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Let Me Tell You What Is Going To Happen To Qantas....
Let me tell you what is going to happen to Qantas.
No, it's not operational doom, it's financial doom if QF is not very very careful. Some of you have been critical of QF's slash and burn management style, especially its predilection for outsourcing and "user pays" practices, for example the ideas that pilots should borrow money to pay for their own training and endorsements, that employees are easily replaceable by contractors, and that the experience of employees is a worthless commodity. Well the penny finally dropped for me..... That entire style of business is based on one simple assumption. - that debt financing is cheap, and there is plenty of it to go around. Well I have news for you. Don't just think about Greece and Ireland. The entire world is now entering a period, for at least the next Ten to Twenty years, when debt of any sort is not going to be cheap at all. You might like to follow the predictions of these little fellows, as far as I can tell they haven't put a foot wrong since they started forecasting trends in 2006. English | LEAP 2020 What does that mean for Qantas? It means, folks, that cash is going to be king. It means that countries with very high savings rates, like China, are going to see their currencies appreciate. It means that the Eurozone are not going to be able to subsidise the manufacture of Airbus. It means that corporate finance costs are going to double, or triple or quadruple. To put it another way "stuff" is going to become more expensive; fuel, nuts bolts, aircraft parts, aircraft, engines, blades, vanes, bearings, whatever. Stuff is going to get more expensive compared to Australian labor costs. If QF hasn't got all its finance needs locked in place right now, it won't even survive, because finance is going to dry up rather quickly now. What that is going to do is place a premium on skills, most importantly the ability to maintain and repair stuff and extend it's working life to the absolute maximum. ..And as any former and perhaps current aircraft engineering person will know, that takes great skill, and experience, and ingenuity, and innovation. ...and you won't get any of that through outsourcing. To put it another way, paying "one low hourly rate " to get your engines maintained in Singapore is suddenly going to appear very, very, expensive. In fact sending anything out to be maintained is going to be expensive compared to doing it yourself - simply because of finance costs and working capital requirements. Furthermore, you won't be getting any cadets willing to take on debts of around $130,000 to get a cockpit seat either, if they could even find a bank willing to take on the risk. It's going to be back to about 1970 folks. I wonder if Qantas can write to all its old retirees and offer them their jobs back, especially the engine folk. Doing everything in house is about to become a much cheaper option than sending stuff offshore....again. Watch the debt markets. |
Tick Tock, the clock is running - "Roll Program"
Te-be-shure, Te-be-shure |
Sunfish
I wish that what you were saying was realy true. Why, because, both myself and, more importantly, my son, are both involved in the aviation maintenance industry.
Unfortunately, I dont think what you are saying is going to happen.. I think that engineers (and pilots ) need to stand up and be counted. I know most people here dont agree with me because I am old school, but hey, us guys used to make things happen. |
Arnie, it's going to happen quicker than you think. Wasn't it the NAB that put its mortgage rates up last week? Above the Reserve bank increase? The long term finance rates are going to go way up, and quickly.
That is going to put cost pressures on everyone, including the outsourcers. The folk that know how to "make do" and make and mend are going to be in demand because the debt finance is going to be too expensive. Sending aircraft overseas for heavy maintenance where all they know is how to replace stuff instead of repair it is going to become rather expensive. |
Sunfish, in some Asian facilities they do not replace or repair. They turn a blind eye. We have dozens of reported cases were cards were signed for completed inspections and the Aussie upon checking noted that the panel to access the inspection area had not been disturbed.
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Sunfish, in some Asian facilities they do not replace or repair. They turn a blind eye. We have dozens of reported cases were cards were signed for completed inspections and the Aussie upon checking noted that the panel to access the inspection area had not been disturbed. |
Its just more union scaremongering!
But back to the OP's question. Qantas is heading downhill. Its disgraceful treatment of the OEMs will come back to bite it. Especially as all the evidence is that they picked the wrong types for their future fleet (A380 and 787) and their maintenace standards are so low. In 10 years they will be all but a domestic operator. |
Another frightening manifestation is that in the USA, car dealers are offering zero deposit, zero security loans for new vehicles. This applies to cars made in the USA as well as imports.
Did the banks learn nothing from the US housing meltdown? They have simply switched into a different market to sell credit. The bonus system of renumeration for bankers remains alive and well. However, this time they are providing credit for cars instead of houses. Although the car manufacturers will get the benefit of demand, consumers are purchasing assets that depreciate as soon as they leave the shown room. Doesn't this sound similar to the real-estate bubble that burst and left the lenders with bad debts that required the public to bale them out? |
Why not publish these reports?? (assuming they are true) |
Sunfish, in some Asian facilities they do not replace or repair. They turn a blind eye. We have dozens of reported cases were cards were signed for completed inspections and the Aussie upon checking noted that the panel to access the inspection area had not been disturbed. |
Sunfish is correct. The US long term bond rate, has jumped significantly in the last 2 weeks, commodity prices are way up this year. Inflation comes in a thousand different flavours & the one coming down the line is cost of living inflation - food, energy & materials (things you need to live), whilst simultaneous encumbered asset deflation (real estate, cars, electronics - things you want) due to credit destruction. Money printing(QE.x) by the Federal Reserve is deliberately designed to export inflation to Asia to get it to break the yuan / USD peg, and force the yuan to upward. This "hot" printed money is not being lent to businesses, but used to purchase hard commodities, hence less business lending & commodity price increases. Food price inflation in China is currently running at close to 15%.
