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So you need a new fleet Leigh?

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So you need a new fleet Leigh?

Old 16th Jun 2019, 12:01
  #1021 (permalink)  
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Now, is JQ being supported by Qantas in different areas where it is appropriate to? Yes
There is nothing wrong with a company doing it, but to do it and then ignore the benefit of doing so to leverage other more nefarious agendas is poor form.
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Old 16th Jun 2019, 12:13
  #1022 (permalink)  
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Originally Posted by a_pilot View Post
Because the discussion here is specifically about a new widebody fleet for QF INTL, and someone here specifically denigrated the Jetstar group as a whole (48% ASK vs 30% revenue, this is the Jetstar Group as a whole that they specifically mentioned).

It is not fair that someone only mentions revenue to denigrate Jetstar without looking at how much profit it actually makes.
Nobody is 'denigrating' anything.

Reading published accounts that are compliant with AASB 10 is one thing, to actually know how costs are allocated between and to segments is beyond the scope of the 'General Purpose Audit'.
To actually derive the genesis and magnitude of the purported profit of Jetstar requires three important steps:
  1. Segment Jetstar into two operating segments, Domestic and International
  2. Not simultaneously report Jestar Asia as both a controlled entity under AASB 127, yet for the purposes of some select transaction neglect the control element and determine that certain inter-segment revenue is actually external.
  3. Allow an audit to ascertain the materiality threshold applied by executive management. Management can simply set a high threshold, say $200,000 whereby any invoice under that amount does not go the the segment incurring it, but is picked up by, say hypothetically Qantas International. Auditors do not investigate 'materiality threshold' they simply at their annual audit see that management applied their threshold consistently, whatever it is. They make no judgement whether it is appropriate, nor are they required to.
These small changes to the accounting of Jetstar would allow the statements made by Mr Evans and Little Napoleon to be tested. When in CY13 Little Napoleon required AUD $3 billion of taxpayer assistance, he quickly backed away because the audit that would need to be conducted was to examine materiality. That is why a mere six weeks later he withdrew his request.

There are reasons management choose not to disclose more detail.
A business with such a huge footprint generating so little revenue for all the ASK, would, ordinarily be viewed closely.
Further, the degree to which management discretion is applied to costs incurred by Jetstar could conceivably massage Jetstar CASK.
This can easily provide a distortion to actual profit.

Qantas could have re-equipped with a wide body international fleet, of two engine variety, lowering the CASK (fuel included), improving their operating margin and probably building yield.
That they don't is peculiar.

Last edited by Rated De; 16th Jun 2019 at 22:22.
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Old 16th Jun 2019, 12:52
  #1023 (permalink)  
 
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I was told by (I would think) a reliable source that on one international route, if the passenger spends no other money than the actual ticket, ie no ancilliaries at all, then JQ make a low single digit cent profit on the seat. If all the passengers on board do this, JQ make $3.25 for the leg.
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Old 16th Jun 2019, 22:30
  #1024 (permalink)  
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Originally Posted by Traffic_Is_Er_Was View Post
I was told by (I would think) a reliable source that on one international route, if the passenger spends no other money than the actual ticket, ie no ancilliaries at all, then JQ make a low single digit cent profit on the seat. If all the passengers on board do this, JQ make $3.25 for the leg.
This point is very important.
Most airline cost is fixed (or sunk) thus low fare airlines need that ancillary revenue as the ticket price "the bait" does not cover the entire cost.

In ancillary revenue terms, Jetstar in 2016 (latest data on hand) made USD $26 per passenger. Annually that was USD $600,000,000.00
Qantas too make ancillary revenue from mostly Frequent Flyer, which naturally is almost dependent upon the International business.

Small movements in a Low Fare Airline CASK kill margin, with fuel being able to wipe them out entirely.

Thus if Qantas persist with a dual brand 'strategy' to focus on the demand elastic low fare airline at the expense of the parent is foolish.

Re-equipping the QF International operation with fuel efficient aircraft is low hanging fruit that even Little Napoleon ought be able to reach.






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Old 17th Jun 2019, 03:22
  #1025 (permalink)  
 
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Rated D - what about the impact of capital cost or lease cost incurred to 'reequip' the Qantas fleet. This is a financial consideration that has not been discussed. It is easy to say cASK is lowered by more fuel-efficient aircraft, but to reequip also incurs considerable expense. Would Qantas not consider these factors in its decision to invest now or hold?
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Old 17th Jun 2019, 03:37
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A good question. Best answered by AJ.

And while he’s answering, ask if the return of capital employed on the Jetstar 787’s has justified their allocation? Was it an allocation decision based on strategy rather than ROCE?

Will a new aircraft order improve the ROCE of Jetstar International by a greater amount than the commensurate amount of capital spent in Mainline?

Sh*t. I should be a journalist.
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Old 17th Jun 2019, 03:51
  #1027 (permalink)  
 
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Originally Posted by T-Vasis View Post
Rated D - what about the impact of capital cost or lease cost incurred to 'reequip' the Qantas fleet. This is a financial consideration that has not been discussed. It is easy to say cASK is lowered by more fuel-efficient aircraft, but to reequip also incurs considerable expense. Would Qantas not consider these factors in its decision to invest now or hold?
If we are to go this deep then we need to consider maintenance savings as well as delay costs saved from having a more reliable fleet plus a better product with newer interiors.
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Old 17th Jun 2019, 04:44
  #1028 (permalink)  
 
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Crosscutter - JQI would not have survived if JQ did not take on the 787's asap. The operating economics of the 330 and the 787 are worlds apart. I suspect JQI is already financially hammered. The 330 would have obliterated it.

