All the above can be achieved without one airline "embedded" within another.

Genex is obviously onto something with his thinking. But as usual his not so well hidden disdain for mainline pilots and their conditions colours his thinking.

He seems to concede that the J* model won’t work in the present environment but hangs his hat on the lower cost winning over from those pesky mainline people.

There is no doubt that with the suite of choices available, the ultimate combination for management would be to have the J* cost structure with the QF revenues. In other words as you retire the older QF aircraft re-badge the J* aircraft into the higher yielding and far more resilient mainline brand.

Some say this was the plan all along. And to a certain degree I think it was, but this fuel crisis has brought the whole J* sham to a head a lot sooner than planned, and there is a spanner in the works.

Redundancy cost.

If you need to get rid of, say, 300 pilots in a short period you have to understand the cost of moving those pilots out of mainline versus the alternative. The Longhaul EBA is very prescriptive on how this works, far more so than the J* EBA.

Maybe it is a perfect time to be negotiating the LH EBA, for example I’m sure the attention of AIPA is now firmly focussed on the big picture issues like maintaining and even strengthening the redundancy provisions rather than short term issues like a x% pay rise.

Can mainline survive at $200/barrel? The answer is yes, I say this because there will still need to be airlines, there will still need to be business travel, and there will still be plenty of wealthy people who will travel.

Of all the airlines QF is one of the most profitable (and no thanks to J* despite what Genex thinks) and therefore even as fuel costs skyrocket they will still be one of the most profitable (or least loss making as the case may be).

As the other, less resilient, airlines fail, then the QF position actually could improve. It is possible that after a few years of severe pain, that at $200 + a barrel QF could actually make more money than ever before from fewer assets due to the collapse of the competition.

And the most important bit, is that at $200 a barrel the wage difference between the Mainline and J* group will be largely insignificant. Fuel will be 60% of the costs, wages about 15%. Think about it.

Having said all that, I suspect that fuel will not get to $200, in fact, quite the reverse, but only time will tell. But one thing is for sure, airlines will have to at least plan for the eventuality of $200 fuel and therefore the tough decisions will be made regardless.

Latest is that all JQ CC are now being retrained to QF procedures...

Is this the start of something????

I think that as a concept, the J* domestic ops experiment has been one of GD's better accomplishments and success'. For all the vitriol, domestically it has achieved what it was set up to do. It has maintained market share for the group and stifled the competition. J* domestically has taken on some of the unprofitable routes to the benefit of the entire group.

So from an operational perspective J* has been a success domestically. J* implementation, (international in particular) from a HR and PR perspective have been bad for the group. I think that the problem comes from the fact that management come to the realisation that J* apart from the purpose of maintaining market share, J* could ALSO be used to provide leverage against mainline cost. A good thing from the companies perspective = more profits, but very difficult to implement seamlessly. They failed in the implementation and as a result disengaged a huge section of the work force. In doing so they have created a belligerent group of employees from what was a loyal group. J* is far from the only reason for this, poor leadership and double standards are also players amongst others. See some of the things mentioned above by Keg. But this is starting to hurt the group, see engineers, FOG etc etc.

It seems that they have forgotten the core of the business. i.e high yield passengers and instead of focusing attention on this primary part, a part which was starting to show signs of decay, e.g Aging fleet. They have seemingly inexplicably given priority to a pet project. The international LCC. Whilst treating the core of the business with contempt. Why a full fare paying QF mainline pax should be forced to endure international travel on a 767 (whose cabin was ragged 8 years ago when I joined) whilst a J* international pax is on board a new A330 or even a 787 beggars belief. Can someone please explain how this is a good decision and the rationale for it? Would Singapore airlines treat their business class pax like this? No chance. Singair has always stayed focused on core business and although helped by govt and position does not do badly for a "legacy" airline.

It is not that there is no place for a international LCC. There is. But if your business model can only support it if you make it the focus to the detriment of your core business then it is not the time to do so. They should have waited for the 787 to replace the 767 and 743 and then gone into int LCC ops with A330s or 787s.

GD and co have made some very good decisions, J* domestic and purchasing the 738s. The A380 and the 787 should be good decisions also. They have also however made some clangers. Private equity bid, No 777's or no more 744ER, A330-200s on domestic, disengagement of the staff, freight conspiracy and losing sight of core business to pursue his baby J* int.

