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Could have something to do with the contents of this video as well ... only been posted for a few days and I have not seen a full western version saying "otherwise." An interesting aviation news angle that may interest LAME's on here who may not have seen it yet ..... link here: YouTube - People & Power - On a wing and a prayer .
or click below. . |
No way Qantas has its financing locked in - the current debt is under control but the big bogey (as a shareholder) is capex!!
Per last results Qantas Group presently has 254 aircraft, but has a massive 158 committed aircraft due by 2018 See pg 38 of http://www.asx.com.au/asx/statistics...idsId=01087340 This will be a huge financing task (albeit I cant see 50 787s being in grey or white by Jun-2018) and one better hope the profit holds up |
What happened to the hollow log, 3.5 billion was it?
has it been squandered? |
First, I'm amazed at the perceptive comments this thread has engendered. More tomorrow after a sleep.
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Welcome back Romulus.
Great video guys, suggest all watch and see parallels in Australia |
Hey LAME2, frequent lurker, rare poster tehse days.
Despite what someone else likes to think and say I reckon you guys work in a fantastic industry. R |
The Luck of the Irish?
Prior to the inevitable implosion of this thread, I believe that Gobbledock has summed it up quite accurately.
We can see charts and stats highlighting the general state of play. We can take on board what the 'fish' says and look at possible likely scenarios. It's not positive, anyone should by now be seeing what is going on around them in the financial world. Let's not get too carried away though,we've still got jobs and most importantly we've still got time. The Irish are having a bad day, in particular the Leprechaun, huge loss of revenue with A380 and European Flight cancellations. To be sure, he gets well rewarded for his headaches. Nothing like predecessors and bankers though! Whatever you say, don't say banker to this Irishman:- YouTube - An Irishman abroad tells it like it is !! :-) |
Romulus, I don't believe Debt is going to be cheaper at all. If you go back through the forecasting website I linked, you can look at the Government debt funding requirements of the rest of the world.
The situation is basically that Europe can look after itself. Don't believe the "financial porn" in all American originated news stories. That is part of an orchestrated campaign to both sink the Euro and deflect attention form Americas problems. As for Britain, the IMF has enough to bail them out, just. However the entire world does not have enough money to bail out the United States Of America. They are going to go over the falls. Please note that this is not about budget deficits as some politicians would have you believe, it is about maturing debt that has to be rolled over in 2011 - 2012. There simply isn't enough money for it. That means, in my opinion, that corporate debt is going to be similarly hard to come by, particularly for airlines that have exposure to a collapsing tourist industry. My opinion in part is driven by personal biases and experience. As an Engineering "concrete thinker" my strategic worldview tends to get built fomr the ground up - look after the pennies and the pounds will look after themselves, focus on customers and frontline staff to the exclusion of management, focus on maximising safety and minimising waste. Build in a measure of self sufficiency with enough in house engineering capacity to whether most, if not all shocks. On that last point, suppose the North Koreans had responded to South Koreas artillery drills yesterday, last night American jets took out North Korean gun positions and today shells are falling in Seoul and the Chinese and Americans are rattling sabres at each other? Outsourcing to Hong Kong and Singapore still sounds good? You know what a tip grinder is? There used to be one at Fishermans Bend, not sure if QF had one, talk about strategic capability! But this is just personal opinion. "Grand Corporate Strategy" brings me out in a rash because each time I've seen it, it descended into miserable farce and ruin. I watched a software company make the decision that computer mainframes and COBOL programmers were "Legacy systems". I watched as dozens of Cobol programmers with huge experience in their Forties and fifties and even Sixties were "let go". They were let go because COBOL was a "Legacy Computer programming Language" and we are now going to a "Modern, Object Oriented language whose fundamental concepts are unlikely to be able to be understood by COBOL programmers". I was told they would "Pollute the culture" - the young dynamic Twenty something, sexy advanced culture we wanted to promote. Guess what? We spent a fortune making people redundant and embittering them at the same time. We hired, at vast expense, a whole array of new talent that cost far more than the poor COBOL programmers. We invested millions in fancy new workstations, software, software architects, business transformation analysts, you name it. All very sexy. The Twenty somethings got their doctorates writing our code, which turned out to be as buggy as the object oriented language we wrote it in. The analysts made the mistakes a Twenty something analyst would make. The VAX computers we tried to run these mission critical infrastructure systems couldn't take the load. In the end it was back to Industrial strength, but boring, COBOL and mainframes to provide a rock solid foundation for the business. There was no other choice. Then they had to hire COBOL programmers back, at vast expense, as they took their revenge on the company. So when I hear words like "Legacy Airline", "pollute the cuture", "Asian Mega Carriers", "Jetstar", "Jetstar Asia", and the Qantas Group. I just shake my head and grin sometimes. I would currently assess QF's future as being a minor brand name for Singapore airlines or some other carrier in a few years time. While management will have suitable Golden parachutes, probably being topped up as we speak in advance of any Gillard Government reform, the reality is that Australia will be left where it was around 1935. No independent aviation capability in a what may well be a rapidly un-globalising world with distinctly nasty things going on. |
Originally Posted by sunfish
Romulus, I don't believe Debt is going to be cheaper at all. If you go back through the forecasting website I linked, you can look at the Government debt funding requirements of the rest of the world.
