Clifford gone/ Goyder Next Chairman
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A good old purge with the 'aviation lightweight' still there.
A worrying development is that rising fuel prices with Qantas show no real sign of waning, as the geo-politics imply more risk premium. The term structure for oil is not good for an airline with fleet metrics like Qantas.
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They have seen the results and whilst the free cash flow was ok in June, it gets chewed up with fuel. There fleet metrics are still horrible.
Those airlines with an efficient fleet are better placed to absorb volatility. There is no one else to blame.
Perhaps worrisome for the Australian government is that Qantas has already established a narrative suggestive the QSA 1992 that is the problem.
It isn't. However a government may be pressured into concessions. It is no secret Qantas want to merge.
The fact remains that they are neglectful, wasteful and a long way behind the curve.
Mr Goyder ought have a close look at the inter-segment management accounts. The ones that rarely leave the special hiding place on QCA9
A worrying development is that rising fuel prices with Qantas show no real sign of waning, as the geo-politics imply more risk premium. The term structure for oil is not good for an airline with fleet metrics like Qantas.
In a Bloomberg TV interview, Chief Executive Officer Alan Joyce said there’s “plenty of operating cashflows” to fund both shareholder returns and fleet investments. He was responding to a report by S&P Global Ratings last week that said Qantas needs to divert money away from investors to pay for fleet upgrades. Joyce said the ratings company should have waited to see the airline’s first-half results
They have seen the results and whilst the free cash flow was ok in June, it gets chewed up with fuel. There fleet metrics are still horrible.
Those airlines with an efficient fleet are better placed to absorb volatility. There is no one else to blame.
I do. How about one massive fleet (Australia's largest?) of 14 Dreamchangers and code share the rest. I wouldn't put anything past them. They've taught me _anything_ is possible, even if it is totally self destructive and makes no sense to anyone not personally benefiting from the idea.
It isn't. However a government may be pressured into concessions. It is no secret Qantas want to merge.
The fact remains that they are neglectful, wasteful and a long way behind the curve.
Mr Goyder ought have a close look at the inter-segment management accounts. The ones that rarely leave the special hiding place on QCA9
Last edited by Rated De; 22nd Oct 2018 at 07:15.
The sky is not falling in at QCA/B/C - and by the sounds of it if it were, there would be some baskets to gather it up in.
Yes, fuel is rising, but QF have done well with hedging such that it's not (yet) going to have a major impact. Arguably, they are getting a huge operational hedge by replacing the 747s with 787s, even if in their config the benefit is only a few %.
Hedging will help to lower the impact on cash flow, as will suspending dividends, which I expect will happen soon given the tax losses from previous years have been reversed and so they will not have any more franking credits. As it is, they have managed to use cash to buy their last few 787-9s, and they are buying a stack of 737s, A320s and A330s as they come off-lease, which the credit ratings agencies like. The debt has been but, is now at a lower rate, and a longer maturity, and the rating is at investment-grade. So even assuming that they have to quickly renew everything, they would have lessors and banks falling over themselves to give Qantas attractive rates.
Best of all, the biggest irritant for them - Virgin - are just getting their heads above water financially and gave away their cost advantage as the Borg took them upmarket. Both carriers took hits in the capacity war, but Virgin came off second-best and had to have its balance sheet revamped a couple of times. And if the rumours of HNA seeking an out are true, while Etihad would probably exit at the right price, things aren't going to get easier on the other side of the fence any time soon.
So, in summary...chill, Winston.
Yes, fuel is rising, but QF have done well with hedging such that it's not (yet) going to have a major impact. Arguably, they are getting a huge operational hedge by replacing the 747s with 787s, even if in their config the benefit is only a few %.
Hedging will help to lower the impact on cash flow, as will suspending dividends, which I expect will happen soon given the tax losses from previous years have been reversed and so they will not have any more franking credits. As it is, they have managed to use cash to buy their last few 787-9s, and they are buying a stack of 737s, A320s and A330s as they come off-lease, which the credit ratings agencies like. The debt has been but, is now at a lower rate, and a longer maturity, and the rating is at investment-grade. So even assuming that they have to quickly renew everything, they would have lessors and banks falling over themselves to give Qantas attractive rates.
Best of all, the biggest irritant for them - Virgin - are just getting their heads above water financially and gave away their cost advantage as the Borg took them upmarket. Both carriers took hits in the capacity war, but Virgin came off second-best and had to have its balance sheet revamped a couple of times. And if the rumours of HNA seeking an out are true, while Etihad would probably exit at the right price, things aren't going to get easier on the other side of the fence any time soon.
