Joyce ‘retires’ early 👍
I find it somewhere between amusing and perplexing that likes of Gottliebsen doesn't seem to grasp the very basic concept of "Revenue received in advance".
All airlines typically receive payments for flights in advance of when they actually operate the flight. Very often, the receipt is well in advance of the actual flight.
The money received goes into revenue. The equivalent value is then held on the balance sheet as a Liability. It is not held as an asset and it is therefore not "capital". The whole thing is a simple and basic business practice with well established accounting rules.
What is often instructive is the ratio between total passenger revenue received by an airline and "Revenue received in advance". For Qantas the ratio is about 29 percent. This is not, by any means, unusual.
For comparison, Southwest sees an "air traffic liability" (one of the US terms for "Revenue received in advance") to total passenger revenue ratio of around 26 percent. Singapore Airlines runs a similar "Sales in advance of carriage" ratio of 26 percent. Delta, United and American Airlines typically see lower ratios; often somewhere in the teens.
Virgin Australia currently has a ratio approaching 40 percent. I'm yet to see much hand wringing about that.
Virgin also holds $290 million of unredeemed Future Flight credits that are currently due to expire by 31 December 2023. When that liability is written down to zero that will be the equivalent of Virgin converting passenger revenue paid in advance into capital. And I'm yet to see much hand wringing about that either.
And Virgin has assets of just over $3.7 billion and liabilities of a shade over $5 billion for a balance sheet that is underwater to the tune of $1.3 billion (a shade over $1 billion come the New Year thanks to those written down flight credits, or "theft" as it is known in some circles).
All airlines typically receive payments for flights in advance of when they actually operate the flight. Very often, the receipt is well in advance of the actual flight.
The money received goes into revenue. The equivalent value is then held on the balance sheet as a Liability. It is not held as an asset and it is therefore not "capital". The whole thing is a simple and basic business practice with well established accounting rules.
What is often instructive is the ratio between total passenger revenue received by an airline and "Revenue received in advance". For Qantas the ratio is about 29 percent. This is not, by any means, unusual.
For comparison, Southwest sees an "air traffic liability" (one of the US terms for "Revenue received in advance") to total passenger revenue ratio of around 26 percent. Singapore Airlines runs a similar "Sales in advance of carriage" ratio of 26 percent. Delta, United and American Airlines typically see lower ratios; often somewhere in the teens.
Virgin Australia currently has a ratio approaching 40 percent. I'm yet to see much hand wringing about that.
Virgin also holds $290 million of unredeemed Future Flight credits that are currently due to expire by 31 December 2023. When that liability is written down to zero that will be the equivalent of Virgin converting passenger revenue paid in advance into capital. And I'm yet to see much hand wringing about that either.
And Virgin has assets of just over $3.7 billion and liabilities of a shade over $5 billion for a balance sheet that is underwater to the tune of $1.3 billion (a shade over $1 billion come the New Year thanks to those written down flight credits, or "theft" as it is known in some circles).
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All airlines typically receive payments for flights in advance of when they actually operate the flight. Very often, the receipt is well in advance of the actual flight.
The money received goes into revenue. The equivalent value is then held on the balance sheet as a Liability. It is not held as an asset and it is therefore not "capital". The whole thing is a simple and basic business practice with well established accounting rules.
The money received goes into revenue. The equivalent value is then held on the balance sheet as a Liability. It is not held as an asset and it is therefore not "capital". The whole thing is a simple and basic business practice with well established accounting rules.
So nothing would change if those payments in advance were received and held by someone else until the service is provided? That would relieve airlines of the terrible burden of having to hold the amounts as a liability on their balance sheet.
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When you live....
What is often instructive is the ratio between total passenger revenue received by an airline and "Revenue received in advance". For Qantas the ratio is about 29 percent. This is not, by any means, unusual.
For comparison, Southwest sees an "air traffic liability" (one of the US terms for "Revenue received in advance") to total passenger revenue ratio of around 26 percent. Singapore Airlines runs a similar "Sales in advance of carriage" ratio of 26 percent. Delta, United and American Airlines typically see lower ratios; often somewhere in the teens.
