One would think not due to the number of NGs already in the fleet and the 60 odd options Qantas hold from the initial NG buy, at fire sale prices.

The LCC can still share the mainline spares pool, and would probaby be better of for doing so.

Kaptin M said:

"Have the public benefited by the introduction of Australian by way of lower airfares? Have the staff benefited?
The answer to both is NO"

AO was never meant to result in lower fares, the objective was a lower cost base to allow a profit on routes that are/were historically marginal or loss making to Qantas. I have benefited, I get paid more and my roster is more stable than when I was in mainline.

You also said

"however Australian created many more ground management positions for former middle management, but at HIGHER salaries than they on before."

What facts do you have to prove this or is purely your speculative assessment?

Pete. You are obviously p1ssed off where you are. Your bitterness must be a real problem for all those around you. It is guys like you that initially stopped your outfit geting jets. Remember?

You make your own bed little matey. Dont you?

I am really getting tired of certain pilots here trying to justify their award / pay system in terms of competitiveness.

If an inch thick award which takes a lawyer to fully comprehend and a team within the company to administer is efficient, then surely every start up would be asking for a copy.

The reality is that these pilots are well paid and enjoy even better conditions. If WE are to compete in the low cost game, then it must be on truly competitive terms, or else the company will simply look elsewhere.

I sincerely hope the union do not have the same attitude or else the flying will surely dissappear.

You probably paid to work too..

Crewed by current Mainline pilots. End of story.

Absolutly, current crews..........End of story............BTW cadets to go to Pearl, Air North and Eastern as of next course. :E

Fri "The Australian"

Qantas no-frills team for new airline
By Steve Creedy and Terry Plane
October 17, 2003

Qantas has recruited former executives from aggressive European no frills operator Ryanair to help it with ambitious plans to establish a low-cost carrier by next May.

The executives will work with the new airline's executive general manager, 37-year-old Alan Joyce, to establish the carrier as a separate business under its own brand.

Qantas is negotiating with Airbus, Boeing and aircraft lessors to buy Boeing 737-800 or A320 aircraft and expects to have at least 23 by mid-2005.

It will decide within six weeks about whether to establish the new airline using the former Impulse operations bought in 2001 or start an entirely new company.

"This will be a true low-cost carrier - lean, highly competitive and with the standards of safety and reliability associated with Qantas," Qantas chief executive Geoff Dixon said.

The new airline's aggressive growth strategy surprised analysts and industry observers.

"Twenty-three aircraft by 2005 is faster than Virgin's rate of expansion," said Centre for Asia Pacific Aviation managing director Peter Harbison.

Mr Harbison said it was inevitable that the new carrier would cannibalise existing Qantas operations. It was also bad news for Virgin Blue's planned float, expected later this year or early next year.

"That will not only make it difficult for Virgin to float but it will make it quite difficult for it to expand," he said.

But Mr Dixon did not believe the new carrier would take sales away from mainline operations, saying Qantas could "chew gum and walk at the same time".

He also denied the move was aimed at Virgin, saying he expected a 15 to 20 per cent growth in the leisure market.

"This is the biggest and fastest growing segment of the industry," he said. "It's not aimed at Virgin, it's aimed at growth."

Qantas said it would pick a location for its headquarters within six weeks but it would not be Sydney-based. It would also get Melbourne advertising agency Dewey & Horten to work on naming, branding and advertising.

Earlier, Qantas chairwoman Margaret Jackson said the board's approval of the low-cost carrier demonstrated Qantas's "ongoing commitment to ensure our ongoing competitiveness".

Ms Jackson said the airline's "Sustainable Future" program, which aimed to reduce costs by $1 billion over two years, had so far identified $800 million in cost savings, with $350 million targeted for this financial year.

Ways of achieving the savings included simplifying and reorganising the aircraft fleet through the progressive retirement of Boeing 767-200s, transferring A330s to international operations and flying one widebody aircraft type, the 767-300, on domestic operations.

Mr Dixon also revealed Qantas would reconsider its appeal against the Australian competition watchdog's rejection of its proposed alliance with Air New Zealand if it was also rejected by the New Zealand Commerce Commission next week.

==========================================

Fri "The Australian"

Virgin Blue float faces delay
By Byron Kaye
October 16, 2003

QANTAS Airways Ltd's decision to set up a low cost airline could delay the float of Richard Branson's Virgin Blue Airlines Pty Ltd by three months, according to analysts.

Australia's biggest airline revealed today its directors had approved the establishment of a discount domestic airline to take on Virgin Blue, with the new operation to be launched next May.

The announcement came just a few months before the partial float of Virgin Blue, loosely touted for the end of this year, and analysts said Virgin Blue could now be forced to rethink competition risks associated with the public offer.

"It probably pushes out the timing of what was already going to be a very accelerated float beyond Christmas (and) puts it probably late in the first quarter of next year at best," said Peter Harbison, managing director of research firm the Centre for Asia Pacific Aviation.

"The slender chance of getting it done before Christmas is probably knocked on the head by this."

He added the timing of the float was not critical, given Virgin was already cashflow positive and did not urgently need to raise new capital.

Shaw Stockbroking research director Scott Marshall said the news would impact the Virgin Blue's operations, and float, but not necessarily delay it.

"If the current prospectus assumes 30 per cent market share, then there will possibly be not a lot of impact on the Virgin forecasts," he said.

Virgin Blue's share of the domestic market is nearing 30 per cent, Mr Marshall said, a threshold Qantas does not want to see crossed.

"The only reason Qantas would launch a discount airline is to offer an alternative to Virgin, so yes of course it would have an impact on Virgin," he said.

"It's more a matter of how to establish the discount airline without impacting the rest of Qantas."

Virgin Blue spokesman David Huttner said: "If they are trying to imitate us, we appreciate the recognition that we have the much more sustainable business model.

"If Qantas believe that this would have any impact on our float plans they will be disappointed."