Got that, bear in mind that debt is a nil sum equation, when it becomes due it gets paid back, so someone somewhere always has a balancing entry. If there’s a default then the entry goes into a bucket that can’t be reloaned but there’s still the same sum of money out there. If debt gets paid back then that means the original lender then has capital available they want to make a return on so they start looking for places to put it. Ultimately they do the risk:reward tradeoff depending on their risk appetite and how much they want to earn, at present minimising risk is the preferred option but sooner or later those who take higher risk will make higher returns and the funding will go out again to those prepared to pay for it. I accept that the conventional wisdom is that debt will get more expensive, equally there are a couple of relatively new factors at play that change things at the structural level.
Originally Posted by sunfish
The situation is basically that Europe can look after itself. Don't believe the "financial porn" in all American originated news stories. That is part of an orchestrated campaign to both sink the Euro and deflect attention from Americas problems.
As for Britain, the IMF has enough to bail them out, just. However the entire world does not have enough money to bail out the United States Of America. They are going to go over the falls. Please note that this is not about budget deficits as some politicians would have you believe, it is about maturing debt that has to be rolled over in 2011 - 2012. There simply isn't enough money for it. But where will the money come from? Most likely, for the majority of it, the Chinese. And as we are already seeing they are flexing their muscles in exchange for anything they do. The USA may not like it but then it’s what the USA did before, during and after WW2. It’s the nature of capital and the Chinese have experience in it as well. The Opium Wars were a direct result of China producing the goods that Western middle classes wanted. They were so successful that they held so much of the world’s foreign reserves they were distorting the market. Simply put, the West had nothing China wanted so we couldn’t get our hands on any of the hard currency and the trade flows were starting to lock up due to a paucity of finance Sound familiar? Ultimately Opium was introduced as a good that not only attracted a high price but built in a recurring market. Leaving the ethics of the drug trade aside it was a brilliant solution. Devastated the locals but achieved the aim of liberating global trade from the credit crunch. Ultimately the devastation was so bad the Chinese took up arms and got caned, the terms of settlement kept the terms of trade flowing and away the world went. If you look through history many wars, in fact the majority of wars, come down to trade. Rome vs Carthage was a classic. The Opium wars. Japanese involvement in WW2 was a direct result of American oil and other embargoes. Religion usually cops a lot of the blame but ultimately it usually comes down to money. The Golden Rule applies: “He who has the gold makes the Rules” Right up to the point he who hasn’t got the gold but has the muscle decides he wants the gold in the old fashioned way of might is right.
Originally Posted by sunfish
That means, in my opinion, that corporate debt is going to be similarly hard to come by, particularly for airlines that have exposure to a collapsing tourist industry.