Virgin Australia currently has a ratio approaching 40 percent. I'm yet to see much hand wringing about that.
Virgin also holds $290 million of unredeemed Future Flight credits that are currently due to expire by 31 December 2023. When that liability is written down to zero that will be the equivalent of Virgin converting passenger revenue paid in advance into capital. And I'm yet to see much hand wringing about that either.
And Virgin has assets of just over $3.7 billion and liabilities of a shade over $5 billion for a balance sheet that is underwater to the tune of $1.3 billion (a shade over $1 billion come the New Year thanks to those written down flight credits, or "theft" as it is known in some circles).
For comparison, Southwest sees an "air traffic liability" (one of the US terms for "Revenue received in advance") to total passenger revenue ratio of around 26 percent. Singapore Airlines runs a similar "Sales in advance of carriage" ratio of 26 percent. Delta, United and American Airlines typically see lower ratios; often somewhere in the teens.
Virgin Australia currently has a ratio approaching 40 percent. I'm yet to see much hand wringing about that.
Virgin also holds $290 million of unredeemed Future Flight credits that are currently due to expire by 31 December 2023. When that liability is written down to zero that will be the equivalent of Virgin converting passenger revenue paid in advance into capital. And I'm yet to see much hand wringing about that either.
And Virgin has assets of just over $3.7 billion and liabilities of a shade over $5 billion for a balance sheet that is underwater to the tune of $1.3 billion (a shade over $1 billion come the New Year thanks to those written down flight credits, or "theft" as it is known in some circles).
I think the whole "we only guarantee to get you somewhere when WE feel like it" defence is laughably flimsy. If that were true, why aren't all seats on all flights on a given day the same price? Why would I pay additional $$$ for a morning flight when according to Qantas I hadn't bought anything other than an assurance that I'd get there sometime? Sure, my additional $$$ might increase my chances of getting a flight closer to the one I booked (or even the one I booked) but I think that where they've charged premium prices on a ghost flight then their argument starts to fall apart. I also wouldn't be surprised if the ACCC takes their defence and adds abuse of market power and deceptive & misleading conduct to the charges.
Australia needs legislation like the EU and Canadian compensation models. I think if you surveyed and said - hey, you ticket price will go up, but would you like these protections in their place? - you'd get an overwhelming yes. Heck, even let passengers opt-in or opt-out if they are that price sensitive. Then airlines who can't organise a proverbial in a proverbial will suffer either through loss of business (if they pass their costs on fully) or loss of profit (if they don't) compared to the ones that can get their stuff together.
And on Virgin - I think that 'steal' should also come to bite them. I reckon a large part of the Bain business model is tied to keeping that cash. They'll be far less likely to succumb to external pressure and unfortunately I don't see the current transport minister with anything approaching the credibility or political capital to take them on. Of course it helps that they're not currently up in front of the ACCC nor warring with every worker in sight.
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My presumptive position is that any business which insists on money ‘up front’ for yet-to-be provided goods or services is probably dodgy anyway.
TBH, I can't really believe that most people are so naive that they don't realise what they are getting into when they pay for their ticket. Surely every traveller has in the back of their mind "Gee I hope my flight isn't delayed or cancelled, that will really mess up my plans" as they're heading to the airport. It's not like this is anything new.
That's about how 90% of commerce works these days. You bought a Macca's or a car lately? The only difference between that and an airline ticket is the time lapse between payment and delivery, and the rubberiness of what they will provide for that money.
TBH, I can't really believe that most people are so naive that they don't realise what they are getting into when they pay for their ticket. Surely every traveller has in the back of their mind "Gee I hope my flight isn't delayed or cancelled, that will really mess up my plans" as they're heading to the airport. It's not like this is anything new.
TBH, I can't really believe that most people are so naive that they don't realise what they are getting into when they pay for their ticket. Surely every traveller has in the back of their mind "Gee I hope my flight isn't delayed or cancelled, that will really mess up my plans" as they're heading to the airport. It's not like this is anything new.