Qantas chief executive Geoff Dixon said the new carrier had nothing to do with the float of Virgin Blue.

"I can assure you that the board of Qantas and the management of Qantas don't sit down and make decisions just to try to spoil the float of another company," he said.

"I think Qantas is a pretty robust company...and I believe that we are capable though with our financial strength and with our board and management...to be able to compete with Virgin."

Mr Dixon described Virgin as a good competitor.

============================================

Fri "Sydney Morning Herald"

Qantas buys big for no frills fleet
By Scott Rochfort and Wendy Frew
October 17, 2003

Talk of a prolonged and bloody domestic airfare war intensified yesterday, after Qantas confirmed plans to launch its own budget domestic airline in May next year along with a massive order of new aircraft.

Amid speculation that yesterday's announcement was meant to spoil Virgin Blue's planned listing on the stock exchange, Qantas chief executive Geoff Dixon said:"This is not aimed at Virgin. It's aimed at growth."

Mr Dixon also scotched talk of a looming price war, saying: "I don't accept your premise that this is a discount price war. I don't know what Virgin will do; they are a pretty unpredictable competitor."

With the former Ansett and Aer Lingus executive Alan Joyce heading the new airline, analysts were surprised at the projected size of the new carrier, which Qantas said would have at least 23 aircraft by mid-2005. This compares with the estimated 80-odd Qantas planes now in use on domestic routes.

Amid projections such a fleet could snare 18 per cent of the domestic aviation market, resulting in a massive cannibalisation of Qantas's current domestic network, Mr Dixon said he didn't expect any job cuts or trouble from the unions, arguing the new airline would create growth and jobs.

Virgin controls an estimated 30 to 35 per cent of the domestic market.

Considering it has taken the growth-hungry Virgin more than three years to build its fleet to 35 B737s, some analysts remained circumspect over the prospects for the new carrier. Virgin's early growth spurt was aided by the collapse of Ansett.

Virgin also shrugged aside speculation it was thinking of buying another 11 aircraft on top of the 42 Boeing 737s it expects to have in the air by mid-2004.

Some analysts said such a move could lead to a severe over-capacity in the domestic market.

"We're always happy to look at new opportunities," said Virgin Blue's head of strategy, David Huttner.

It is understood the 11 new aircraft were cancelled orders, which one analyst said were being offered at a bargain basement price.

ABN Amro analyst Bruce Low said it was feasible Qantas could retire its ageing - and inefficient - fleet of 21 B737-300s while its new budget airline built up its fleet of A320 or B737-800s. The aircraft could cost up to $1.5 billion, unless the airline chose to lease the aircraft.

With Qantas still deliberating on whether to use the shell of the former budget airline Impulse it acquired in 2001 or establish a "greenfields" company, Mr Dixon said the new base of the yet-to-be-named airline would be chosen within six weeks.

Virgin's David Huttner said the new airline would not affect Virgin's operations or growth plans.

"It's clear that Qantas recognises that Virgin Blue has the most sustainable and profitable business model," Mr Huttner said.

Qantas shares fell 4c to $3.58 after hitting an eight-month high of $3.68 before the news.

===========================================

ABN Amro analyst Bruce Low said it was feasible Qantas could retire its ageing - and inefficient - fleet of 21 B737-300s while its new budget airline built up its fleet of A320 or B737-800s.

Inefficient! - I presume that they are only becoming inefficient due to their age. I am sure no one has ever regarded the 737-300 as inefficient for its size/range class.:}

Slice

Makes sense to me and also an over capacity problem,
25 new aircraft for 'Skimpy' in, and the 21 old 737s out from SH gives
you an increase of only 4 aircraft, not much increase in capacity
overall at all.

Wirraway

Wiiraway
The only problem is that there are only ten of them left now. 737 300's that is.

I was having my medical renewal last week when the Doc started talking about an Impulse pilot who had recently been in. He said that he and his fellow workers were very concerned about their jobs. He said that a LCC was going to be started by QF and there was BUCKLEYS chance of Impulse crewing them as QF management were always having a go at Impulse's poor performance. He thought an overseas company from Europe would be involved in it.
Also, surely there isnt enough money to sustain an airline only on the leisure routes. Who does Dixon think he is kidding. They will take over the current mainline ops eventually.
Time WILL tell.:ok:

Responding to the information contained in the several media reports above about plans to launch a "greenfields" low cost operator one can only agree with Centre for Asia Pacific Aviation managing director Peter Harbison that QF is in mortal danger of cannibalising their own business and following BA's experience with Go.

Added to that if they go ahead with plans to purchase or lease up to 23 new aircraft and setting up a new corporate headquarters all I can see so far is duplication of overheads and infrastructure.

Impulse once heralded as its low cost vehicle it is now regarded as not low cost enough. If the reports are correct an even lower cost model crewed from existing employees using bought or leased new aircraft is going to be the model to counter the inroads of DJ into their market share. But where are the cost savings going to come from?

At present supposed low yielding "leisure" passengers travel on both "low cost" Impulse and main line Qantas flights or a combination of both to reach their destination. They either pay top dollar if they travel at short notice or at peak times or get the opportunities to buy the limited number of "early bird" or promotional fares that effectively fill up otherwise empty seats. Yield management sees to it that aircraft depart with the best mix of passengers and maximise returns.

Take away those so called low yield passengers and put them onto a new "low cost" operation and as far as I can see all you have achieved is duplicated your costs not reduced them. Business passengers will not have to step over rucksacks and sit next to someone reading the Lonely Planet Guide but the number of "mainline" Qantas services would presumably be reduced since they have diverted a reasonable percentage of their customers onto a so called low cost alternative. Why not just separate the "Y" class passengers and make them pay for the in-flight extras as they do on DJ, while giving the others a full service option?