Subsidies
 

A Little History Re Susidies.
1.In the early 50`s when QF was nationalised it was technically insolvent.Another month of trading and QF was no more.
2.Between the nationalisation of QF and the early 90`s when QF was privatised some 12 billion in todays money was given to QF to keep it affloat.It was nothing more than another gov`t department soaking up money.Unfortunately some of the employee work practices followed suit and still remain today. The Pilots LH EBA is 655 pages[Would make the wharfies pre Corrigan blush]
3.This Gov`t ownership also allowed for cheap borrowing of funds with QF `s AAA credit rating.
4.Before privatision 1 billion in debt was payed off by the gov`t,Australian airlines[which was proftable] was traded for a book debt of 400 million,and contracts like the armed services where won by QF for the first time in history, all weakening AN terminally.
5.An collapsed and QF has never been more profitable.

What is my point!!!

Whether you like GD and his team or not he has successfully steared QF to success since privatisation.The current problems Qf face are world wide.Unless all current employees realise this,especially ones on outdated work practises,they will be left behind.
Qf Mainline and its subsidiaries,including Jetstar,have a big future but change is upon us and has to be welcomed.

Capt Snafu: Good post. Agree entirely:D

The false assumption implied here is that the change is not welcomed by the 'legacy' personnel. This is simply not the case. I don't know of a single pilot that isn't excited at the prospect of a successfully expanding QF group. All of us want to see QF grow and prosper. Heck I'd love J* to be a rampaging success and build up routes that mainline could then take over and make even better money on whilst J* heads off onto yet more new routes.

Most significantly however, if you want me to embrace the change then don't exclude me from it. Personally I think it's a tragedy that pilots who joined QF in 2000- prior to the Impulse buy out- are still F/Os whilst pilots who were flying for a competitor at that time or joined well after that date are Captains in J* and most of the QF crew aren't allowed a look in.

So bring on the change. Just don't bs me with platitudes, false economies and distortions of reality. Don't tell me that mainline is 'expensive' whilst costs are foisted onto us. Don't tell me that QF isn't making money on Japan and then heap a product onto the market that is widely despised by those they claim to want to attract. Don't tell me to accept change whilst screwing me over along the way. I'm more than willing to help and grow a successful pilot group but if I'm treated like an idiot, don't be surprised when I respond in a negative way. Ultimate the people that get hurt the most are the only people that Geoff reckons he works for- the share holders.

“All of us want to see QF grow and prosper.”

The DJIA could end the month at its lowest for June since 1930.

The airline industry aint gunna do much growing in the next couple of years.

Might shrink a bit though.

I don't suppose "current management" will be left behind? You know...the ones with the outdated management practices. Management practices that include flying the entire board first class to NYC, along with their assorted hangers on/wives/partners. Holding the QF107 LAX to JFK for "commercial reasons" for the delayed QF93 because their was a board member on the QF93. Then shuttling everyone around, no doubt in limos, and no doubt putting the whole lot of them into 5 star hotels. You know...the current management leader who puts shareholder return ahead of everything else. That whole exercise didn't cost the shareholders anything, did it?

Apologies to genex.

Couple of questions:

1) Has the Big Q hedged fuel at $70/barrel or not? If so, why the bleating about higher fuel costs.

2) What is it with poster's decrying pilot wages? Come on. Have a look at Dixon's benevolent comments about freezing management wages. What a grand gesture. Bit of history on the recent payrises he and his band afforded themselves, please. Oh, was that 42%, then 30% then another 35%, or figures similar - THIS YEAR. Compare those hundreds of millions in director fees and management salary to the supposedly bloated pilot wages.

3) Is the Big Q profitable because of the lack of items on the debit side of the ledger? Could it be that longer-term necessary expenditures in core items - reequipping with new planes, maintaining spare parts inventories, building engineering support, improving cabin crew training, adding morale boosting techniques to the troops in the planes and on the ground - haven't been booked for many years, making the credit side more promising?

Yeah, the Big Q is profitable. How were those profits booked?

If at the expense of reinvestment, doesn't that accounting technique have a half-life?