In some ways yes. Bear in mind a couple of factors directly related to this specific case however: 1: China needs Australian raw materials to keep their own economy growing. This is incredibly important to the Chinese because having given the masses a taste of (comparative) wealth there will be an open revolt and the ruling party will be toppled. Which they don’t want. 2: Australia needs China to need our raw materials, it’s the key reason we have great trade at present. 3: That trade leads to a potential inflationary spiral which in turn means the RBA keeps our interest rates relatively high in global terms. And that keeps our $ high. 4: That high $ protects us from a lot of issues such as cost of fuel, cost of materials etc that we would otherwise have to pay more Aus$ for in order to pay the same number of US$. 5: That high Aus$ also makes us the “new USAmericans” in terms of world travel. Our dollar lets us go anywhere because all of a sudden holidays are 50% cheaper when we get there. Right now people are taking shopping trips to the USA. Shopping trips. That’s just insane, but it works. Globalisation of finance and communications technology coupled with cost effective airlines, allows us the means (money and perhaps more importantly credit card interoperability allows us to purchase goods anywhere), to take advantage of our knowledge (the internet allows me to compare prices of Zegna suits in Italy, LA, New York and London and find that I can get them at about half of the local Aus$ cost as an example) and the ability to get there to check it out (globally competitive airlines mean everyday people can afford international travel). So right now Qantas as the biggest Australian carrier is carting loaded up Aussies off to the USA to spend money and buy stuff. That gives them a base load of utilised capacity that is protected to a significant degree by certain government agreements and positions. And that makes Qantas a lower risk than other premium airlines like BA who don’t have similar benefits driving them forward whilst also maintaining the credit worthiness advantages of being a full service carrier rather than one of the new low cost carriers. All of which means when money starts flowing again Qantas will be pretty close to top of the pile of preferred clients for the money lenders
Originally Posted by sunfish
On that last point, suppose the North Koreans had responded to South Koreas artillery drills yesterday, last night American jets took out North Korean gun positions and today shells are falling in Seoul and the Chinese and Americans are rattling sabres at each other? Outsourcing to Hong Kong and Singapore still sounds good?
In the modern globalised world it would take a major conflict between at least two of the USA, NATO, China and Russia to make a truly global impact. And they know it. And they know if they pull the trigger against each other they are the ones with the most to lose. Because they will destroy the world economy which is what now drives and provides the improved living benefits. The key exception is the USA because in any non nuclear war they win. Simple as that, they have the technology, they have the military capability, they have massive advantages in the military field right now. Sooner or later they’ll get caught up, but the investment in military technology to get there is massive. So there’s no point letting the USA fail because they have the ultimate power to resort to – superior military capability. Sure, others can go nuclear but that is a guaranteed loss for everyone, the only nation with the current power to win at global war is the USA. So there’s no way on earth anyone would pick that global war. Do it via proxy in limited conflicts but overall as long as the USA doesn’t back people into a corner they can do pretty much what they want and the world has to support them or everyone loses. So the money will be found.
Originally Posted by sunfish
There was no other choice. Then they had to hire COBOL programmers back, at vast expense, as they took their revenge on the company.
No argument that skills need to be maintained
Originally Posted by sunfish
So when I hear words like "Legacy Airline", "pollute the culture", "Asian Mega Carriers", "Jetstar", "Jetstar Asia", and the Qantas Group. I just shake my head and grin sometimes.
The old story of how many of the Top 100 companies in 1910 are still around applies.
Originally Posted by sunfish
I would currently assess QF's future as being a minor brand name for Singapore airlines or some other carrier in a few years time.
Given Qantas will be the major carrier using those types in and out of Australia (and let’s be honest there’s no way Boeing are not going to do whatever it takes to get ETOPS accreditation) they have set themselves up to gain an inherent competitive advantage in customer service which they can afford for the reasons outlined above. My belief is Qantas will be around for a long while yet, they will gain a lot of customer loyalty based around the new aircraft types creating an excellent customer experience (even the 777 is a poor comparison from a customer experience point of view to the A380 and the customer specs for the 787 are better again although more of an incremental improvement over the A380 rather than the full step change the A380 is over current aircraft), they have the financial capability backed by a resource driven economy with the resulting strong currency offsetting US$ costs and they’re prepared to take unpopular decisions. As I said, I don’t agree with all of them but that’s what their senior guys are paid to do. Overall I see Qantas being around for a long time as a successful airline. What that means for individuals is less certain, the high Aus$ makes outsourcing more attractive and that’s a simple fact. The customer will decide what they want to pay and the rise of LCCs indicates cost is a key factor for enough people to make it a concern for Qantas. That means, like it or not, we need to find ways to be more effective in Australia in order to keep the work onshore. In the global environment we need to justify our superior wages and conditions, we need to provide that value and it can be done, we just have to make sure that we don’t give the buggers an excuse to take it offshore. And that DOESN'T mean we shouldn't pay people well, it means we should build a system that provides such a massive value for money benefit that they can't get better anywhere else |
Some very informative discussion about finance, business, economies and aviation here, and the varying degree of personal opinion has not yet degenerated into a slinging match which is truly fantastic, excellent work.