Presumably there are going to be some 737-7-800 and the balance of the 300 fleet available from the QF mainline fleet that will become surplus to requirements. Unless there is an expectation that there is going to be an exponential growth in the overall market of air travellers going to the leisure destinations and or a similar growth in full fare business travellers to replace those lost to the new "low cost" carrier there is going to be a considerable over capacity which of course could be the card QF is playing.

On the face of it, it all shows a considerable lack of foresight to dismantle Impulse as some threads suggest to merely replace it with another "low cost" operation after investing heavily in introducing a new aircraft type and training flight and technical crews to then have a sudden revelation that "Whoops! we have got the wrong model guys", scrap it and start all over again. In essence I suspect the Qantas corporate culture has no real understanding of the meaning or the implementation of the concept of anything "low cost". Stick to your knitting Geoff.

It is all akin to shuffling the deckchairs on the Titanic.

No Way
 

QANTAS chief executive Geoff Dixon yesterday hosed down predictions of an airfare bloodbath after the company's decision to go ahead with plans for a low-fare domestic airline.


Geoff Dixon at the press conference yesterday announcing the new Qantas venture / Martin Jacka.


Mr Dixon said the new value-based airline would be "low-cost but not cheap" when it is launched next May.

"We're not starting something to lose money, we're starting something to make money," he said after the company's annual meeting in Adelaide yesterday. "This will be a serious carrier that will be here to stay."

Qantas aims to quickly expand the new airline and predicts it will have at least 23 Airbus A320 or Boeing 737-800 aircraft by mid-2005.

Mr Dixon's comments suggest the new airline could follow the model set by Qantas's low-cost international offshoot Australian Airlines, which does not offer significantly lower fares but uses its reduced cost base to compete on marginal routes.

Such a model would allow Qantas to expand its reach while reducing labour costs and limiting growth by competitor Virgin Blue. But Centre for Asia Pacific Aviation managing director Peter Harbison believes there will still be "a real feast" of low fares as Qantas moves to establish the airline.

"This is an interesting strategy that's bigger than I thought and they are really going to grow ... fast," he said.

Operational details of the new carrier were skimpy yesterday and Mr Dixon would not say where the airline would fly.

He said a decision on where it would be based would be made within six weeks but it would not be Sydney.

A meeting today at Melbourne advertising agency Dewey and Horten would consider six possible names for the carrier.

Asked if three airlines could survive in the Australian market given the demise of Ansett, Mr Dixon said Ansett had been severely overstaffed and suffered an "out of whack" cost structure.

"Qantas is much leaner, Virgin Blue is very lean and the business we're going to start is very lean," he said.

Tourism authorities yesterday welcomed the new carrier, saying it would help bring more tourism dollars.

Sounds like desperate last ditch measures from QF to lower costs.

Dixon may have another card up his sleeve that he has not yet revealled, and he knows when he does - it will upset a lot of people. (ie unions)

"Speculation over the new airline, and Qantas's two-year plan to slash its cost base by $1 billion (HALF FROM LABOUR).."

Huloooo?? Is anybody home???

And to then award himself a "something million dollar bonus" for f#@*king EVERYONE else!!

All this going on, and a 717 sim being built in Brisbane by FSB and another company.

A classic case of jumping the gun? Or simply right hand not talking to the left?

Interesting times ahead guys.

Thylacine - I like your logic. But then again, logic has never been a strong point in Qantas' favour. Just saw a photo of a J class cabin with the new skybeds...the config is 2-3-2. The dreaded middle seat would appear to have made an appearance. IRRESPECTIVE of the fact that neither BA or SQ have middle seats in J, QF goes ALLLL out and then takes 2 steps back. :hmm:

I can't wait to hear what else they bungle up with during the next 6 weeks. And god help us all when the LCC is launched...there's BOUND to be something they've missed!

Not that I'm cynical or anything...:E

Sat "Weekend Australian"

Qantas hopes to fly with ten arms
By Steve Creedy
October 18, 2003

Qantas yesterday forged ahead with a corporate restructure which will split the airline into 10 businesses as the market reacted uncertainly to news the airline would launch a domestic low-cost carrier next May.

Qantas closed down 3c at $3.55 after falling as much as 7c as investors grappled with sparse details about the new carrier.

The previously flagged reorganisation divides the group into four flying-related businesses, two servicing the flying operations and four associated enterprises such as Qantas Catering and Qantas Holidays.

It aims to make each unit accountable for its performance and contribution to the Qantas Group under the guidance of a corporate centre which will focus on issues such as governance, investments and group strategies.

"The reorganisation will deliver a range of major benefits, including increased accountability, greater speed and quality of decision making, and improved return on assets," said chief executive Geoff Dixon.

New additions to the senior executives include low-cost carrier chief Alan Joyce, executive general manager technical operations and maintenance David Cox and the new head of Australian Airlines, Andrea Staines.

Mr Cox replaces 34-year Qantas veteran David Forsyth, who is leaving the company in December for personal reasons, while Ms Staines replaces Denis Adams, who takes charge of a portfolio of associated Qantas businesses.

The restructure also puts chief financial officer Peter Gregg in charge of corporate strategy and makes executive general manager sales and marketing John Borghetti responsible for core domestic and international airline operations.

Other executive members are Grant Fenn (airports and catering), Narendra Kumar (regional airlines), Paul Edwards (fleet, network and alliances), Kevin Brown (people) and Fiona Balfour (chief information officer and Qantas business services).

The restructuring details emerged as doubts were raised yesterday about how many additional aircraft Qantas would need for its new carrier.

Qantas said on Thursday the new airline would fly at least 23 aircraft by mid-2005 but there was speculation yesterday this could include 14 Boeing 717s already operated by its Impulse Airlines subsidiary.

A decision about whether to start the airline using Impulse or as a greenfield operation is due to be made within six weeks.

"They're not going to put 23 new aircraft in the market - that would be a less than sensible idea," said Macquarie Equities analyst Ian Myles. "I think they will use 14 717s, they'll use eight new 737-800s and they'll use one from the existing fleet."