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That's about how 90% of commerce works these days. You bought a Macca's or a car lately? The only difference between that and an airline ticket is the time lapse between payment and delivery, and the rubberiness of what they will provide for that money.
TBH, I can't really believe that most people are so naive that they don't realise what they are getting into when they pay for their ticket. Surely every traveller has in the back of their mind "Gee I hope my flight isn't delayed or cancelled, that will really mess up my plans" as they're heading to the airport. It's not like this is anything new.
TBH, I can't really believe that most people are so naive that they don't realise what they are getting into when they pay for their ticket. Surely every traveller has in the back of their mind "Gee I hope my flight isn't delayed or cancelled, that will really mess up my plans" as they're heading to the airport. It's not like this is anything new.
Versus - How dare you accuse us of anything, you're not worthy, we're Qantas and we aren't going to change because you're wrong! Yes they might win a battle in Court, but the political optics are not good. If they don't win in Court, they will have the book thrown at them, they will look appalling (again) and create more problems. Of course, a loss could put a great deal of legal problems into their laps selling tickets (let alone FF points) into the future, but sitting and negotiating those points in good faith (assuming Qantas is capable of understanding the meaning) is going to achieve FAR better results than throwing spears at each other across a table.
Fighting IMHO is negatives all around for QF. Mea Culpa would have been a great positive for Qantas and especially Elaine's Wig from a marketing and political perspective.
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[Payment up front] is about how 90% of commerce works these days. You bought a Macca's or a car lately? The only difference between that and an airline ticket is the time lapse between payment and delivery, and the rubberiness of what they will provide for that money.
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90% of the commerce in which I choose to participate involves me paying after the goods or services have been delivered. Other people can make other choices. That's the joy of the free market.
My main point was that there is no law of physics or commerce that prohibits the payment model I proposed. But I suppose - as others have correctly observed - if sheeple continue to line up to pay in advance then I'm sure airlines will be happy to take their money in advance and treat them like sheeple.
if sheeple continue to line up to pay in advance then I'm sure airlines will be happy to take their money in advance and treat them like sheeple.
Has there ever been a payment model in any segment of aviation where you pay after you get out of the aircraft at your destination?
And, just to be clear: My proposed model requires passengers to pay in advance. The key difference is that the airlines don’t get their grubby fingers on the money unless and until the service is provided in accordance with the booking and the passengers have proper security of their money and refund if the service isn’t provided in accordance with the booking.
Has there ever been a payment model in any segment of aviation where you pay after you get out of the aircraft at your destination?
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Well, even if there hasn’t, it doesn’t mean in cannot happen. And I reckon you’d agree with me: The outcome would be vastly different behaviour on the part of the airlines.
And, just to be clear: My proposed model requires passengers to pay in advance. The key difference is that the airlines don’t get their grubby fingers on the money unless and until the service is provided in accordance with the booking and the passengers have proper security of their money and refund if the service isn’t provided in accordance with the booking.
And, just to be clear: My proposed model requires passengers to pay in advance. The key difference is that the airlines don’t get their grubby fingers on the money unless and until the service is provided in accordance with the booking and the passengers have proper security of their money and refund if the service isn’t provided in accordance with the booking.
Not the consumers’ problem. The consumer can elect for a full refund from the trust or accept an alternative offered by the carrier. The least best placed person to understand and manage the risks of the vagaries of the air traffic system and other myriad complexities of aviation is the passenger.
Opinion 
Chris MaxworthyQantas shareholderNov 8, 2023 – 12.41pm
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At last week’s annual meeting of Qantas, board chairman Richard Goyder directed that my microphone be cut off during questions from the floor.
My sin was that I questioned the morality of board decisions: the illegality of Qantas shedding 1700 ground handling staff; the ACCC’s prosecution of Qantas for allegedly selling 8000 ghost flights; and Goyder’s approval for Alan Joyce’s $17million share sale. What a trifecta.