Hi Waren. I can't agree with you about the pay scales. The low cost carriers only pay that way because they can. Pilots pay scales is only a very small part of the hourly operating costs of an aircraft.
I don't want to be negative towards those of you that fly for low costs carriers but what really concerns me is that the average passenger isn't going to be able to afford to fly with the way that fuel costs are going up. When travelling overseas, the average business person travels either business or first as it allows them to get work done and allows them to be fresh on arrival for appointments etc. They won't go in economy. What concerns me is that technology will increase to the point that business people won't need to travel thus decreasing the numbers of those who use air travel.

So Warren while every other profession from teachers and nurses to doctors, surgeons and lawyers, (Not forgetting every truck driving, dirt shoveling or kitchen handing resources boom bogan from Bowen to Bunbury.) are winning CPI plus wage rises you are happy to trade down and take a pay cut to move to a low cost carrier for what i imagine is essentially the same job?

Please correct me if I am wrong.

I thought the object was to check-mate your opponent, not yourself and your colleagues.

Yes, Iron Bar I, too, am perplexed.

When I interviewed at Jetstar and declined the (non-pilot) job on the basis that they weren't paying the market rate for my skills, the Jetstar HR lady looked bewildered and said "well, we are low cost you know". I was genuinely amazed that people were so readily accepting/embracing this new company "culture", where it seemed that it was perfectly reasonable to accept lower remuneration, because "it's the future".

The word idiots comes to mind.

So, just to be certain, Waren; your gamble (as you put it) is to guarantee yourself a much lower remuneration now and into the future, foregoing a much higher remuneration into the forseeable future, just so that you will have any sort of remuneration much later in the future? In an industry as fickle as the airline industry? Making these statements on a thread titled "Jetstar redundancies"?

Yes, the right word came to mind.

I hope there are not to many Warens around, just when I had thought I had heard/seen it all. Unbelievable piece of logic.

Actually NUNC, and there is no spin in this....it's not a bad idea as your career progresses to be looking around carefully at other opportunities, even if there's some short-term pain in some way (salary, training bond/pay, relocation etc).

I have had a number of US friends who let the "golden" pension plan and a high seniority number blind them to either a) the fact that their airline was dying by degrees and/or b) really exciting opportunities to get in on the ground floor of new carriers. I have alluded elsewhere to one friend who knocked back a single digit seniority number at FEDEX because "it was poorly paid and would never work".

The guys who left AN a year or two before the shutters came down seem to have prospered. I certainly never regretted the short term pain of a few years "single pilot" in Asia that resulted in a wide-body command.

ferris,

waren9 is employed - and will probably always be with that outlook. Are you employed? With your outlook it seems to me that you are far more likely to be unemployed than waren9!

FGD135. Yes, I am employed, as any number of posters will confirm. After a look around the job market, I accepted employment at just under 4 times the remuneration offered by Jetstar.

I dont consider selling myself short in order to gain some sort of long-term leverage or 'security' in the aviation industry to be a sensible outlook. If Waren9 is the 'new world order', good luck. Take a leaf out of the book of those that run QF/Jetstar, the very people selling this culture: Shining examples of restraint and thrift. Do you think they are working for below the market rate? I mean, it is low cost, you know! What a joke.

Dont get me wrong, I could see the logic of sidestepping or even backstepping under certain circumstances, in order to advance. But re-read Warens post. It's snake oil sales, plain and simple.

An interesting read. I just wonder for those feeling a little insecure, would it not now be a good time to look towards the sand pit? Emirates and Etihad both seem to come with their own oilfield, and a happily ordering away new A/C as they can see some great new routes opening up, as other airlines falter by the roadside. Nobody knows what the future holds, but a recovery world wide right now seems unlikely. I think if I was a young bloke, I would be certainly wondering should I buy a bucket and spade for the kids and head up there.

teresa,

The problem with that is that Aeroplanes don't run on crude oil, and while Dubai and Abu Dhabi produce oil, they don't refine jet fuel. We have to pay for it like everyone else and (in the case of EK) are expected to make a profit as well (Etihad are currently a chronic loss maker, but will probably have to start being financially independent one day).

EK are probably one of the best placed to weather the storm, but for the same fundamental, strategic reasons they've been so successful so far (Well positioned, cheap labor, diverse market). Fuel costs are hurting up here plenty, and it will slow growth like everywhere else.

Wiz,

What are your loadings and forward bookings like? I hear down this way they are a bit thin on the ground.

The fuel price affects those who are buying tickets.....not just when they buy jet fuel but when they buy fuel at home, food, and anything else that has a fuel cost input.

J