Virgin Blue, seen as a target for the new carrier, said yesterday it was unconcerned about the move because its business model was built on a three-airline environment.

===========================================

Sat "Sydney Morning Herald"

Flying Kangaroo could be turning cannibal
By Scott Rochfort
October 18, 2003

Qantas's plan to launch a no-frills airline has raised concerns that it risks cannibalising its existing main-line domestic network and moving higher-yielding passengers down the value chain.

The airline hasn't offered much detail on the make-up of the carrier, which is yet to be named, and the market remained hesitant yesterday on the strategy to attack Virgin's 30 to 35 per cent market share. Qantas shares eased 3c on Friday to $3.55.

Some investors were unsettled by the experience of other carriers such as KLM, British Airways, Air Canada and SAS in launching low-cost carriers.

ABN Amro's Bruce Low said Qantas would have to ensure passengers lost to its mainline business went to its own low-cost operation and not Virgin.

To do this, the Qantas offshoot would have to offer fares equal to or lower than Virgin's, Mr Low said.

There are forecasts the new airline could take up 20 per cent of the domestic market, owing to its larger-than-expected projected fleet of 23 aircraft by mid-2005.

Mr Low said the shrinkage in the existing business could leave that airline with less market share but the same infrastructure and costs.

In a note to clients, Mr Low said:"Qantas would need to be careful not to be seen to be purposely shrinking the mainline operation", given the illegality of "shrinking one business to grow a replacement business with less attractive labour agreements for staff".

But Macquarie Equities analyst Ian Myles said the problem could be overcome by Qantas drawing people from its domestic business into its growing international business.

Ian Thomas, of the Centre for Asia Pacific Aviation, said Qantas seemed to be following the growing holiday market in a bid to make its low-yielding leisure routes profitable.

"It's going to be a substantial operation," Mr Thomas said. "It's something that they can scale up or scale down depending on its success. But there is the classic risk that [Qantas] could push passengers downstream to low fares."

As part of its two-year strategy to cut $1 billion in costs, Qantas also announced the formation of 10 separately accountable business units on Friday. Sales and marketing manager John Borghetti was named the new head of Qantas Airlines, which covers the mainline domestic and international operations.

Other units include the new airline, Australian Airlines, Qantaslink, Engineering Services, Airports and Catering, Freight, Qantas Holidays, Defence Services and Qantas Consulting.

==========================================

Dow Jones

Qantas Raises Possibility Of Listing Business Ops
By Helen Ubels
Of DOW JONES NEWSWIRES

SYDNEY (Dow Jones)--Qantas Airways Ltd. acknowledged Friday that a restructuring now underway will make it easier for the Australian carrier to break off parts of its business and list them on the stock market.

Although that doesn't seem to be the plan for the time being, Chief Executive Geoff Dixon conceded that the restructure does make the "floating" of different units a possibility.

"It always has been the case, but certainly after we finish our restructure all of them could be quite easily floated off," Dixon told Australian Broadcast Corp. television.

"We could float off the regional airline, we could float off Australian Airlines, we could float off our catering division, we could float off Qantas Holidays."

"All of those are very good businesses, but I've got to tell you they are very integral to our business plan," he said.

Feeling the heat from flourishing domestic budget carrier Virgin Blue and increased competition on the busy trans-Tasman route, Qantas confirmed Thursday plans to launch a domestic budget airline while continuing to pursue an alliance with Air New Zealand Ltd. despite a hostile regulatory response.

Under its so-called Sustainable Future program, the airline is looking to strip A$1 billion from its cost base over the next two years.

In tandem with these efforts, its restructure will see the creation of 10 business units in pursuit of improved accountability and returns on assets.

John Borghetti, the 48-year-old head of sales and marketing at Qantas, has been named executive general manager of the core domestic and international airline. This big promotion potentially sets Borghetti up as a rival to Chief Financial Officer Peter Gregg as a future chief executive candidate.

Qantas' nine other business units include another three flying divisions, engineering, airports/catering and four associated operations covering freight, holidays, defense services and consulting.

"An increase in autonomy for each business will be coupled with a strong focus on performance targets," said Dixon in a statement.

"The new structure will also increase the growth opportunities of noncore businesses such as freight and Qantas Holidays," he said.

Costs Versus Cannibalization

Analysts said Qantas needs to update its model if it is to survive the onslaught of new, more agile competitors.

"At least they're looking at ways they can become a little bit leaner and a little bit more responsive to the way the environment is changing," said Bruce Low, an analyst with ABN AMRO.

"Certainly Qantas has realized that the way the model used to be...is just not a sustainable thing. The whole market is changing - you've got low cost carriers coming in and...to keep plugging on and keep doing what they're doing is just a recipe for disaster," he said.

But the decision to launch a low cost domestic carrier has left some analysts pondering the extent to which the new carrier will steal away Qantas customers.

"The great unknown remains Qantas' ability to insulate its premium brand to minimize cannibalization by the low cost carrier," Credit Suisse First Boston said in a note to clients.

Though the company plans to improve its premium brand service to further differentiate it from the new carrier, more information is needed on strategy to evaluate the company's growth profile, the broking house said.

Qantas is keeping much information about the new airline, including its name, under wraps. What is known is that the launch is planned for May using the operations of a low cost carrier, Impulse, that it bought in May 2001.

Purchases of new aircraft are expected to build its fleet to 23 by mid-2005, Qantas said.

Investors needn't panic that the airline is going to flood the market with excess capacity, noted an analyst with another broking house.

"The bulk of the planes we think are in fact the Impulse planes...and there's only eight new planes. They're not about to go and absolutely cannibalize themselves for the sake of fighting Virgin Blue," he said.

The analyst played down the prospect of Qantas separately listing any of its units.

"They've got bigger issues to think about," and the company has some land and terminal assets that could be sold if it really wants to raise cash, he noted.