Shareholders were welcome at the Qantas AGM. Questions not so much. Jow Armao Goyder’s initial reply was: “I have absolutely zero concern about the ethics of the [board members] here.” My reply was that having had the High Court back the Federal Court decision on the TWU members, “you might have justified it at the time on a commercial basis, but we are paying for your lack of ethics now”.
I moved on to Goyder’s approval of Joyce’s sale of his $17 million of Qantas stock. Joyce received his parcel away before the ACCC announcement that it was pursuing Qantas over the ghost flights. This was too much for Goyder, and he demanded that my microphone be switched off. Jeers and calls of “shame on you” spread throughout the venue. I pointed to the board and added “shame on all of you”.
After 40 years as an investor, that Qantas meeting was the worst I have attended. It was carefully scripted, with an excess of security staff and board members who looked ill at ease with their owners. What the board knew, but the audience was yet to learn, was that the remuneration report had been voted down by a stunning 83 per cent.
That result means that almost all shareholders, including the institutional holders of Qantas stock, have had enough of brand damage. Of the 178,000 owners in Qantas, just 160 shareholders control 80 per cent of the company; that is, holdings greater than $5 million. I am just one of the other 107,000 shareholders with fewer than 1000 shares.
Goyder’s petulant silencing of me has tainted his reputation. The meeting was a miserable experience for the board such that none – repeat none – of the members attended tea and sandwiches with their owners after the formalities. Goyder had stated that the board could spare “five to 10 minutes to speak personally with shareholders”. It never happened – the first time in my experience.
I am profoundly saddened at how the board and the executive management of Qantas have conducted themselves.
Witness the complicated and weak argument explained at the annual meeting as its defence with the ACCC. Facing heavy fines and a competition watchdog prepared to pursue Qantas under the Trade Practices Act, the fresh argument is that booking a Qantas flight is not really a good but an array of rights. I have never seen that explained in a Qantas advertisement!
Qantas has been adept at channelling national sentiment to build up a profitable customer base. But Australians are not mugs. We have a healthy scepticism of national leaders and businesses that do not match up to our collective sense of what is fair and ethical.
Qantas was a national institution, and the distinctive branding of the Flying Kangaroo previously generated pride among Australians. But that sentiment has long gone. Price gouging, political special pleading to exclude competition, delays in refreshing the fleet, hard practices with Qantas frequent flyer points, and acting as a monopolist – that is not the spirit of Australia.
From here on, the senior management must work at rebuilding Qantas’ social licence. It needs to be real and tangible, with marketing pushed to the rear. Real answers, genuine care and not taking patronage for granted, not just cozying up to the influential and powerful through access to the Chairman’s Lounge. No more playing fast and loose with definitions of what a flight is, or the nature of the customer relationship.
Up to $16 million of Joyce’s recent performance incentives are within the board’s control to claw back now. If the board wants to restore the airline’s reputation, then a starting point would be to repudiate a large portion of these bonus incentives. In the court of public opinion, that would receive strong backing, and show that the board is now more in tune with the real spirit of Australia
Qantas turned off my microphone at the AGM. Here’s what I think
My sin was to challenge the morality of board decisions. But it is the company that needs to relearn what the spirit of Australia means.Chris MaxworthyQantas shareholderNov 8, 2023 – 12.41pm
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At last week’s annual meeting of Qantas, board chairman Richard Goyder directed that my microphone be cut off during questions from the floor.
My sin was that I questioned the morality of board decisions: the illegality of Qantas shedding 1700 ground handling staff; the ACCC’s prosecution of Qantas for allegedly selling 8000 ghost flights; and Goyder’s approval for Alan Joyce’s $17million share sale. What a trifecta.
Shareholders were welcome at the Qantas AGM. Questions not so much. Jow Armao Goyder’s initial reply was: “I have absolutely zero concern about the ethics of the [board members] here.” My reply was that having had the High Court back the Federal Court decision on the TWU members, “you might have justified it at the time on a commercial basis, but we are paying for your lack of ethics now”.I moved on to Goyder’s approval of Joyce’s sale of his $17 million of Qantas stock. Joyce received his parcel away before the ACCC announcement that it was pursuing Qantas over the ghost flights. This was too much for Goyder, and he demanded that my microphone be switched off. Jeers and calls of “shame on you” spread throughout the venue. I pointed to the board and added “shame on all of you”.