http://www.neurosoftware.ro/finance/...d042_chart.jpg This type of inflation will start to show up in other things you need to live over the next 6 to 12 months, & significantly lower lending. |
Why is it just Qantas Sunfish?
I would expect that the low cost carriers will suffer the most and the quickest in a sustained debt crisis. Most LCC's are debt financed, highly leveraged with very low cash reserves. They rely on growth to sustain their business models. It will be the major airlines with significant global alliances that that will be in the best position to negotiate the best deal within restrictive debt provisions. There will also emerge a huge chinese/asian mega-carrier/alliance that will eat up many regional asian airlines. QF needs to be a part of it. |
It ain't just Qantas. It's any airline that outsourced core functions. As for "Asian Mega Carriers" that is marketing hype that has been repeated at least Seven times since 1935. You do not want to "be part of it" whatever that means. The Asians will skin you alive.
I keep hearing these wonderful strategic mismanagement ideas every few years. Recently we had "Asian Tiger Economies", then there was the "Celtic Tiger". They are now as dead as the Tasmanian Tiger. Asia has been trumpeted as a "huge growth opportunity" to westerners at least seven times since 1935 by my old dads reckoning he traded in Asia since 1935. The line is always the same "X zillion Chinese, you sell to ten percent of population, you make lot of money!". Time after time Western businessmen have put their investment and technology in and vastly overcommitted themselves. Then the joint venture goes bad or something else happens. The investment is always lost, as is the technology. One guy I know lost everything and committed suicide. There is no effing way Qantas or anyone else is going to "be part of it" and walk away with any share of the profits. Nobody gets to profit from the Chinese except other Chinese.. There is no skill or capability Qantas has that would be of the slightest interest to China that is not already available to them elsewhere as far as I can tell. Please don't kid yourself about China. You will just become another of a long line that have had their fingers badly burnt. |
Very interesting thread this one.
Sunfish makes a factual argument here. The 'bubble' that burst in 2008 is just a precursor to what is coming. The 2008 bubble saw businesses and banks go bust, not a good situation, but it was the tip of the iceberg. As predicted 18 months ago by astute financial people the next stage would be individual countries going bankrupt. Well it has already started, Ireland is broke, Greece, Italy and Portugal are on the brink, the USA is in a mess and by not raising taxes for another 2 years and printing money will see them digging a deeper hole by the day, the trilions being spent on wars and bailouts is unsustainable. The UK has no money, Australia for all it's mouthing off has a governement that is broke and states that are racking up more debt than can be paid off in 50 years ! Anybody who has their head in the sand and is living the fantasy that all is kosher in the worlds economy is a fool. And China is overheating big time and it is inevitable that they will start slowing right down as the growth rate is unsustainable. We havent even started talking about third world countries yet ! The governments are simply trying to delay the inevitable, they know what is coming and do not want you to see it. Mass panic is never good for elections is it ? I agree with The The that pending future financial woes will affect more airlines than just Qantas which is just a grain of sand in the current financial climate. When the real bubble bursts we are all going to be in a world of hurt. Kiss your super goodbye, your house values will be half of what they are now and share portfolios obliterated. At the moment it is true - cash is king ! But only for now. Give it another few years and the governments will be picking the change out of your kids money boxes, it will be that bad. Crew rest and breakfastburrito in their comments also paint a good picture of the state of things. People need to start listening and unwrap themselves from the 'hear no evil, see no evil' protective covering they have cocooned themselves in. Things are not as they seem.... |
Sunfish,
An example of what you are saying was Foster's failed attempt to penetrate the Chinese market. |
There is always the scaremongering glass is half empty type out out there!
