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".

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

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?

Here we go again all you Neville's.

We had this discussion with Australian Airlines and it was said then on this board that it would be crewed by current mainline pilots. No one believed that and alot believed that the ex Ansett blokes and Impulse guys would crew it. It was never going to happen.

This will be no different. Fullstop. Current mainline pilots will crew it. So can we stop dreaming that all of a sudden 100 737 jet jobs will eventuate. Some jobs may eventuate as a result of people moving up the chain within Qantas mainline - and they will be second officer slots on the A330 and 400. And that is a good thing.

Hate to say it, but if Skimpy is crewed by mainline crew maintaining current conditions and benefits then this Airline is going to have a very hard time competing on the 'Flight Operations front'.

And the name will be...
 

..Air New Zealand?! :{

Maybe if they didnt spend millions on there new uniform(australian designer label)and have the stuff made in asia.And by the way thanks for suporting the australian textile industry!!
They wouldnt have to shed staff.
The new low budget service could end up like the two skips on the side of the road near the alice airport.ROO STEW!!!!

hoss, you're kidding right?

A VERY reliable source within QF who also has some pretty good sources at DJ assures me (and I'd trust this bloke every day of the week and I know he's reading this!) that the cost structures between DJ and QF as far as tech crew costs are concerned are 'not that different'. If I could be bothered, I'd do the maths for you but I can't. I little 'give' and 'take' and some creative ways of doing business and I wouldn't be surprised if both AIPA and QF come to a pretty good arrangement.

Just to help me out though, can someone give me the yearly average hours for F/Os and Captains in DJ and I'll do a comparison based on some mates in QF.

apacau -
NJS have just closed down their entire East Coast presence and are only hiring on contract. They have also indicated that they wish to wind down the Airline Ops business and focus on charter and freight.

Why wouldn't Impulse get the new Embraer jets? They have all the infrustructure already in place (crew and bases) at the locations these new jets would fly.
I ask you these questions seriously - not looking to argue. Just can't understand why NJS would close everything down and hire on contracts only just to start everything up and expand again. Why do it when all Impulse would have to do is renew their fleet (for regional ops - not the LCC)?

I believe the LCC will be under the Impulse umbrella somehow but remain a separate operation. Why would QF just say Impulse is the new LCC and swap the 'regional routes' over to NJS and their new wonder jets when they have the chance to start up a separate operation at significantly lower crew costs? I am sure QF could negotiate contracts much less than what the current Impulse crew are on. Just look at JetConnect!

This new LCC will not replace the current 717 regional network anytime soon. You can't fly all Y 737s BNE-ROK or MEL-LST frequently as you can the 717. Also the 717 is still very efficient in terms of aircraft and crew costs on such sectors as above. I agree the 717s will go - just not tomorrow or next year.

Hope the above makes sense. Just curious as to why QF would spend so much money on changing things that aren't broke. The 717 operation makes them heap$.

It has been stated in QF cabin crew employee forums, that if the new LCC is to go ahead, that all employees, in every division, will be paid at rates 'considerably lower' than Virgin Blue .... would mainline techies want to take such a pay cut? I know cabin crew wouldnt voluntarily do it !

If it happens, it will be intersting to see what all the EBAs end up like, and whether it affects QF mainline shorthaul services.........

Ditzy
 

Where do you get your info from?

NJS haven't told me or anyone I know that they want to wind down the airline side of things. As a contract service provider the east coast flying has reduced because the contracts were not renewed, not because NJS just decided to shut up shop.

Why won't NJS get the junglejets? They have all the infrastructure already in place ....

I think the reality is that until a decision is made by QF, no one knows who will get what, be it LCC or regional jets. What we read here is speculation, and understandably based on individual biases towards retaining employment.

Upper Deck Right - this was also said about Australian Airlines , and the only group within Qantas Mainline to crew this airline were the pilots. This will be no different with the new LCC. Conditions and pay will be comparable as they are in AA.

3% or thereabouts is the figure in the saving in tech crew costs, between a full service airline and a low cost one. ****** all.

Pete C you are a bitter little pr1ck. How long does it take to get a high capacity rpt AOC up and running?

I think you have missread QFs commitment to guys like yourself. Im sure they dont loose sleep at night worrying about what you feel or think. See you at gate 59!!!!!

Capt Claret, thats the illusion that Impulse are under, that they are the saviours of QF and that they are the only ones that can operate jets.

Thurs "The West Australian"

Qantas set for low-fare launch
By Geoffrey Thomas

QANTAS is expected to announce the launch of its new low cost/low fare airline at its annual meeting in Adelaide today.

First flagged two months ago by chief executive Geoff Dixon, the new holiday airline will operate a fleet of up to 20 all-economy class Boeing 737-800 or Airbus A321 aircraft.

The airline, which some insiders refer to as skimpy, will be modelled on Qantas' low cost international brand, Australian Airlines.

According to ABN AMRO airline analyst Bruce Low, Qantas has gained significant insight into the operation and structure of low cost carriers through buying Impulse Airlines two years ago and the establishment of Australian Airlines.

"Qantas appears to have come to the conclusion that it must do more to cut costs to compete with Virgin Blue," Mr Low said.