After 40 years as an investor, that Qantas meeting was the worst I have attended. It was carefully scripted, with an excess of security staff and board members who looked ill at ease with their owners. What the board knew, but the audience was yet to learn, was that the remuneration report had been voted down by a stunning 83 per cent.
That result means that almost all shareholders, including the institutional holders of Qantas stock, have had enough of brand damage. Of the 178,000 owners in Qantas, just 160 shareholders control 80 per cent of the company; that is, holdings greater than $5 million. I am just one of the other 107,000 shareholders with fewer than 1000 shares.
Goyder’s petulant silencing of me has tainted his reputation. The meeting was a miserable experience for the board such that none – repeat none – of the members attended tea and sandwiches with their owners after the formalities. Goyder had stated that the board could spare “five to 10 minutes to speak personally with shareholders”. It never happened – the first time in my experience.
Weak argument
Goyder’s plan to remain in place until November next year is now in tatters. CEO Vanessa Hudson and board member Todd Sampson should also consider falling on their swords.I am profoundly saddened at how the board and the executive management of Qantas have conducted themselves.
Witness the complicated and weak argument explained at the annual meeting as its defence with the ACCC. Facing heavy fines and a competition watchdog prepared to pursue Qantas under the Trade Practices Act, the fresh argument is that booking a Qantas flight is not really a good but an array of rights. I have never seen that explained in a Qantas advertisement!
Qantas has been adept at channelling national sentiment to build up a profitable customer base. But Australians are not mugs. We have a healthy scepticism of national leaders and businesses that do not match up to our collective sense of what is fair and ethical.
Qantas was a national institution, and the distinctive branding of the Flying Kangaroo previously generated pride among Australians. But that sentiment has long gone. Price gouging, political special pleading to exclude competition, delays in refreshing the fleet, hard practices with Qantas frequent flyer points, and acting as a monopolist – that is not the spirit of Australia.
From here on, the senior management must work at rebuilding Qantas’ social licence. It needs to be real and tangible, with marketing pushed to the rear. Real answers, genuine care and not taking patronage for granted, not just cozying up to the influential and powerful through access to the Chairman’s Lounge. No more playing fast and loose with definitions of what a flight is, or the nature of the customer relationship.
Up to $16 million of Joyce’s recent performance incentives are within the board’s control to claw back now. If the board wants to restore the airline’s reputation, then a starting point would be to repudiate a large portion of these bonus incentives. In the court of public opinion, that would receive strong backing, and show that the board is now more in tune with the real spirit of Australia
Qantas accused of omitting information from defence of ACCC allegations over ghost flights
Qantas has been accused by the consumer watchdog of failing to explain why it left flights on sale after they had been cancelled, in its response to allegations of false or misleading conduct.In a case management hearing before Justice Helen Rofe on Wednesday, barrister for the Australian Competition & Consumer Commission, Chris Caleo, KC, said it may be necessary to seek orders to force Qantas to handover more details.
The ACCC has alleged Qantas continued to sell tickets on more than 8000 flights for an average of 16 days after they had been cancelled, over several months in 2022.
In its defence, Qantas claimed no customer was left out of pocket and it was in fact selling “a bundle of particular rights” rather than “a particular flight”.
The embattled airline also stated that customers were not immediately informed of flight cancellations because they wanted time to arrange alternative travel options, or wanted to avoid further blowouts in call centre wait times.
In some instances “human error” was to blame, Qantas said.
Mr Caleo told the court they were hopeful of reaching agreement on key aspects of the facts, and would pursue “alternative interlocutory steps” if unsuccessful.“If the initial remedy of seeking particulars proves to be ineffective, it may be necessary to raise with your honour on the next occasion aspects of the (defence) and in particular what the commission sees as a failure on the part of Qantas to respond directly to the key allegations of conduct,” Mr Caleo said.