To put it another way, Sunfish has been attacking Qantas since he joined this board. To put it yet another way, it is getting very tiring. To simply put it another way, Qantas will survive no matter what, it will just be owned by the Australian Taxpayer if the current morons continue on this path. To put it another way and drive it home, I'm getting very tired of your negativity. Putting it another way - leave this bored to professional Pilots, if you want to speculate on your conspiracy theories, join a business forum full of your favourite people, narcissists. |
Sunfish,
have to both agree and disagree with you on some points. 1: Slash and burn management is ridiculous, completely agree. I have no problem getting rid of non productive roles, far too often they come to dominate the workforce rather than the other way round and everyone wants to be a corporate type instead of getting involved in the actual work process. 2: I actually think debt will become CHEAPER in the not too distant future. Reason being the banks and other investment houses are sitting on massive piles of cash, be it from being bailed out with our money (they should have been forced to liquidate assets as the penalty the free market imposes rather than being bailed out with tax $$) or from their retail customers or whatever. The problem at the moment is they are currently not lending due to increased "credit concerns" at the "credit committee" who have to sign off on any loan whatsoever. Currently they regard this as a prudent situation, they call it sound financial management etc. And the lock up of money means minimal supply which is currently driving rates up. BUT Longer term they NEED to place that money somewhere. As confidence returns the lending flow will resume. And once it does those who lend early will lock in place some of the currently quite high rates. But as they do that will signal to the market that certain institutions are prepared to accept risk again and all of a sudden there will be the usual herd like mentality of bankers and they will all rush to try and claim the safest clients as quickly as possible. Qantas will rate as an excellent client and they will be inundated with offers as opposed to various low cost carriers or BA or other airlines who have much larger structurally embedded financial issues. For confirming evidence on the banks piles of cash Google Krugman and see what he has to say on the matter. Note that this does not mean it will get better for everyone, just those highly rated clients. Lower rated companies will have to wait until the exuberance of the bankers means they are willing to accept greater risks before they get allowed back into the tent of ultra competitive interest rates. 3: Currency appreciation is not always a good thing in terms of a nation's ability to win work. Taking China as one example you mention if their currency appreciates then they become relatively dearer in a world where the USD is the contract standard. Equally when the Aus$ appreciates the way it has off shoring starts looking exceptionally cheap. Taking the move of the Aus$ from about US70c to US100c that means things are now about 50% better value (i.e. 30c in 70) for the same number of Aus$. That makes off shoring far more attractive and anything priced in US$ is also looking cheap. Doesn't matter where you purchase those items in the world, the US$ standard applies everywhere. 4: Qantas can now hedge at a far better rate than they have been able to for years. Sure they will have a certain amount of funds hedged at 70c and the like, equally they'll be scurrying around hedging whatever they can at current rates less a risk factor, and given the relative strengths and weaknesses of the Aus economy to the US economy those risk factors are currently less than they have been for years, probably decades. Sure, they may cost themselves a few cents of potential upside, but they can lock in and guarantee there is not 30c or 40c of downside. That's a great risk:reward tradeoff 5: Whilst I agree skills are extremely important we need to understand that cost effectiveness is important as well. In order to earn the $$ from operations to keep paying costs (inc staff costs) there will always be a cost benefit analysis that some people don't like because they disagree with any reduction in expenditure on certain things. Maintenance is one, nurses and school teachers are another. There's a strong emotive argument to be had but the facts are that people will simply not pay what it takes to cover higher maintenance costs or salaries for certain "worthy" professions. We don't necessarily like it but the very existence of low cost carriers (as an aviation example) indicates that a large number of customers ARE price sensitive despite what they say. Surveys will tell us time and again that people WANT to fly Qantas or BA or some other full service airline but they CHOOSE to fly Ryanair, EasyJet, Jetstar etc when they have to open their wallets. Like it or not there's a tradeoff to be made, and given airlines like Singapore don't have aircraft falling out of the sky it's a very attractive option to have their people do maintenance at lesser costs than the Aus operations cost. As much as we may like to think we do the best maintenance anywhere the simple fact is that plenty of others do it just as well as we do and their planes fly just as well as ours. That's not going to be readily accepted but it is the way of it. 6: When you outsource with a high value Aus$ you get a lower cost on your checks, plus you avoid the need for capital expenditure for new tooling, facilities etc. Sure you pay for it as part of the check cost but that's a one off immediately deductible expense rather than a depreciable asset. Again, we may not like it but that's the reality, the tax system actually stacks up against certain longer term investment. 7: No argument on training. I have never and will never believe in asking people to pay for their own training. I am perfectly happy with training bonds, if the company invests in the person then the person should pay that back. It's a two way street, the company SHOULD invest in people, the people SHOULD repay the company with some service in return. There's fault on both sides, too many companies don't/won't invest in their people, too many of the people they do invest in then take those skills and go elsewhere. A sensible training bond system covers both parties fairly. Quick last one for Gobbledock: The Aus Govt broke? Methinks not. For all Howard's faults at least they were relatively prudent managers in the good times and paid off all public debt unlike Blair/Brown. Rudd/Gillard may be/ have been spending like drunken sailors but there's a way to go before they totally screw us up. Not to say they won't, but we're not there yet. That's enough for now, probably get hit with a character limit or something anyway. regs R |
Qantas will survive no matter what, it will just be owned by the Australian Taxpayer if the current morons continue on this path. QANTAS is a dead man walking, sorry to say that and I wish things would have been different but that the way it goes,, It's called the airline business in the 21st century. |
without aircraft you are down and out
Latest from the 787 mill
Business & Technology | Dreamliner's woes pile up | Seattle Times Newspaper implications for QF are extreme, you can only keep the 74s and 76s in the air for so long. |
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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