On the Australian Stock Exchange, Qantas shares slipped three cents to A$3.55. The broader market ended fractionally lower.

============================================

low cost is just that...Low cost. Watch out you QF mainline guys the blow torch is being turned up on you very shortly..
It may be Jet connect (yep those cheap Kiwi's again) that will be the new operator and they will be pleased with their new NG's or Airbus. :D
NJS was purchased by FRA to get their hands on the Surveillance operation. They openly said, at that time, that they wern't in the airline business. So their future doesn't look too bright either (though good for the surveillance people). :}
Impulse, sorry guys, but you simply have the wrong type of Boeing. It was an impulse inititive that QF bought out to get you out of the competition. Though it looks like a nice plane and by all accounts is, the 717 is dead in Australia:sad:
The Embraer may be a nice plane but it aint going to compete with Virgin NG 73's that are an accepted/percieved industry norm. ;)
Either way its gonna play out like a splatter movie so watch your step and keep your heads cool (powder dry) as your futures have allready been carefully planned well in advance.:cool:

ABC News Online

Qld bids for Qantas low-cost base

Queensland is in talks with Qantas for it to establish the headquarters of its new low-cost domestic airline in the state.

A spokesman for Premier Peter Beattie says negotiations with the Qantas implementation team have already started.

Qantas has said the new airline will not be based in Sydney and that it will decide on a location along with a new name soon.

The Queensland Government says full consideration and respect will be given to existing airline relationships in any negotiations.

Virgin Blue is already based in Brisbane.

==========================================

The World Today (ABC) - Friday, 17 October , 2003 12:42:50
Reporter: Stephen Long

ELIZABETH JACKSON: It's all go at Qantas. Yesterday, our major airline announced that it would launch a new budget domestic carrier, in May. And today, it's released details of a plan, which it flagged earlier this year, to divide the company into 10 separate businesses, all of which could potentially be floated as separate companies in the future.

Geoff Dixon, Qantas Chief, told the ABC today that he's adamant that the new airline will fly, but the critics aren't convinced.

Our Finance Correspondent Stephen Long reports.

STEPHEN LONG: Budget airlines aimed at the leisure traveller are the growth area of the market. And that's where Geoff Dixon's pitching the new spin-off airline to be launched in May.

Analysts such as Ian Thomas at the Centre for Asia Pacific Aviation see this as a recognition that there's not much growth left in the premium end of the market.

IAN THOMAS: I mean, really, Qantas is saying that the higher end of its market, in other words the premium end, is essentially a mature market, which doesn't really exhibit a great deal more growth.

STEPHEN LONG: Internationally, low cost budget carriers, such as RyanAir in the UK and South West Airlines in the US, are the success stories of aviation. Established carriers have struggled to compete with their low operating and labour costs, and their ultra low fares.

Qantas isn't the first major carrier to try to copy their formula. Ian Thomas says there's a series of mainstream carriers who've spun off low cost leisure airlines, and wacky names seem to be compulsory.

IAN THOMAS: Delta, for example, has one called "Song". SAS, the Scandinavian airline has one called "Snowflake". And Air Canada's operating one called "Zip".

STEPHEN LONG: These airlines have something else in common apart from their wacky names – they've all achieve at best, limited success. British Airways launched then sold off Go, which succeeded, but largely by cannibalising BA's own market.

Geoff Dixon's adamant Qantas has done its homework and won't make the same mistake.

GEOFF DIXON: This airline will be successful in its own right and indeed, if it cannibalises Qantas it will be on the margins.

STEPHEN LONG: In Europe, airlines such as RyanAir offer fares as low as a few pounds.

Geoff Dixon won't be drawn about how low the airfares will be on Qantas's new budget carrier, but he says there'll be no fat in the costs.

GEOFF DIXON: This will be a quality airline, it's going to have no frills certainly, it's going to be the bare basics of a low cost carrier, but it will have good and modern aircraft, it will have well trained staff, it will go out of decent airports, but from then on it will be as cheaply as… as lean as you can possibly put in the air.

STEPHEN LONG: Meanwhile, Qantas released plans today, to separate the company into 10 businesses, with engineering, flight catering, holidays and other services hived off from the core business of flying.

Geoff Dixon says it's designed to promote greater accountability and efficiency.
He's denied union claims Qantas intends to force the businesses to compete with outside contractors to maintain their relationship with Qantas. But he hasn't ruled out the possibility that any of these businesses could be floated off separately in the future.

GEOFF DIXON: In the restructure we've announced today, everything could be floated off. We could float off the regional airline, we could float off Australian airlines, we could float off our catering division, we could float off Qantas holidays.

All of those are very good businesses, but I've got to tell you they're very integral to our business plan. We're one of the few airlines in the world who have decided to be fully integrated, that we have a multiplicity of businesses that hang off the main core business – that is, flying. But right now, and always has been the case, but certainly after we finished our restructure, all of them could be quite easily floated off.

===========================================

So Pete Conrad .... what have you got to say now? :8

F**k it sh1ts me. Couldn't agree with you more Kap M. Wouldn't it be nice if CEO's and like where put on the same pay as the drivers. Tipping we'd see a rather aggressive increase in the pay scales. They're all ****s. (rhymes with name for a small boat).:yuk:

30,000 employees, annual turnover of billions of dollars, worldwide operations that run 24/7/365, capital infrastructure of billions of dollars that requires constant re-investment, profit margins that are less than 5 cents in the dollar even in a good year - tough business, and one that definitely requires management of the highest quality.

Dixon has been voted Australia's best CEO. To my mind, his greatest quality is that he can see the writing on the wall and is prepared to make a hard decision and take action before the red ink begins to flow.

Its very easy to knock but the comments on this forum indicate a lack of understanding of any commercial enterprise, let alone a major international airline.

To my mind, if anything, Dixon and his team are underpaid rather than overpaid.

What is a CEO worth? Maybe the many of you who'll disagree with me could provide a figure and then a justifiable basis on which you calculate it.

