Australian Airline Industry Crisis?
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Australian Airline Industry Crisis?
I found this yesterday on the ninemsn website. It has been penned by business journalist Ross Greenwood.
25 May 2003,
AUSTRALIAN AIRLINE INDUSTRY CRISIS
The popular picture of Australia's airline industry is that it is in crisis: SARS and the Iraq war have combined to decimate profits and to create significant job losses. For this reason it is important that airlines such as Qantas can cut costs by moving closer to Air New Zealand and by cutting staff . Right?
Or part right- part snow job?
Well the snow-job might be that Qantas had already decided to lower staff numbers by 3700 . Iraq , then SARS, gave it the perfect justification to swing the axe more quickly .
Then there's the long simmering move to an Open Skies policy ;having forced it onto the backburner in the free trade agreement with Singapore , Qantas is facing an uphill battle to do the same in the Free Trade talks with the U.S , now underway.
And should agreement with the U.S be struck, then one with Singapore will quickly follow: thereby bringing Qantas and it's arch rival, Singapore Airlines , face to face .
Not helping Qantas's case is the " tightness" of the trans-Pacific routes - ask any businessman or holiday maker about the ease in which you can grab a flight to the U.S. It's not impossible but there's not much spare capacity .
United wont be flying for a few more weeks , Air Canada's in administration and Qantas has the capacity and is making an awful amount of money- but not talking about it .
The Americans wont allow Qantas to delay an Open Skies policy in the free trade talks with the Howard Government.
The absence of an agreement with Singapore is already something of an embarrassment for Prime Minister Howard.... after all, Singapore is helping in the war on terror - and this government owes them plenty after treating Singapore Air badly in the collapse of Ansett.
Qantas boss Geoff Dixon is milking every drop out of the current economic climate to defer any changes . Taking 767's out of international service because of SARS will create a large write-down this year - and a headline loss. But Dixon knows the operating bottom line will be a lot worse when competition increases .
Oh , and by the way, don't think it will be easy for Virgin Blue to move into the international air travel business , or take up some of the capacity that Qantas and Air New Zealand are offering as part of the sweetening of their link up .
We hear that a third party has to approve the use of the Virgin name on international routes ..... No , it's not Chris Corrigan's good mate ....Dickie Branson. No, through it's 49 per cent stake in Branson's Virgin Atlantic , Singapore Airlines . It controls just who can use the Virgin name in International Aviation .
Now, suddenly Singapore Air , after losing a billion dollars in the collapse of Ansett and all those problems with Air New Zealand becomes central to the future of Qantas - Air New Zealand , Trans Tasman travel, plus a whole lot of other possibilities in Australasia .
- Ross Greenwood.
A very interesting article that should stimulate some debate. I can now see why Branson is keen to float Virgin Blue by the end of the year. He is astute enough to know that in the middle term it is going to be a lot tougher to make a buck in Australia .
25 May 2003,
AUSTRALIAN AIRLINE INDUSTRY CRISIS
The popular picture of Australia's airline industry is that it is in crisis: SARS and the Iraq war have combined to decimate profits and to create significant job losses. For this reason it is important that airlines such as Qantas can cut costs by moving closer to Air New Zealand and by cutting staff . Right?
Or part right- part snow job?
Well the snow-job might be that Qantas had already decided to lower staff numbers by 3700 . Iraq , then SARS, gave it the perfect justification to swing the axe more quickly .
Then there's the long simmering move to an Open Skies policy ;having forced it onto the backburner in the free trade agreement with Singapore , Qantas is facing an uphill battle to do the same in the Free Trade talks with the U.S , now underway.
And should agreement with the U.S be struck, then one with Singapore will quickly follow: thereby bringing Qantas and it's arch rival, Singapore Airlines , face to face .
Not helping Qantas's case is the " tightness" of the trans-Pacific routes - ask any businessman or holiday maker about the ease in which you can grab a flight to the U.S. It's not impossible but there's not much spare capacity .
United wont be flying for a few more weeks , Air Canada's in administration and Qantas has the capacity and is making an awful amount of money- but not talking about it .
The Americans wont allow Qantas to delay an Open Skies policy in the free trade talks with the Howard Government.
The absence of an agreement with Singapore is already something of an embarrassment for Prime Minister Howard.... after all, Singapore is helping in the war on terror - and this government owes them plenty after treating Singapore Air badly in the collapse of Ansett.
Qantas boss Geoff Dixon is milking every drop out of the current economic climate to defer any changes . Taking 767's out of international service because of SARS will create a large write-down this year - and a headline loss. But Dixon knows the operating bottom line will be a lot worse when competition increases .
Oh , and by the way, don't think it will be easy for Virgin Blue to move into the international air travel business , or take up some of the capacity that Qantas and Air New Zealand are offering as part of the sweetening of their link up .
We hear that a third party has to approve the use of the Virgin name on international routes ..... No , it's not Chris Corrigan's good mate ....Dickie Branson. No, through it's 49 per cent stake in Branson's Virgin Atlantic , Singapore Airlines . It controls just who can use the Virgin name in International Aviation .
Now, suddenly Singapore Air , after losing a billion dollars in the collapse of Ansett and all those problems with Air New Zealand becomes central to the future of Qantas - Air New Zealand , Trans Tasman travel, plus a whole lot of other possibilities in Australasia .
- Ross Greenwood.
A very interesting article that should stimulate some debate. I can now see why Branson is keen to float Virgin Blue by the end of the year. He is astute enough to know that in the middle term it is going to be a lot tougher to make a buck in Australia .