So, in summary...chill, Winston.
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Qantas needs to divert money away from investors to pay for fleet upgrades
But WTF would I know?
I'm only someone whom, once a year, fills a seat in Row 44 or thereabouts on a 744 long haul flight out of YSSY and returns a few months later. And have done each year, at approximately the same time of year for the last six years.The A/C are showing their age!!
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The sky is not falling in at QCA/B/C - and by the sounds of it if it were, there would be some baskets to gather it up in.
Yes, fuel is rising, but QF have done well with hedging such that it's not (yet) going to have a major impact. Arguably, they are getting a huge operational hedge by replacing the 747s with 787s, even if in their config the benefit is only a few %.
Hedging will help to lower the impact on cash flow, as will suspending dividends, which I expect will happen soon given the tax losses from previous years have been reversed and so they will not have any more franking credits. As it is, they have managed to use cash to buy their last few 787-9s, and they are buying a stack of 737s, A320s and A330s as they come off-lease, which the credit ratings agencies like. The debt has been but, is now at a lower rate, and a longer maturity, and the rating is at investment-grade. So even assuming that they have to quickly renew everything, they would have lessors and banks falling over themselves to give Qantas attractive rates.
Best of all, the biggest irritant for them - Virgin - are just getting their heads above water financially and gave away their cost advantage as the Borg took them upmarket. Both carriers took hits in the capacity war, but Virgin came off second-best and had to have its balance sheet revamped a couple of times. And if the rumours of HNA seeking an out are true, while Etihad would probably exit at the right price, things aren't going to get easier on the other side of the fence any time soon.
So, in summary...chill, Winston.
Yes, fuel is rising, but QF have done well with hedging such that it's not (yet) going to have a major impact. Arguably, they are getting a huge operational hedge by replacing the 747s with 787s, even if in their config the benefit is only a few %.
Hedging will help to lower the impact on cash flow, as will suspending dividends, which I expect will happen soon given the tax losses from previous years have been reversed and so they will not have any more franking credits. As it is, they have managed to use cash to buy their last few 787-9s, and they are buying a stack of 737s, A320s and A330s as they come off-lease, which the credit ratings agencies like. The debt has been but, is now at a lower rate, and a longer maturity, and the rating is at investment-grade. So even assuming that they have to quickly renew everything, they would have lessors and banks falling over themselves to give Qantas attractive rates.
Best of all, the biggest irritant for them - Virgin - are just getting their heads above water financially and gave away their cost advantage as the Borg took them upmarket. Both carriers took hits in the capacity war, but Virgin came off second-best and had to have its balance sheet revamped a couple of times. And if the rumours of HNA seeking an out are true, while Etihad would probably exit at the right price, things aren't going to get easier on the other side of the fence any time soon.
So, in summary...chill, Winston.
UBS,
S&P,
The ICCT ,
and Roger Montgomery need to settle.
Despite every other airline having re-equipped almost without exception a decade ago, QF know something everybody else doesn't!
As Mr Montgomery mused;
In addition to benefiting from cheaper fuel, cash flows have also been boosted by a strategy that has allowed the fleet to age. As I said earlier, the most expensive part of running an airline is replacing old, cheap planes with newer and more expensive models.
Airlines cannot escape this capital expenditure lest passengers jump to competing airlines with fancier entertainment offerings and more comfortable seats, bars and beds. You can call it a disciplined approach to capital spending or you could say the board might prefer to
see the share price go up now, maximise share price-related incentives for current management and leave the reality of replacing planes to the next CEO.
Airlines cannot escape this capital expenditure lest passengers jump to competing airlines with fancier entertainment offerings and more comfortable seats, bars and beds. You can call it a disciplined approach to capital spending or you could say the board might prefer to
see the share price go up now, maximise share price-related incentives for current management and leave the reality of replacing planes to the next CEO.
Best of all, the biggest irritant for them - Virgin - are just getting their heads above water financially and gave away their cost advantage as the Borg took them upmarket. Both carriers took hits in the capacity war, but Virgin came off second-best and had to have its balance sheet revamped a couple of times. And if the rumours of HNA seeking an out are true, while Etihad would probably exit at the right price, things aren't going to get easier on the other side of the fence any time soon.
https://www.news.com.au/finance/busi...78d8c4fd561092
Nunc est bibendum
Some crystal ball gazing. Whilst the dead stop date for the 744 is somewhat fixed (end of 2020 and wouldn't surprise me if it coincides with the 100th anniversary on 16 November) the reality is that this date could be moved either way quite quickly. Note that as at the Nov 2020 date the Qantas fleet has all fourteen 787s in it. So either there is a reduction of four airframes to do the flights the last retiring 744s were doing or there are likely to be more 787s due to arrive from early 2021. I don't discount the possibility of the 787s actually 'slow flying' in the lead up to the last of the 744 replacements also and being able to ramp up their hours to cover the loss. My gut says more 787s in 2021 with Sunrise jets due to come on line 12-18 months later in 2022.