Standing by for the usual spray of invective and vitriol, not to mention quotation marks...

Gotta agree with Tiger here (who, it should be reiterated, is talking about top, not middle level management).

Without a good leader, the whole company can go down screaming more quickly than you can say 'boo'. Underpinned by a strong balance sheet (a hallmark of the current QF CEO), however, it has a lot more room to evolve organically, rather than as a last-ditch effort to save all or some parts of its business from that 'red ink' (the latter situation certainly doesn't apply to Qantas at this time, despite the inroads made by Virgin).

My armchair take on the LCC would be that, relative to the overall scale of QAN's operations, it's really only a drop in the ocean, and if things don't go to plan (I'm sure they will though - don't think for a minute that they havent had a significant number of analysts and experts crunching every possible contingency, especially in lieu of the risks involved ('Go' et al)) they could probably revert to the status quo fairly seamlessly, with minimal overall losses.

Who knows, though.

As far as Jetconnect as a LCC I'm surprised on-one has mentioned the Ansett conection there.The Chief pilot and the majority of pilots are ex-Ansett drivers,some of aircraft are even ex-AN .They,ve all learned to adapt to LCC salaries ,no staff travel.no Super etc and most would love to be home .
Food for thought anyway!

Pray tell, Flying Tiger, where are these clever ideas that Mr Dixon can lay claim to, as being uniquely his?
Rather than uniting QANTAS employees, he is dividing them, indicating - imo - an INability to be able to successfully negotiate with his charges.
Instead he has chosen the easy way out. Break QANTAS up into small parcels (creating many more management positions along the way), to get out of current employee work contracts and conditions, ala point76's post..."LCC salaries ,no staff travel.no Super etc".
In a sentence "Screw the employees", whilst continuing to richly reward yourself.

The lcc concept is apparently a COPY of Brett Godfrey's Virgin Blue - and NOT a Geoff Dixon "special".
Given the funds to which he has access there are probably at least a dozen or more other people who could make the same "bold move and hard decisions".
Hard for whom?
The soon-to-be unemployeds??!!

IMO the QF staff deserve better than they're going to get - but Dixon appears unable or unwilling to spend time on trying to do the right thing.

Er, Kap M, not quite sure where you get the idea that I was claiming Dixon had produced any type of unique proposal. Maybe your usual prolific use of quotation marks is the only way you can prevent yourself from misrepresenting others.

You appear to be rooted in a far more genteel, post war, pre-deregulation era when the proliferation of state owned carriers and excessive regulation led to airlines with huge, bloated bureaucracies and endemic inefficiencies. Naturally, this resulted in enormous salaries and generous conditions for pilots, flight attendants and other employees. This was a worldwide phenomenon.

The breaking down of these barriers in a more liberalised environment has beem retarded buy infrastructure constraints which have prevented the LCC's from developing the critical mass required to force rapid change in the market.

This has been solved overseas by the use of secondary airports, but the lack of such facilities in Australia meant that an LCC could only prosper by the demise of an incumbent. Sadly this was Ansett.

But now with a robust, efficient and ambitious competitor, Qantas has no option but to be proactive and be the driver of change before its too late. Anyone with commercial nous will tell you that a $500m profit on turnover of over $20b, with future capital commitments of greater than $10b, is simply not enough. The only way to sustain such borrowings is to increase the share price, and hence the market capitalisation, to a point where financial institutions are prepared to provide finance on terms which allow the airline to commercially facilitate the investment.

To prosper in such an environment and produce the results required, you must have strong, capable management who are paid absolute top dollar. Geoff Dixon is a long way from the highest paid CEO in Australia but has been voted number 1 by his peers. We are getting him for a steal and I say double his pay.

I can see the writing on the wall and I'm off to work for one of Q's LCC's as soon as possible.

Your implication that inefficient conditions and salaries can be retained whilst at the same time staving off competition and continuing growth is somewhat counter intuitive.

Please take the time to advise us all of how exactly you would deal with the changing situation in the market and exactly how you would negotiate with the 14 unions to address this issue.

Your solutions are keenly anticipated.

Kaptin M, the problem with your synopsis is that Geoff Dixon has been vigorously targeting middle management in his restructure. He has numerous times identified the bureaucracy at QF as being the biggest impediment to change. You know, those "water lilies" you are always on about?

Geoff Dixon is not there to work for his employees, nor is Brett Godfrey or any other CEO is Australia. They work for the board and by extension the shareholders. Brett Godfrey's employers are obviously very happy with him. Geoff Dixon's employers are also clearly very happy with him.

You can't just base your arguments on ideology. Reality has a habit of dismissing dogma.

I'm not in the airlines industry..so please criticise me!


But the way I see the future for the Australian airline industry is that it will go the way of G.A.


The good thing is that there will be growth amid economic uncertainies. Like G.A, the airline industry may be able to cope with economic ups and downs in the future.

It will be great for the industry, new equipment and more jobs. It will be bad for the current employee's as pay will ultimately go down. It's a trade-off more jobs and more turn-over equals less fat-bastard jobs (i.e overpaid). On the down side the unions may perish as pilots and engineers get lower wages. Lets face it, when YOU buy an airline ticket you don't know if the pilot or engineer who pilots/maintains the aircraft is a veteren or a newcommer. That's because your pilot will be the one who passed the checkride and who was the cheapest. You get what you pay for. The people who will make the honey money are the managers and the shareholders.


To counteract the ultimate wage decrease for operational personel (pilots, enginneers, flight attendants, ground crew, ops crew) then the unions and members will have to unite or lose out. Before too long aviation personnel will be more like contractors than employees. If the current airline personnel and unions got talking then maybe you could stop the changing trends...amidst market forces. If it haden't been for 9/11, terrorism and S.A.R.S then maybe we would still have a two airlines premium market, but it's now going the way of the supermarkets....big and cheap.