Romulus - This is one of the keys. There IS enough money, the question comes down to what price will be extracted. If people bought the “too big to fail” argument about the banks then the world simply cannot afford for the USA to fail. Money will be found, whether we like to admit it or not the USA is still the key driver of economic activity for the globe The Golden Rule applies: “He who has the gold makes the Rules” 2: Australia needs China to need our raw materials, it’s the key reason we have great trade at present. 3: That trade leads to a potential inflationary spiral which in turn means the RBA keeps our interest rates relatively high in global terms. And that keeps our $ high. 4: That high $ protects us from a lot of issues such as cost of fuel, cost of materials etc that we would otherwise have to pay more Aus$ for in order to pay the same number of US$. Cheers |
Game's over, it's only inertia that's keeping the ship afloat.
System was insolvent in 2008, AND still is! A Confidential Report on 17th March 2008, by Mervyn King, Bank of England Governor states:- "SUBJECT: BANKING CRISIS NOW ONE OF SOLVENCY NOT LIQUIDITY" The story continues in one of the Wikileaks cables, as reported in the Guardian:- US embassy cables: Mervyn King says in March 2008 bailout fund needed | Business | guardian.co.uk |
Doesn't Qantas have some 15 + billion in cash?
If so, that will provide Qantas with some buffer to counter any "crisis"... |
As for corporate liquidity and thus cash reserves that will need to be invested sooner or later (even if that is done in the form of capital returns to shareholders which gets the cash cycle flowing again) here's a pretty good report
Roubini Global Economics - U.S. EconoMonitor All that cash is available to be used when corporations need it. Whilst the rabid right (bear in mind most would consider me a free marketeer member of the right so rabid in this context is whee some of Sarah Palin's more extreme types sit) might dispute it the reason corporate aren't spending is because they have plenty of curent capacity caused to a significant extent by lack of demand in times of a depressed global economy. When they need to spend they will, when Qantas needs to fund new aircraft they will. They just don't need to right now because beyond the odd A380 rolling off the line they've got nothing to pay for. When the 787 is ready to roll then they will spend. If they need additional spares and capital equipment they will spend. Same for other industries. I don't know why anyone who would build a new commuter motor vehicle plant at the moment, but I do know that certain vehicle plants associated with the mining industry are being built. Simply because the demand is there. China has brought huge production volumes on line for all sorts of commercial goods, until that capacity is absorbed by consumer demand then capital investment will remain lower than during the period this equipment was constructed. Simple as that. So, in my opinion, there's plenty of cash out there to undertake whatever capital works are needed to be undertaken, and if not invested in capital works to obtain a reutrn for the shareholders/investors then it will need to be placed somewhere else for somebody to undertake some fom of capital investment and as the graphs in the linked article show there is so much of it that once confidence retruns at a trickle there will be an almighty rush to secure the most credit worthy clients to earn a good and superior return on the currently stockpiled cash. Qantas is one of those clients. |
Romulus, I hope you are right for the sake of QF, but I'm not so sure.
