created during the good times, are now a weight around their neck, this includes wages.

Then Virgin morphs from an LCC to a full service carrier that is a genuine competitor to Qantas in the domestic market. Not just in the low end of the market, but importantly in the high yield business sector. Because of Qantas reputation, frequency, and frequent flyer points, the drift of business passengers from Qantas to Virgin is not massive, probably in the order of 15-20%, but critically the competition from Virgin has put enormous downward pressure on the price of business fares. So even though Qantas has maintained a fair amount of its business customers, they are all paying much less for their tickets, so revenue is down even further, but the infrastructure, fixed and variable costs are still high.

Add to this, pre GFC the Australian economy was thriving off the back of the mining boom. Those riches flowed to all areas of the economy and punters were spending with gay abandon. Then came the GFC which was a big reality check on everyone, followed closely by the end of the mining investment boom. Both private and corporate travel reduced as a result. Right on the heels of this came Borghetti and the transformation of Virgin.

As Virgins offer improved, so did load factors, requiring Virgin to add more capacity to cope with the increased demand. As this was happening, Alan Joyce steadfastly committed to maintaining his 65% capacity line in the sand. So what this meant was that for every 1 aircraft Virgin added to meet demand, Joyce added 2 into a business that had declining demand. The result has been massive over capacity, more so for Qantas than Virgin. Further downward pressure on yield and revenue.

One can only assume that Joyce thought that Virgin would run out of cash before he did. On face valued that was probably a reasonable expectation if he thought that Borghetti would not be able to find additional cash. Then came the cash injection from Etihad that resulted in AJ going nuclear and forecasting the collapse of Qantas.

It would appear now that Qantas has accepted that Virgin is not going to run out of cash, so rather than try and outlast Borghetti in a war of attrition, it would appear that he has retreated from his 65% line in the sand and is now attempting to try and run the business the way any business needs to be run. And that is get your costs under control and do what you can to increase revenue.

So to answer your question in short, what has changed is that Qantas share of the market and probably revenue has dropped substantially but the cost base has not kept pace.

There is no doubt in my mind that at least some of the loss of market share is a result of some poor management decisions, but a lot has been from things outside the control of management, such as Virgins reinvention, the GFC, increasing access to foreign carriers etc.

Whether Joyce's venture into Asia was folly or not, it would appear to me it needed to be tried. In the face of ever increasing competition in an Australian market that offers no opportunity for growth, and being under increasing attack from foreign carriers on the International front, there is a certain logic to looking at markets that are not as developed as Australia in countries with growing economies to try and exploit the first mover advantage.

The other argument of course is that he should have stuck to his knitting and just continued to be good at what Qantas did, which was provide a good product that Australians loved.
Having dropped the ball on that though, I doubt that it can ever be recovered. Certainly not in time to save the business from where it currently sits.

Given that, in my opinion, I don't see any quick way to increase revenue either domestically or internationally, in the face of ever increasing competition, of the things the Company can control, the fastest way to reduce the flow of red ink is by cutting costs, which he is doing on a grand scale.

There is no doubt J* has taken a lot of revenue from Qantas, but I think that horse has bolted. Even if J* was shut down tomorrow, most of those passengers will not go back to paying the old exorbitant Qantas fares. They fly J* (mostly) because they like the price, not the product.

For Qantas to prosper it needs to find out what its market is and tailor itself to suit in both size and service. At the moment it is too big and too expensive. Before anyone jumps down my throat at the too expensive comment, it is inextricably tied to the size. There is a point where capacity and load factor allow reasonable prices to be charged. As soon as the capacity in Australia allows fares to recover to a reasonable level, both Virgin and Qantas will return to profitability. Cost cutting will not save either of these airlines, it will just change the date at which they return to profit (or go broke). That's assuming at some point in the future the two CEO's return to a rational approach to business.

My two bobs worth.