On the other hand there will be more growth and more jobs. It will be great for the travelling public. Look at the fares now. It's finally cheaper to fly than to drive, it's also faster and saves YOU the stress of driving.

Since I'm in G.A it doesn't really bother me which way it goes...that word again ..go. For the guys and girls at the top, you'd better start excercising...cause in the near future your going to have to be flexible.


My thoughts


U2

Just a few thoughts, mostly along the lines of what is a LCC and where can the savings be made:

- management salaries (yep I agree here)
- tech crew salaries (also here)
- cabin crew salaries (more later on this one)
- efficient aircraft fleet
- not many other places (as fuel, leases, fees, etc are not neg)

Pigs Arse talked about multiple types. As far as I can see the big Q is currently heading down the AN path from Sir Peter days...almost one of everything!! This is just not efficient due:
- type ratings (tech, and engineering)
- crewing (due type rating problems/ costs)
- and as Pimp Daddy suggested spares, etc, etc

Tech crew. The tech crew will be either "new" LCC employees if the management team can dream up a way to keep mainline crew from having a heart attack, otherwise I find it difficult to believe that QF mainline tech crew will be operating.

Cabin Crew. TAY 611, you have hit the nail on the head with this one. Incorporate the LCC in NZ (even as JetConnect) and you can have one less cabin crew per aircraft!! Now we are starting to talk savings; salary, super, annual leave, sickleave, overnights, overnight allowances, roster costs, etc, etc

To get it right QF has to use the existing management (and all other infrastructure) for the LCC, not duplicate.

Interesting: Alan Joyce at 37 is about the same age as Brett Godfrey when DJ started.

Also, Douglas Mcdonnell, what exactly is a "high capacity OAC". As far as I know there is only an AOC, they just happen to have high capacity aircraft on the register.

CEOs
 

Flying Tiger
You might get more sympathy about the 'worth' argument if it was a 2-way street. What upsets me most about executive remuneration is the lack of downside. How do I get a gig where when things are going well (and by going well, I mean you could just be lucky- like have your biggest competitor fall over- or you just go on the cost-cutting merry go 'round, not actually adding value or making decisions that grow the business, just pulling down others pay and conditions) I get people lining up to tell me how good I am and how I should get double the money? Then if I stuff it up, destroying not only shareholder value but the lives and livelyhoods of countless others, I get a great, big, fat cheque to pay out my contract and see me on my way (to the next company ripe for the pillaging)?

Australia used to walk in the middle ground between, say, the US and the UK (in IR terms). We lean ever closer to the US these days. Read a Michael Moore book and see if that's what you want.

Call me cynical, but isn't starting an "all new, low-cost, totally seperate company" just a lot of smoke and mirrors for re-writing (downwards) your EBAs, corporate culture, etc, in one foul swoop? The funny part is some people actually seem glad for these 'opportunities'. If they called a spade a spade and said; "we are going to sack a lot of the staff at short haul, and hire some new faces at half the pay and doing twice the jobs" would people still be so glad?
It seems so.

bitter balance you raise an interesting point with your statement, "Geoff Dixon is not there to work for his employees... for the board and by extension the shareholders.".
Interestingly enough, I had intended to raise this very issue when I next posted, by asking, "To whom should Mr Dixon weight his responsibilities - the QF employees, or the shareholders?"

So exactly who ARE the shareholders?
Can they be defined as one constant, defined group? Or are they an ever changing, indistinct, multiplex?
Do shareholders have any loyalty to a company? Or are they basically, purely reward/profit driven?
Are shareholders individually able to directly influence the base source of revenue for the company on a day to day basis?
Would a 100% turnover of shareholders in say a 12 month period, affect the earning potential for QF during that time?

Now ask the same questions, replacing "shareholders" with "employees".

Let's be quite honest - 1 or 2 p!ssed off Mum & Dad shareholders are not going to have ANY effect on a company the size of QANTAS - the same cannot be said of employees.

QANTAS employees are, right now, feeling insecure - and this is being reflected in Virgin Blue's increasing market share.
An analogy I'd like to make, which I feel fits the current QF shake-up, is that as Dixon cuts up the QANTAS cake into smaller pieces, a few crumbs are lost each time - these crumbs end up on VB's plate.
Each smaller piece of cake now exposes more area (than the original whole) which is vulnerable to attack.

Flight crew and maintenance staff are easily identifiable, per aircraft, fixed costs, eg. 1xB737 = 2 pilots, 3 cabin crew, 1 LAME, minimum, thereby making easily identifiable "targets" in any cost-cutting. Other ground staff such as check-in, loaders, schedulers, etc, are able to be shared over several aircraft and are hence less easily cost definitive.
Even less so are non-revenue producing office staff, whose cost to the company can be written off across the entire fleet.

Anyway, one step at a time.
Where should Dixon's responsibilities primarily be channeled?
IMO, he is acting AGAINST QANTAS' best interests by screwing the staff - but with a million or two $$'s more under his belt from performance bonuses, will he really care by the time the sh!t hits the fan?

Will be crewed by current Mainline crews and new hires will be second officers. You are still not listening.

There is not one CEO of a major airline today that does not devote a moment of each day wondering what to do about the LCC amoebas springing up in their midst.

By announcing Quokka Airlines, QF has publicly admitted it is rattled and willing to accept the inevitable cannibalisation of the main brand as the quickest way to cut some cost out of the business.

IMHO, going for a separate LCC model is an admission that management, instead of being full of ideas, is actually out of ideas and basically lacks the intestinal fortitude to negotiate creative solutions to stretch the brand rather than cannibalise it.

As someone suggested, sophisticated yield management has been around for yonks and taking sandwiches out of the rear cabin is hardly rocket science. So what then is really driving this?

Quite simply, this is the quickest and easiest way to drive down unit labour costs. It is not the best way but simply the easiest.