I've recently become aware of just how corrupt international financial markets are and I am very concerned at the assumptions people keep making. For example, "Australian labour costs are high" - compared to what? What is really important is labour productivity, and when you factor that in, the difference is not necessarily that great. Then factor in the known behaviour of outsourcing contractors. Outsourcing costs only ever increase, unless you are outsourcing into a market where there is plenty of competition and competitors. I am concerned that the world is reaching a tipping point very quickly, as are other commentators such as the ones I first linked to, and that America is not in a "normal" cyclical recession. There are subterranean changes going on, revolving primarily around the fact that India and China are developing middle classes comparable in size and appetites to America and Europe. There are simply not enough natural resources on this planet to cater for their wants. Something has to give. There is a seismic shift coming. In my opinion, the American ruling class are in the process of lowering their citizens expectations, impoverishing millions of them, and girding themselves for domestic unrest. China is dealing with its perpetual problem - maintaining internal order while seeking natural resources in support of increasing living standards. As far as I can tell, India is doing the same. Russia is trying to reassert itself. ...So here we sit, fat and happy, and the "Qantas Group" is blithely talking about limitless growth, and grand strategic visions, with Rolls Royce Powered European built aircraft, filled with American avionics, sweeping into Shanghai to pick up loads of affluent Chinese and take them to the holiday of a lifetime in Australia? Half a dozen hedge fund managers on Wall Street can destroy that vision in a few weeks. If it was me, I'd be closing Jetstar Asia, working out how to integrate Jetstar and Qantas mainline. Praying that the B787 works as advertised and arrives soon. I'd be shoring up finances right now and working out how I was going to maintain a fleet in a thin market. I'd be looking very hard at B787 initial provisioning and ensuring that I could do as much "in house" maintenance as possible. I'd be thinking about selling the A380 off and focussing on the 747 - 800 if I could satisfy myself that there was more than a little commonality. I'd be talking to the Federal Government about our relationship with Singapore and our common interests in maintaining high technology equipment as well. Call me a scare monger, I probably am, but bear in mind that before WWI and WWII, knowledgeable people advanced the argument that conflict was unthinkable because the economies of France, Germany and Britain were so intertwined. All it takes is a few demarches to be exchanged and American technology won't be going into European aircraft, Rolls Royce engines won't be going to China and we will be back to Bretton Woods and a Gold standard. |
Closing Jetstar Asia and working out how to integrate Jetstar and Qantas mainline.. Is a bloody Big Call Sunfish. Wouldn't advocating that Qantas own only 49% of Jetstar create sufficient independence whilst still protecting its flanks. |
Some excellent and thought-provoking thinking on this thread and the parallel "Invincibility" thread....should be merged really.
I finally found a quote which has been going round in my head for a while.....not sure if it's been on Prune before, apologies of it has. But I think it's relevant. “There is scarcely anything in the world that some man cannot make a little worse, and sell a little more cheaply. The person who buys on price alone is this man’s lawful prey. It is unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money — that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot — it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.” John Ruskin, English critic, essayist, & reformer (1819 – 1900) My very best wishes to all Pruners and their families for a happy and blessed Christmas and safe skies for 2011. Sherm |
Capt Sherm:
Some excellent and thought-provoking thinking on this thread and the parallel "Invincibility" thread....should be merged really. I finally found a quote which has been going round in my head for a while.....not sure if it's been on Prune before, apologies of it has. But I think it's relevant. “There is scarcely anything in the world that some man cannot make a little worse, and sell a little more cheaply. The person who buys on price alone is this man’s lawful prey. It is unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money — that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot — it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.” John Ruskin, English critic, essayist, & reformer (1819 – 1900) My very best wishes to all Pruners and their families for a happy and blessed Christmas and safe skies for 2011. Sherm People forget the message. Merry Christmas to All. |
Sunny,
Following on from your Qantas predictions, any chance of getting the winning Lotto numbers for next week? Ta. :E |
That my dear captain is pure crystal ball stuff.Sadly just chance.:sad:
I disagree with some of sunny's hypotheses but I do respect him for thinkng about it and offering his experience.Most of all he has stuck his neck out leaving himself open to all and sundry for comment and ridicule.Right or wrong that deserves respect.:ok: |
“In my opinion, the American ruling class are in the process of lowering their citizens expectations, impoverishing millions of them, and girding themselves for domestic unrest.”
I suspect you are correct. First you make them scared, then you make them poor . . . . “ . . . and we will be back to Bretton Woods and a Gold standard.” I agree. The wheels came off back in 1971. |
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