I don't know about Lala land. For me and others of my age it's a question of weighing up a VR package against future earnings. The 747 has somewhere around 4 to 5 years of service remaining . I will retire with the aircraft or if a VR offer is made that is more attractive than flying for another 4 to 5 years il leave. It doesn't bother me one way or the other. It all comes down to choice for both Qantas (training costs) and me (money).

'Qantas is in severe financial difficulty'
Posted by: 3AW Drive | 12 May, 2014 - 5:48 PM

Tom Elliott has been sent a leaked document that appears to show the perilous state of Qantas' financial affairs.

The "damaging" internal memo, titled "Liquidity Challenge", details how the airline might be forced to sell its frequent flyer program to pay for a black hole in its budget.

The document, dated Wednesday May 7, also discusses funding being rationed to the airline and suggests that its burden of debt is too great. It also reveals the company is "concerned" its credit rating will be downgraded further.

The memo questions whether Qantas management is at a "tipping point" and also appears to table the sale of its loyalty program.

"If this document is true - and I believe it to be true, it's only a few days old - Qantas is in severe financial difficulty," Tom Elliott said.

"The frequent flyer program is probably the one thing it has that is really worth a lot of money, that you could sell to someone else.

"I think there is a very strong likelihood that Qantas will sell its frequent flyer program.

"This document also talks about things like 'further credit downgrades'.

"And here's a really ominous sentence: the document talks about 'a jigsaw puzzle of issues' and then says 'When will management reach a tipping point?'

Speaking on 3AW Drive, Tom said his program has contacted Qantas to establish the veracity of the document.

In February, Qantas announced a six-month loss of $250 million and plans to shed 5000 jobs.

Qantas sent the following statement to 3AW Drive: "Qantas has been very upfront with the market and the community about the challenges it is facing.

"The suggestion that, effectively, 'It’s much worse than you think' is misleading and wrong.

"The concept of a 'liquidity challenge' seems to ignore the $2.4 billion Qantas has in the bank, not to mention a large number of unencumbered assets (ranging from airport terminals to aircraft). This has been noted by a number of analysts since February.

"We have an obligation to keep the market up to date with our position, and we did that as recently as last Thursday. This was widely reported.

"No decision has been made on Frequent Flyer, so any suggestion to the contrary is simply wrong."

The words smoke and fire come to mind.

Might be something in it, VA's share price has had a bit of a surge over last couple?
Probably will help managements shock and awe campaign.

I'm sure in the last 12 months I read an article by a well credentialed person that said an airline the size of Qantas needed $2 billion in cash to fund day to day operations. Not having access now to credit card sales until the day of travel due to the ratings downgrade would further exasabate the cash flow problems as would today's load factors which I think were around 61% international and 64 % domestic.

This is absolutely not an attack on QF crew themselves, more management's inability to do anything constructive:

And there lies yet another argument for the 777. Can't change the past but the -300ER entered into service 10 years ago. QF could've had the majority of long haul crew on 767/330 rates, still could've kept the 380 as the so-called 'flagship'.

Not really my area but they also could've recruited FAs for the specific 777 fleet, like the cabin crew now on the 380 (as I understand it).

Finally (and I'm only using second hand information here - feel free to post actual figures), I've been told the 777-300ER uses ~20T less fuel on BNE-LAX than the 744 does. Figures are rough but that's 40T/day (return flight). Daily services so 280T/wk or 14,560T/yr. Converting kg/L (*1.266) gives $18,432,960/yr if QF managed to hedge fuel at $1/L, someone might know more though.

- - - - - - - -

Thanks McHale, so let's use that: 29,120T per year per east coast-LAX route. Daily flights from MEL/SYD/BNE (MEL used to be 744) so 87,360T/yr. That's $110.6M per year at $1/L. Disgusting hey..