'ROIC' is a better measure here.

Dragonman - Product can be replaced. You can make a clapped-out frame look new again with a new interior and fresh coat of paint. Reliability - that may subjective. Well maintained aircraft with the right schedules will be reliable. It is component failure/wear that drives this.
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Old 17th Jun 2019, 05:05
  #1029 (permalink)  
 
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ROIC is correct...thanks.

My point I guess, is QF need to generate a certain ROIC for any investment. For Mainline that ROIC seems a lot higher than for JQI. No JQ bashing here, just pointing out that now that both businesses are ‘mature’ any investment decisions should be based on similar criteria. For this to occur JQI’s financials should be released.
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Old 17th Jun 2019, 06:41
  #1030 (permalink)  
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Originally Posted by T-Vasis View Post
Rated D - what about the impact of capital cost or lease cost incurred to 'reequip' the Qantas fleet. This is a financial consideration that has not been discussed. It is easy to say cASK is lowered by more fuel-efficient aircraft, but to reequip also incurs considerable expense. Would Qantas not consider these factors in its decision to invest now or hold?
The original narrative that the fossil Clifford pushed was the QSA 1992 was the reason for the lack of re-equipment, it is a little disingenuous to say capital was hard to find when they spent over AUD $2.5 billion buying back their own shares, which is not surprising given the vesting dates of all the management options.

Arguably, better use can be made of capital than enriching the insiders.

Qantas have deferred fleet decisions preferring to engage in social discourse, identity politics and advance the agenda held by the CEO, running an efficient airline ranked nowhere near its list of priorities.
  1. The A330 is likely beyond a mid life airframe. What is to replace these?
  2. The A380 is likely at book value way in excess of the actual realised sale value (second hand)
  3. The 747 (with the exception) of the ER (6) aircraft are aged and have substantial CASK inefficiency.
  4. The oldest of the 737 fleet are in excess of 17 years.
That the committed to re-equipping the entire Jetstar fleet without battering an eye lid is perhaps indicative of their intent, costing AUD $9.5 billion.
Whether that business can deliver an IR nirvana and an adequate ROIC is debatable.

A 'transformed' Qantas has no doubt improved the CASK, a replacement of international fleet would improve their fuel included CASK by a considerable margin.
It ought improve operating margins.

That they do not do this perhaps has something to do with ideology rather than economics.
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Old 19th Jun 2019, 07:24
  #1031 (permalink)  
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There you go you old fossil Leigh, it wasn't the Qantas Sale Act 1992 making aircraft purchase difficult.

See Little Napoleon, just like the little engine you can order aircraft.

Did this have a special project name? A secret team?
Did you need apply the same template to Jetstar's route economics as you claim you do for Qantas, just what ROIC do you actually achieve?
Have you repatriated a tangible profit from Singapore yet, how about Vietnam, what about Japan? Of course leasing aircraft back and forward isn't really profit now is it?

https://www.qantasnewsroom.com.au/me...Z_9GpwUhZjB3-g
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Old 19th Jun 2019, 09:56
  #1032 (permalink)  
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You can also call cousin Willie he just did it too...

https://simpleflying.com/iag-boeing-737-max-order/
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Old 20th Jun 2019, 02:42
  #1033 (permalink)  
 
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You must be fun at parties.
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Old 20th Jun 2019, 04:23
  #1034 (permalink)  
 
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Originally Posted by das Uber Soldat View Post
You must be fun at parties.

Please explain?
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Old 20th Jun 2019, 06:47
  #1035 (permalink)  
 
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Originally Posted by das Uber Soldat View Post
You must be fun at parties.
Does one need to provide one's own tin foil hat for a Rated De party?
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Old 20th Jun 2019, 06:49
  #1036 (permalink)  
 
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It’s like an echo, you yell out but the only reply is yourself saying the same thing over and over.
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Old 20th Jun 2019, 18:02
  #1037 (permalink)  
 
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Originally Posted by Beer Baron View Post
Itís like an echo, you yell out but the only reply is yourself saying the same thing over and over.
Even though that approach seems to have worked so well for Alan, repetition of a theme does not make a viewpoint less accurate - especially so with new data arriving daily!
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Old 29th Jun 2019, 23:16
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.... the further an LCC plane flies the less of a cost advantage it has over traditional airlines. Fuel can rise from 30 to 50 per cent of operating costs shrinking profit margins.
This is precisely why Mr Evans wants to lower unit cost; his unit cost is much higher the longer the stage length and his revenue remains soft.

Last year, Jetstar’s earnings before tax was $461 million. Qantas doesn’t factor out Jetstar’s international revenue, however, only saying it had “strong earnings”.
This is because the Jetstar International business is elastic.

Imagine if Qantas had decided lowering unit cost at the 'transformed' Qantas International was met with a new fuel efficient fleet.
Qantas could have much improved RASK/CASK margin, lower fuel spend, generate less pollution and do so generating more revenue.


“Many of the markets developed under the long-haul low-cost banner may prove sustainable, but the operating model seems likely to be lower cost rather than true low cost,” said Flight Global's Lewis Harper.
Then, axiomatically if the model can't deliver revenue premium then operating margins continue to shrink the further a low fare airline flies.

https://www.news.com.au/travel/trave...82a6d22ab19415


Qantas, not Jetstar need the new fleet.
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Old 30th Jun 2019, 00:06
  #1039 (permalink)  
 
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I'm legitimately worried old mate is going to have a stroke when jq ends up with the new fleet.

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Old 30th Jun 2019, 00:18
  #1040 (permalink)  
 
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If they get 321 and Qantas get the 787s back you might be surprised as it would partly satisfy the present problem.
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