At the moment it's likely the 744 fleet could survive with all the Captains and F/Os currently on it staying until the last flight if they choose to do so. The last four jets (needed to fly a HND- SYD- JNB- SYD service) can be heavy crewed with Captains and F/Os. Wouldn't surprise me though if they RIN S/Os before that or at least hope they take promotion to F/O on the 737 for the newbies, or the A330 or 787* for those who've been around a while. As at November 2020 we start the RIN process for Captains and F/Os and we'll know a bit more about aeroplane orders beyond that time from mid to late next year.
I do strongly suspect that any decision to retire the 744s earlier than November 2020 will come with a commensurate acceleration of 787 arrivals and potentially additional airframe orders due by the end of 2020 also. If this occurs the RIN process simply starts earlier than November 2020.
When the RIN occurs the top 35ish 744 Captains not retiring can displace to the A380 if they so choose. The remaining 30-35ish won't have the seniority to displace to the A380 and either retire or go to the redeployment positions available on the 787 (or heck, even displace to the A330!
). Logistically, if Qantas wanted to shrink capacity in the short term this RIN is possible anytime from January next year given the numbers of 787s due to arrive over the subsequent 12 months. I don't reckon this is capacity reduction is likely... yet.Anyway, lots of water to go under the bridge on this one. We'll see how it plays out.
(*Rumours of vertical promotion coming back for 787. Very second to third hand info though).
Franking credits are used when a company has paid tax, it’s a credit for tax that the company has paid, so what you write is incorrect. Management were only paying token dividends because there were no franking credits and shareholders had been whining about no dividends for a long time.
Also, for the record, the S&P report was not as alarmist as some reckon it was. Have a read, they say that the fleet is fit for purpose now, but will require replacement later on, as all ageing aircraft do. They see some risk in that, but it's nothing that a competent management team cannot handle. Of course, the definition of competent varies from person to person.
Interesting rumour I’m hearing today is that Fridays meeting is actually to discuss keeping the 747s longer now because the loads are so high that the 787 can’t replace them.
Can’t see any 747s being kept. Alan has had no problem reducing capacity in the past. Getting rid of 747s equals less fuel, less engineers, less crewing costs and less maintenance. Alan has never expanded LH. I would suggest Friday’s meeting is about managing capacity to fit with the 747 unchanged retirement schedule. I’d love to be wrong.
I think you will find it’s correct Mrs Doubtfire said for all types.
Promotion on type. Sky gods past decreed only they were talented enough to manage to go from seat to seat on the same type. The idea was to force more handling experience than typical long haul ops provided. Among many bizarre consequences it would also have increased training costs massively.
It was fine on all fleets until the powers that be put a stop to it on the 747-400, ie as an SO you could promote to FO on the 747-300, A330, 737 or 767 but not the 747-400. Similar story for FO to captain.
Now it also applies to the A380 and 787, which means SO's have to promote to the 737 or A330 before they can be an FO on the 744, A380 or 787.
Initially it meant promotion from SO to FO, or FO to captain on the same aircraft type.
It was fine on all fleets until the powers that be put a stop to it on the 747-400, ie as an SO you could promote to FO on the 747-300, A330, 737 or 767 but not the 747-400. Similar story for FO to captain.
Now it also applies to the A380 and 787, which means SO's have to promote to the 737 or A330 before they can be an FO on the 744, A380 or 787.
It was fine on all fleets until the powers that be put a stop to it on the 747-400, ie as an SO you could promote to FO on the 747-300, A330, 737 or 767 but not the 747-400. Similar story for FO to captain.
Now it also applies to the A380 and 787, which means SO's have to promote to the 737 or A330 before they can be an FO on the 744, A380 or 787.
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Its business seemingly doubling up on presence 'with dual brand strategy' eating its yield pouring resources into a segment that is heavily dependent on mother Qantas, yet is incredibly demand elastic.
A strategy, optimising fleet and network appears the purview of Mr Meyer. Whilst once must give kudos to Qantas for creatively spinning every possible thing into some sort of 'info-mercial' running an airline isn't list on the list of priority.
It could be Mr Meyer decided a safe exit is preferable.
Perhaps Mr Clifford is smelling the breeze.