With the new airline to target domestic leisure routes, there may be some overlap with Qantas' regional subsidiary Qantaslink which operates 106-seat Boeing 717s and 75-85 seat BAe146 aircraft.

The new airline is part of Qantas' bid to cut its expenses by $1 billion over two years.

According to Mr Dixon, $800 million in cost savings have already been identified with $385 million from increased labour productivity, $200 million in fleet simplification overheads, $135 million through distribution initiatives and $80 million from refinement of the domestic product.

Qantas has also been striving to position itself and its fleet to meet widely varying market demands, from high yield traffic on routes to London and Los Angeles, to very low yield traffic from Sydney to Cairns or Melbourne to the Gold Coast.

This month Qantas unveiled its new business class skybeds and is in the final refit of its long haul fleet with seatback videos for all passengers.

Qantas shares yesterday jumped 10¢ to $3.62.

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

So who takes credit for the name Skimpy???:D

I believe the fleet size of Impulse and NJS are similar ( no. of jets ).

If you listen to the " reliable " sources, NJS were just unlucky that they had 146s coming up for the end of their lease and Impulse did'nt. Also these same sources say that the 717 does not fit into QFs long term plans, it's not a regional jet and it's not a full size airliner ( a la 737 ). People have been bagging the 146, and saying that NJS is finished with QF since time in memoriam, well guess what........they are still there.

Ditzy, the main use for the jungle jet would be west coast, last time I looked, Impulse did'nt have too much infrastructure over there.

It's all speculation until Uncle Geoff makes a decision, but I can tell you that NJS' 10 year relationship with QF is far from on the rocks.

I've heard from good sources about Jungle jets for NJ. Emb190s to be precise. Just waiting for the big Q tick-off.

On that issue, I note in this month's ATW (p62) that there are 10 undisclosed orders for the EMB190 with 20 options. Could these be related (looks like the right sort of numbers) or am I reading FAR too much into this?

Capt Claret -
My point was that it would be a huge cost for NJS to set up things on the East Coast again. Not impossible of course but I very big cost nontheless. Why not just use Impulse?

I am sure I have read that NJS was no longer interested in the Airline side of things. Infact two NJS employees said the same thing. I am not saying it is true but it was the feeling for a while (about a year ago?). I am sure I did see it in print somewhere. (Not from NJS though!)

cunning -
Then who or what would fly the regional jet routes on the East Coast? Yes I agree the 717 doesn't fit into QF's long term plans but that is not to say it is making them alot of money on the routes it flies. They don't seem in too much a hurry to get rid of them. And you are right. The 717 really isn't suited to the West.

Pete -
Please do not be so bitter. No one is provoking you to say such things. You just seem hell bent on upsetting or annoying people. Think what you wish but please refrain from such negativity. Please.

Qantas has made it quite clear in the last couple of months that it wants to simplify its fleets. The most successful carriers in the world. Ryan, Easy, SouthWestern, JetBlue, Virgin Blue all operate just one A/C type. Dixon is no dill and wants a dramatic reduction in QF's fleet types. 717 great on some routes but lacks flexibility on others (Q words not mine) and Boeing have already indicated that they will stop production soon. So when the leases are up on the 717 off they go barring a huge up swing in dom travel (the current reason more 767 200's aren't coke cans). The classics and 146 similar story. As for skimpy my guess it will be either main line or Jet connect. Mainline along similar lines of Aust Airlines or go for the jugular with the cheapest pilots going around any where, Jet connect. Impluse, NJ may get the Jungle if that ever comes. But that's just a guess. AIPA has its work cut out thats for sure.:\

Ok so all the talk here is NJS and Impulse - you are forgetting two other QF subsidiaries namely eastern/sunstate sitting in the background with very solid and now increasingly combined infastructure..and....what's more appealing to QF is that the crews are even cheaper than impulse.

It would not be a crazy thought that the impulse 717 Jet operation is wound up, with impulse crews operating on the new skimpy services. EAA/Sunstate given Dh8-400's or even the jungle jets to operate MEL-LST, BNE-MKY etc.

There are other players in the field !

Just heard, that the type will be A321's.
Anyone know if that is true or not.

Hoss,

I think you're under some delusions about the conditions and benefits mainline guys get. I have a few friends working as 717 F/Os and read some info recently regarding F/O pay at Virgin. As a 767 F/O I bring home within $200.00 per fortnight of what these guys get.

Most of the so called "conditions" you're aluding to benefit the company more than they benefit me. It strikes me that many people base their impressions of Qantas Pilots on the old regime pre - privatisation when we got equal standown at home and only flew 400 hrs per year. Much has changed in the intervening years.

If I went to Australian, I'd get a pay rise, pay less tax on allowances, a simplified and (IMHO) fairer rostering system. The fact that Australian achieves cost savings of around 30 percent over its mainline parent confirms what most pilots have always known - that the cost savings are in infrastructure and support services, and not in what pilots actually get paid.

So if Geoff Dixon wants to set up a LCC airline then he has at his disposal a group of highly proficient and well trained tech crew to fly his aircraft at their current, economic, rates of pay. And they're all working for mainline.

:ok: :ok:

WG.