“It may well be that a request for particulars can address those matters, and we hope it can, but if that proves not to be the case then we may need to raise those matters with your honour on the next occasion.”
Robert Yezerski SC for Qantas said his client rejected the idea there was “any deficiency” in the defence.
“We think the matters that have been raised in the concise response are relatively clear,” Mr Yezerski said.
Justice Rofe gave Qantas until December 1 to respond to any request from the ACCC for more details.
Additional information was provided to the court by the ACCC including a 400-page spreadsheet detailing every flight cancelled in the period in question, and the date when customers were notified.
The consumer watchdog said some of Qantas’s requests for more information about its allegations went “beyond” their legal requirements, court documents showed.
Legal letters exchanged by the ACCC and Qantas were made public after the Federal Court hearing.
According to the letters, Qantas sought “particulars” about the ACCC’s case, but lawyers representing the watchdog said they had largely given them enough evidence.
Justice Rofe told the parties it was her preference to send such matters to mediation and also asked if there were any suitable dates in 2024 for a trial.
Both Qantas and the ACCC were in agreement that it was premature to be planning a trial.
The case was set to return to court on February 28 for a hearing.
ACCC chair Gina Cass-Gottlieb has said she wanted a fine in the vicinity of $250m against Qantas to send a message to other companies about such behaviour.
At stake for Qantas is more than its battered reputation, with almost $6m in short term executive bonuses being held in limbo until the outcome is known.
In response to the ACCC lawsuit and the High Court’s finding Qantas acted unlawfully when it outsourced the jobs of almost 1700 employees, the board took the decision to reduce short term incentive payments by 20 per cent and withhold the balance of $5.9m.
Last Friday’s AGM heard the board would revisit short term bonuses once the cost of the ACCC lawsuit, and compensation for outsourced workers was known.
Qantas shares closed up 7c on Wednesday at $5.32.
But now you pay up front for the privilege of tram, train, or bus by needing to have bought a ticket before you can travel. Or you have prepaid a balance to an account in their books which they have they use of while you draw it down gradually.
It may not be the segment of aviation that you allude to,
[QUOTE]Has there ever been a payment model in any segment of aviation where you pay after you get out of the aircraft at your destination?][/QUOTE
Maybe things have changed over the last 50 years, but when I worked GA a long time ago, all our charter was done that way.
Scheduled service, different story.
Maybe things have changed over the last 50 years, but when I worked GA a long time ago, all our charter was done that way.
Scheduled service, different story.
Qantas has been adept at channelling national sentiment to build up a profitable customer base. But Australians are not mugs. We have a healthy scepticism of national leaders and businesses that do not match up to our collective sense of what is fair and ethical.
When you live....
From the last AFR article
Up to $16 million of Joyce’s recent performance incentives are within the board’s control to claw back now. If the board wants to restore the airline’s reputation, then a starting point would be to repudiate a large portion of these bonus incentives. In the court of public opinion, that would receive strong backing, and show that the board is now more in tune with the real spirit of Australia
This isn’t going to happen. Why? Because Elaine will have a documented paper trail to the board telling them exactly what he was up to including the risks - and they will have signed off on it. If they try and claw back, he’ll be straight off to court and pleading that he’s being unfairly penalised for something the board told him to do. Why do you think the reluctance to throw him under the bus?
It’s possible that there may have been a deal done around the share sales - agreeing to let him sell at the top of the market even though they knew the ACCC were coming - and in return withhold a marginal portion of his bonus package for PR purposes.
I’d also bet he’s extracted something extra in return for ‘falling on his sword’ early
Up to $16 million of Joyce’s recent performance incentives are within the board’s control to claw back now. If the board wants to restore the airline’s reputation, then a starting point would be to repudiate a large portion of these bonus incentives. In the court of public opinion, that would receive strong backing, and show that the board is now more in tune with the real spirit of Australia
It’s possible that there may have been a deal done around the share sales - agreeing to let him sell at the top of the market even though they knew the ACCC were coming - and in return withhold a marginal portion of his bonus package for PR purposes.
I’d also bet he’s extracted something extra in return for ‘falling on his sword’ early