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I hardly think the 767's (-300's) will be taken out of service just yet. They still fill a gap that the Jumbo (and A330's on delay) cant fill, and furthermore some of these flights are still getting reasonable loads.
Putting the 767-200's against the fence when they are due for a service is a different matter.
Putting the 767-200's against the fence when they are due for a service is a different matter.
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GOD.....
PPL will read and believe anything.
I should become a journalist so that I could postulate such tripe AND get paid for it.
A little bit of fact+An educated guess <> anything worth reading.
( <> means does not equal )
PPL will read and believe anything.
I should become a journalist so that I could postulate such tripe AND get paid for it.
A little bit of fact+An educated guess <> anything worth reading.
( <> means does not equal )
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He is the same journalist that claims BA are going to take over Virgin Atlantic. 
Which is apparently impossible at present as Virgin is not a publicly listed Company, unless RB sells out to them, highly unlikely.
Of course IF it did happen, it would have massive implications for Virgin Blue and to a lesser extent SIA.
Which is apparently impossible at present as Virgin is not a publicly listed Company, unless RB sells out to them, highly unlikely.
Of course IF it did happen, it would have massive implications for Virgin Blue and to a lesser extent SIA.
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The main area of his argument that I am concerned about is the ramifications of the Free Trade agreements currently being sorted out. If an open skies policy is a resulting trade off during these talks then the prospects for both Australian Airlines is pretty scary in the medium term.
Unfortunately , when governments and big business start to play politics it is usually those of us at the coalface who suffer.
I read so much crap about the industry , but I thought Greenwood's comments were worth posting as he did present some aspects that , quite frankly , scare the **** out of me .
Only time will tell if what he suggests may happen actually does .
Unfortunately , when governments and big business start to play politics it is usually those of us at the coalface who suffer.
I read so much crap about the industry , but I thought Greenwood's comments were worth posting as he did present some aspects that , quite frankly , scare the **** out of me .
Only time will tell if what he suggests may happen actually does .
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With regard to KnackeredII's post,
didn't SQ get burned many years ago laying off pilots during a downturn and then when the up turn came, they were unable to respond appropriately?
didn't SQ get burned many years ago laying off pilots during a downturn and then when the up turn came, they were unable to respond appropriately?
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Dan K
Spot on.
In the relentless drive to satisfy the daily excursions odf the share market index they and most others have fallen for the trap of hiring and firing according to the index swing.
That or they are depending onthe wrong market.
And then they wonder why there is little staff loyalty.
That is the fatal flaw in SQ, they do not have a large enough "captive" population to provide the business relative to their size. They like CX are almost totally captive to world events, and rely almost entirely on "external" traffic to support their operations.
How you run a business that lasts forever is you cop the short term good with the short term bad and closely monitor the long term trends and it all works out at the end of the day.
But that requires courage and real judgement, management by share market index and insitutional pressure is not management at all. You can train monkeys to do that.
Share price down fire staff, share price up hire.
If you run it on the basis of counting the pickets in the fence you will get lost as surely as you will if you navigate that way.
Spot on.
In the relentless drive to satisfy the daily excursions odf the share market index they and most others have fallen for the trap of hiring and firing according to the index swing.
That or they are depending onthe wrong market.
And then they wonder why there is little staff loyalty.
That is the fatal flaw in SQ, they do not have a large enough "captive" population to provide the business relative to their size. They like CX are almost totally captive to world events, and rely almost entirely on "external" traffic to support their operations.
How you run a business that lasts forever is you cop the short term good with the short term bad and closely monitor the long term trends and it all works out at the end of the day.
But that requires courage and real judgement, management by share market index and insitutional pressure is not management at all. You can train monkeys to do that.
Share price down fire staff, share price up hire.
If you run it on the basis of counting the pickets in the fence you will get lost as surely as you will if you navigate that way.
Hello Gaunty,
Whilst principally I agree with your post, I was just thinking of the flipside to your share price analogy. It is apparently very difficult to 'dislodge' staff when the share price is doing well, in fact its likely you have stubborn resistance to reducing conditions of the workforce (Cathay) should net profit be healthy. (lets ignore underlying reasons for share price rises/falls) OTTH - world events and share price falls are a convenient excuse for downsizing and perhaps that is why it happens that way.
I am sure there is a boffin out there who can come up with a financial model that balances the highs and lows of the market with the size and remuneration of the workforce over a 20yr. period. Or is that wishful thinking? Factor in an 'intelligent' remuneration plan for the incoming CEOs which doesn't rely on share price swings etc and we might be getting somewhere.
A bit off the subject but it is a shame there isn't room on a balance sheet for loyalty, morale and CDF. (common sense)
sirjfp
'A very interesting article that should stimulate some debate.'
Agreed.
Cheers
CS.
Whilst principally I agree with your post, I was just thinking of the flipside to your share price analogy. It is apparently very difficult to 'dislodge' staff when the share price is doing well, in fact its likely you have stubborn resistance to reducing conditions of the workforce (Cathay) should net profit be healthy. (lets ignore underlying reasons for share price rises/falls) OTTH - world events and share price falls are a convenient excuse for downsizing and perhaps that is why it happens that way.
I am sure there is a boffin out there who can come up with a financial model that balances the highs and lows of the market with the size and remuneration of the workforce over a 20yr. period. Or is that wishful thinking? Factor in an 'intelligent' remuneration plan for the incoming CEOs which doesn't rely on share price swings etc and we might be getting somewhere.
A bit off the subject but it is a shame there isn't room on a balance sheet for loyalty, morale and CDF. (common sense)
sirjfp
'A very interesting article that should stimulate some debate.'
Agreed.
Cheers
CS.