ConfigFull,


Old mate up in Brisvegas tells me BNE-LAX flt averages 150T of fuel per flt and info from VA engineers and refuellers that the 777 BNE-LAX averages 110T of fuel per flt. So roughly a ballpark saving of 80T on a RETURN flt, therefore, you can DOUBLE your figures, which leads to a lot of $$$'s in fuel bill for JUST 1 FLT (QF15/16) IN THE QF NETWORK!!! Give me friggin strength!!!


McHale.:mad: :mad:

Angryrat,
Haven't heard those rumours but it makes sense, let's not forget that what is happening to the LH award is exactly what started 10 years ago to the LH flight attendants. 767 and 747 gone, all left on the LH award will be A380 and A330. Both are arguably a dying fleet already. Make no mistake no future aircraft will be introduced on a LH award, so it is by default a fading dream. Any bozos hoping for 2 year VR will keep waiting, ain't gonna happen. Stick hour awards are the norm and the future, that's the fact. I'm not condoning it but just stating the bleeding obvious....i

I am only a stupid pilot, however one thing seems clear to me. 2 billion dollars would look like a lot of money in my bank account, but I would think that an airline the size of Qantas could burn through 2 billion pretty quick. I stand to be corrected, however.

747 carries 25 extra business class seats over the 777-300.

Thats $87.5k extra revenue per flight. Daily return flights = up to $64m pa in extra revenue.

Using your Mel, Syd, Bris example would equal up to $192m per year in extra revenue.

Thats before even considering that the 747's have no remaining capital value whereas the 777 would cost as much as $300m each which needs to recouped. Lets keep it real simple, 6 777, 15 year life = $120m in capital costs per year that need to be recouped on a straight line basis ignoring the time value of money.

Considering it was 3.2 Billion not so long ago I'm sure it won't take AJ to long to burn through the other 2 Billion. :ugh:

How is it that when we had no Jetstar we were making a Billion a year yet now with this amazing business in our portfolio we are quickly going out the back door??

Go figure. :hmm:

Stalin,

I agree, through all the fog , the main point that the cash in bank is 2.4b compared to 3.2b about a year ago points to a crisis within the next year. You need a certain amount to keep the car on the road, and the tipping point is around 2b for a company like QF.

Qantas just issued $300m of bonds at 7.75%. Virgin announce sale and lease back of HQ.

The war continues! Looks like both sides continue in the need for a bit more cash!

It would be interesting to see who would buy bonds from a company that is rated as "junk" on an investment level.

With Aussie government bonds for the same period yielding about 3.7%, it's about the right premium for junk status. 4% above the swap rate gives premium over Government bonds so I think there would be interest in them.

It's not Ansett yet it kinda is if you look at potential outcomes.

In a way it's worse, we were gifted the cheesey '65%' when Ansett collapsed. So we grabbed a few BA 763's and a couple of AWAS 763's plus all the AA 738's they couldn't take after 9/11.

Seems like so many things have happened to make Qantas so strong and so set to expand and prosper.

Then the blame game started, then everything was too much to pay for, then staff became the problem and then and till now the bullying began.

What a criminal and corporate disgrace. This is ENRON stuff that will go down in history.

SHAME SHAME SHAME - Clifford, Board and Joyce.

Revenue's not the whole issue and depreciation's only part of the cost puzzle. How does the operating cost per ASK compare between the 747 and the 777 or even the A330 or A380 over the same sectors?

And it's only $300m... Any local super fund investment manager wouldn't even blink. It's practically a retail quantum.

All the focus has been on the loss of jobs since the announcement (and no changes at the top). I am surprised that the media hasn't attacked Joyce and the board - they should be attacking them harder. None of them have been accountable for thousands of people losing their jobs.

Camel Squadron,

Couldn't agree more - but the 744s were never going to fly forever! The complete lack of foresight has put QFI in this position. 25 less J seats would also raise the premium for those seats. Between the fuel, engineering and crew savings it's hard to ignore - the 777 is the same endorsement as the 787 for flight crew, could've saved a bunch there too - who paid for the 787 "introduction costs" in the last financial results...