No-frills kangaroo ready to hop
 

Wed "Sydney Morning Herald"

No-frills kangaroo ready to hop
By Scott Rochfort
October 15, 2003

Qantas is expected to formally outline the launch of its own low-cost domestic airline as soon as tomorrow, in a bid to slash labour costs and counter Virgin Blue's burgeoning share of the domestic aviation market.

Since Qantas's chief executive Geoff Dixon first flagged the idea two months ago, speculation has mounted that the Flying Kangaroo will announce its low-cost plans before shareholders at its annual general meeting in Adelaide tomorrow.

With Qantas remaining tight-lipped on the make-up of the airline, the only point made clear is that, like its low-cost international carrier Australian Airlines, the domestic carrier will be operated as an independent business unit, with its own union agreements.

Speculation over the new airline, and Qantas's two-year plan to slash its cost base by $1 billion (half from labour), heightened yesterday after the airline sent another batch of middle to senior managers for ground handling training in Los Angeles.

Citigroup Smith Barney analyst Jason Smith said it was feasible the carrier could commence services within nine months.

"We think they are committed to the low-cost carrier," Mr Smith said, adding that the Qantas-offshoot would probably initially compete against Virgin on low-yielding leisure routes.

If the low-budget concept were successful, Mr Smith said, the airline could then expand into key business routes such as Sydney-Melbourne.

Aside from giving Qantas more bargaining power against the 14 unions with which it deals, Mr Smith said any announcement of a second low-cost domestic carrier could impede Virgin Blue's plans to list on the stock exchange early next year.

Mr Smith said the formation of any low-cost carrier would be justified "as long as it covers its cost of capital".

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From a reliable source:

quote " I am not interested in a core airline, I want a virtual airline " unquote.
Geoff Dixon , a few months ago, behind closed doors.

"Hmmm, let`s see now, if we grab half a dozen aircraft we can start a whole NEW airline. A hundred mill ($$`s) should get us started - establishment costs, marketing, logo design...and think how many new MANAGERS we can appoint on bloated salaries. And If the low-budget concept were successful, the airline could then expand into key business routes such as Sydney-Melbourne."

What a joke! Bleed QF a bit more, and it won`t be around at all in another 5 years.

If You look around the world Kapt M you will find LCCs are
a fact of life, maybe you can enlighten us on how Mr Dixon
can compete effectivley against Virgin Blue when his costs
are some 25-30% higher, at the moment DJ is growing at
an awsome rate and the paying public seem to like the way
they do business, tell us how else he can stop them gaining
even more share than they have already.

Wirraway

Cunning:

Surely in that alleged 'quote' he's referring to the LCC, not the mainline? Show me an example of a successful 'core-based' LCC and I'll be very surprised. The only way they can keep overheads down with Skimpy (just as DJ do) is to 'virtualise' their airline, and make maximum use of third party providers.

Wirraway's hit the nail on the head. That said, Kap, they will have to be very, very careful with the likes of management structure etc to ensure that management overheads are kept to a bare minimum. Like that scene in "Apollo 13" in the simulator where they're turning off all non-essential electrical loads to get the total battery load down to 5A or whatever it was, the formation of a LCC is much the same. Say their business plan says that 'in order to compete with DJ, we need a unit cost of $4.99/unit, rather than DJ's unit cost of $5/unit' (imaginary numbers), they basically have to trim down all non-essential facets of their business until they achieve $4.99/unit. If they get to $5 or more, then it's simply a waste of time for all concerned (assuming they want to make a profit, otherwise $5 and no more would be just fine).

ED

LCC Pilots
 

Okay I ask the question so many have pondered on another thread. How will it be crewed?:confused:

ExcessData highlights my concerns, Wirraway. It appears all too apparent that existing infrastucture is NOT used - Australian being a classic example - but rather the excuse to cut the majority of the workers` wages is really a poor cover for supporting MORE management of a new airline, and to afford promotion opportunities to middle level managers who have reached the highest position within QANTAS.

Have the public benefited by the introduction of Australian by way of lower airfares? Have the staff benefited?
The answer to both is NO - however Australian created many more ground management positions for former middle management, but at HIGHER salaries than they on before.

Poto - I've heard something along the lines of 4000TT min, 737NG endorsement from a friend of a friend of mine. ;)

Like you said, it's been discussed in detail \ on here before - so that's probably your best bet.

Best of luck,

Soulman.

Poto

When this was discussed in another thread, most seemed to
think "Skimpy" will acquire new aircraft, Mr Dixon has said
other airlines that have tried an LCC off shoot have got it
wrong.

My take on this is a clean sheet of paper and all
staff will be hired fresh, if he transfers the aircraft from
domestic, obviously there will be a staff surplus in QF short
haul, if this occurred I can imagine that many ground staff
and F/As will have to be made redundant, and offered new
positions with "Skimpy" at the new pay level, trying to imagine
current QF F/As having to clean the aircraft on 30 min turns
at this pay level seems too hard, this could be why many newbies are on the short list at MAM.

Remember that DJ only have 80 odd employees per aircraft,
so to get to that level, check-in, Baggage handlers and F/As
and other staff would have to adjust dramatically, pilots is
anyones guess as to how it would be handled, tomorrow
should shed some light, then again maybe I'm wrong and it will get new planes
and "Skimpy" will compete against QF as well as Virgin.

Wirraway

One aeroplane type, one operator, one only QF LCC. Bye bye Impulse.

Crewed by mainline Qantas pilots.
You fellas don't seem to listen.

Pete, I would be game to bet a beer that Impulse will remain
seperate to "Skimpy"

Wirraway

"fifty bucks and my left nut" that the Impulse guys will crew it. Perhaps not a direct transfer over but I'm sure they will get preference(looked after) IF Qantas 'wind up' Impulse.


jakethemuss,

I don't know and maybe I'm not looking at this the same way as you but 'please explain' your reasoning.:ugh:

I just can't see the mainline guys giving up their conditions and benefits and having to start all over again at 'Skimpy'.

hoss :)

Wirraway, don't forget that Virgin have less employees per aircraft than Qantas because they outsource so much of their work whereas Qantas does it all in house.

When National Jet get their junglejets the 717s will go. Lots of Impulse drivers and cabin crew screaming out for a job at Skimpy, those who arent flying the jungle jets or transferred to mainline that is.

I can feel another "GO" coming on!!!!!!

Your on Wirraway, but I can't see LCC's competing against one another. MOU says it all, crews to be hired off the street will have NG rating similar to Jetconnect.

Boeing last week said they were going to stop building the 717 in 2005, current orders mean that they are only building one per month.

Nup, bye bye Impulse.

Apacau, yes thats the going word.

Excess, I'm afraid he was talking about Qantas.

Remember...you heard it here first!!!
 

The name of the low cost carrier will be......



Ansett. :eek: ;)

So what happened to GO(BA)? In particular where did the crew come from and have they been looked after?