History has shown that none of the so-called majors has been successful using the strategy being proposed. The jury may still be out on Delta's attempt but I don't rate their chances any better than some of the Europeans.

As for Quokka, it is the easy way to put some air in the PR tyres and make it look as though there is some creative thinking going on...no matter how destructive it may end up being to the brand in the longer term.

Most would accept that there will be continued downward pressure on working conditions across the industry for the foreseeable future. My question to the QF board is; why baste the whole turkey in such a distasteful sauce and make even more of the kitchen hands and patrons choose the chicken? Actually KapM's crumb analogy was pretty good.

VB must be quietly pleased with this development and will no doubt be doing some homework on what kind of business class seats to install on selected routes.

Perhaps it could be time to put my QF Frequent Flyer card next to my Ansett one....in my son's toy box.

Kaptin, I'm sure Geoff Dixon includes his staff in his decision making but when weighing his responsibilities they clearly have to be to the people who employ him. How can CEOs answer primarily to their employees? CEOs by definition must make decisions that will sometimes piss their employees off. That's their job.

I appreciate its a hypothetical but a 100% turnover of shareholders in 12 months would by definition damage QF immensely, if not terminally. If all of your shareholders sell their shares is this likely to increase the share price or decrease it? A large drop in the share price is going to threaten the company's existence more than staff turnover, particularly in such a capital intensive industry.

Lets look at QF's shareholders. A large majority of QF shares are held by fund managers and institutional investors. i.e. share market professionals. They do not measure a company's success by how happy the employees are. They are looking for hard financial data. If Geoff Dixon produces two plans - one for a radical restructure to reduce expenditure by $1 billion and the other a long term plan to reduce staff turnover (and not respond to a competitors attack on the QF cost base) - which one will they go for? Which one would they back to maintain or improve the share price?

Do you make investments to ensure the recipients of your capital are happy or do you set out to make a return? If its the former PM me and I can put you on to some great ventures ;)

BTW - if you are judging companies by their staff morale maybe you wouldn't be ranking VB too far ahead of QF at the moment.

Although I agree a good CEO should be well remunerated, I don't know that I agree that the employee's can't be a top priority.

Anyone who has read "Peanuts" which is the story of Southwest in the US, will know that employee's are THE top priority of management, on the basis that happy and fulfilled employees will work harder and look after customers better and make decisions based on the best interests of the company. And Southwest is now the largest (in numbers of pax) airline in the world and also the most consistently profitable.

Maybe there is a lesson there.....

Jakethemuss - and if Q renegs on any agreement they have made?? Would mainline really strike over the issue? If not what else can mainline do - with Jetconnect, Impulse, Ex Ansett and God knows who else lining up for the seats?

It is just that you seem to be awfully confident an organisation that seems to be gearing up for a showdown with Unions generally (re: LAX) will honour whatever agreements they have made(they may well do of course, but these are still turbulent times for Aus/NZ aviation). Given the way the last Pilots'strike ended up, if push comes to shove would the crew be prepared to go out over this issue??

Wait and see I guess!

If Dicko uses mainline crews for this operation he is a big teddy bear!

A seperate pilot group would offer many advantages and to suggest that the new airline is a low cost model, would surely demand this.

A ruthless CEO would make use of the following:

1- Pilot's paying for their endorsements as opposed to the double whammy of training a S/O onto the new type and training someone to replace the S/O.

2- A company tool to break industrial unrest at the extreme, or toward the other end, have ruthless EBA bargaining powers. Qantas likes this.

3- A contract having little semblance, in any shape or form, to present mainline perks- staff travel, bonuses, yearly service increments etc.

4- Possible cultural problems of cross polinisation of long haul crews into a budget domestic model.

5- Business models love the start afresh attitude. Catchcry stuff for those who have played boardroom bu$$sh$t bingo!

Good luck guys, but it doesn't make sense to use QF Mainline Crews.

No sooky pilot responses, just hard and cold facts as to why or what advantages there are to using QF crews. When the above seems cheaper.

Just how I have been thinking, it all makes too much sense:ok: .

Gnads,

Even being QF mainline, I don't know anything more than anybody else here. The Company have obviously thought a lot about it and AIPA may have added their two cents worth, but basically it's all very close to the chest.

But when you're talking about whether to use mainline pilots or not, have a look at what happened with Australian. Originally we were told that it would be all new aircraft, but instead they painted up exisiting airframes for the new venture. They also used mainline crews operating to the Australian contract. Why? Well to me it seems to be that if it all gets too hard (or unprofitable) they can just close up shop, respray the planes and tell the boys to wear their mainline uniforms to work tomorrow.

The new LCC thing could be started up the same way. It would make a lot of sense to use 737s, which are already operated by SH and then phase out the old 737-300s (probably to Jetconnect's trans-Tasman operation). By offering slightly reduced pay levels for captains and FOs, they would find plenty of takers to take these slots - resulting in the required labour cost savings. As unsavoury as this proposition is to many members of AIPA, this method of business at least ensured that Australian pilots were from the mainline. New hire cabin crew and ground staff working under much tighter contract conditions would be where the main savings would come from.

Their respective unions also wore this scenario for the formation of Australian airlines, since no existing mainline jobs were lost. It could work again in this instance.

Now I'm not saying that I particularly agree with any of this. But QF's problem, in my opinion, is that people expect to get the old QF service level (from ten years ago - booze, entertainment, movies, meals etc) for the Virgin Blue price. Attempts by QF to save money in product delivery and compete directly with VB are seen by the public as a deterioration in the QF product and provide any even bigger incentive to travel with VB. This has led, in my opinion, in QF seeing the need to form a new carrier that can compete head-on.

I hope that it will not be a disaster! I hope that it will make QF more profitable! I hope that it will be crewed by mainline pilots! But mostly, I hope it gives those smug little smarties in VB management a real kick up the butt!

Gnadenburg,
All good points but why did GD go with mainline boys and girls when he started AO operations?Must have had a good reason!