Hard hat on. Preparing for incoming.
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Old 24th Aug 2014, 09:37
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Hard hat on. Preparing for incoming.
Why? I thought you made many good points worth considering.


Originally Posted by virginexcess
One can only assume that Joyce thought that Virgin would run out of cash before he did. On face valued that was probably a reasonable expectation if he thought that Borghetti would not be able to find additional cash. Then came the cash injection from Etihad that resulted in AJ going nuclear and forecasting the collapse of Qantas.
Excellent summary of the situation, this has been my thinking for quite some time

Originally Posted by virginexcess
but a lot has been from things outside the control of management, such as Virgins reinvention,
Virgins "reinvention" was actually within QF management's control - it was their idea. This was actually Qantas's strategy, to force Virgin upmarket, and with it their cost base would increase disproportionately. It was described as a "pincer" move, undercut them with J*, screw them through QF Dom, forcing Virgin to either lower cost base, or increase it significantly.

This has a big influence on your argument domesticly, as quite a bit of your logic turns on most things being beyond managements control, particularity competitor behaviour.

The International arguments I will leave to someone else.
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Old 24th Aug 2014, 09:56
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Interesting Point.

One of the reasons Virgin chose to go upmarket instead of downmarket was that the low end (leisure travel) is too sensitive to the economy, whereas business is far less so. Given that J* is clearly mining for the lower end, I wonder how they balance their exposure to the cyclical nature of leisure travel.

Perhaps it is as many have said on these threads, that it is subsidised by the parent to disguise the reality.
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Old 24th Aug 2014, 09:56
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In order, the 3 big Opex costs to an airline:
1. Fuel (from 2003 - 2013, once adjusted for inflation - has increased on average, 100%. Approx $46 a barrel US crude to $92). Try building a successful model around erratic costs like this. Fuel price is incredibly complex - so many unpredictable variables; war / politics / supply.
2. Air navigation / airport charges: privatisation in Australian airports = disaster costs for airlines.
3. Labour: labour intensive, highly unionised, highly regulated (in most areas); cost vs productivity (measured in yield in an airline) is comparatively low compared to most other businesses.
The above got me thinking. If it is bye bye QANTAS, Jetstar should have to pay their own:
1. Fuel, including associated costs for an increase in staff numbers in 'their' fuel department as the corresponding fuel department numbers at QF decrease.
2. Air navigation / airport charges including associated costs for an increase in staff numbers in 'their' staff numbers that work on such charges as the corresponding department numbers at QF decrease.
3. As above and all other areas such as reservation staff, check in staff, baggage handling, accounting, IT, marketing, catering, engineering (sorry they are no longer needed at JQ are they?) etc as the QF numbers decrease.
Then there's the 'new' lounges to reflect that they are Jetstar and hence, massive savings for QF as they close their lounges.

All of a sudden, the JQ costs rise and the QF costs drop but we all know it won't work like that.

Another thing that we at home have just found recently is comparing JQ to VA on flights to PPP for 'schoolies'. Son is going up with the son of a QF staff member. We have purchased VA flights for our son and his mate has told him that the JQ flights have plenty of seats. I had a look just yesterday and the flight out of PPP to BNE on the VA site stated 'only 2 seats left, apparently the JQ flight on the same day has 66. Indicates to me that many parents and kids I assume much prefer VA over JQ. We won't ever know but I would say that if it was only QF flying to Phuket, Denpasar and Honolulu to name just 3 and not JQ, the flights would be chockers. Wait a minute, wouldn't plenty of you staff be able to advise if it is hard to get on the QF flights to HNL say in school holidays and that there are perhaps seats available on JQ?
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Old 24th Aug 2014, 10:13
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You can't get a staff travel seat to or from HNL out of Sydney most days we operate hence the increase in services just announced.

School holidays ? Not a chance in hell.
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Old 24th Aug 2014, 10:36
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VA site stated 'only 2 seats left
They are probably suggesting 2 seats left at that price
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