Bye Bye Qantas Hello Jetstar
 

I can't believe this might happen.

Qantas to wind back overseas routes as Jetstar set to become Australia?s main international airline | News.com.au

The article doesn't mention the Kangaroo route to LHR. Does this mean QF pulling off the route? I hope not.

Bye Bye Qantas, Hello Virgin, Emirates, Cathay, Etihad, Air New Zealand because that is what will happen! Another Ansett I am afraid! It is called "Flogging a Dead Horse" :ugh:

I disagree, its a good horse being trained ridden and managed by the slaughter house.

Change stables and you have a reasonable old nag.

How to avoid the equity provisions of the Qantas Sale Act - change your make up!

A Jetstar equity majority sell off would nicely finance the CEO and Chairman's retirement whilst making redundant all those highly paid and under worked Qantas staff.

:mad:

If you are correct, I wonder how Air New Zealand, Singapore Airlines and the Middle East carriers make a profit as full service international airlines competing against LCCs and Qantas makes a profit domestically?

I guess they never read your book, eh wasathangi? :E

Or maybe they have more proactive, innovative management? Maybe not, only Qantas has the world's best airline management team!

Gosh and crikey, how New Zealand must have grown since I was last there!

No need to lecture me old chap, I've been a successful senior executive and company director on a number of Boards over many years, understand my fiduciary obligations and have more than a passing familiarity with the Corporations Act 2001, including Sect 179. :ok:

But do they in reality? Please document directors of ASX companies who have actually been sued and had their assets confiscated/frozen in the last 10 years.


Here's a snippet of who got away: CENTRO
We could then visit the James Hardies affair, and the directors who deliberately cheated the victims of a compensation fund & made false statements about it - small fines & minor disqualifications as directors. The list goes on.

There is a widespread gulf between the law statutes, "potential penalties" the reality at the sharp end of a prosecution. In just the same way Eddie Obied and his family will walk away with the best part of hundred million or so for massively corrupt behaviour. The talk is tough, the reality is likely to be a smack over the wrist with a wet feather duster. Sure they have to endure a period of the pain during public scrutiny, I will concede that.

So go away with your fanciful ideas that these people are ever likely to be held to account in any meaningful way that involves significant personal pain. Quite frankly, the law is a joke: THE MYTH OF THE RULE OF LAW

Wasathangi, you are right about the majors having an LCC attached to them, astute observation indeed! But look again at your beloved QANTAS version of that model and you may find that QANTAS is becoming an LCC with a once great major attached.

Members of the board do swan around looking towards (early) retirement and their next bonus. They care not about the company they feast on, nor the people who make their little world go around.

I just wish the worst thing that could happen to me if I have a bad day at work is to have my assets frozen.

wasathangi

You are an angry little Pprunner.

Actually Air Ace make some valid points. Also as well as New Zealand having a population of less than 22 mill (4.5 mil in fact) Air New Zealand doesn't have an LCC arm either.I wonder what profit they announce later this month.

Air NZ is a very different animal - It's been completely recapitalised through the years, the major one being the aftermath of the Ansett debacle, so it is not a legacy carrier in the true sense of the word.


The management also seems to have half a clue compared to the muppets in OZ.

Time to close this thread and add another to my ignore list

And.......those cheap flights are resulting in massive business losses.

Air Asia X, Qantas Group, Virgin. All loosing money.

It's simply not sustainable.

The perfect utopia would be to lower ticket prices even further, stimulating the market and getting "more people to fly for less" (now where have I heard that before?)

However, the airlines would put themselves out of business in the process.

The JQ business is a "blocker move", it was suppose to saturate capacity at places like Sydney airport to ensure no other entity could fill those spare aircraft movements. JQ was suppose to utilise gate space at the old Ansett Terminal Sydney to ensure no other airline expanded (VOZ, Ozjet, Tiger) to fill that void.

However the desire to protect QF mainline from the growth of other carriers HAS lead to the Cannibalisation of Mainline routes.

Instead of JQ flying on non trunk routes to destinations other than those served by mainline, they had to reduce their costs or go out of business in the LCC market. The only way they could reduce costs was scale. The increase in JQ aircraft fleet and network to achieve economy of scale lead to the saturation of the market of the Orange & Silver tails.

This from Wikepedia regarding Starbucks strategy

Sound familiar with the JQ Australia & Asia Expansion?

It's the cost base, plain and simple.

NZ salaries are lower in dollar terms and lower again due to exchange rate.

Anyone that thinks that Qantas can ever compete on Quality and price. i.e charge a premium for the service, is denying reality, but that is what would be required to return international to profitability. It can't be done with the current cost base. In fact, it is my view Australia will never be able to compete again in the international market until there is a correction to the cost of labour in Australia. The only potential market is the US, as they arguably have similar first world problems as Australia, although they have just emerged from a period of massive restructure post 9/11 and GFC, so chances are we have higher costs than them as well.

What's left? Jetstar to Bali, Phuket, and Honolulu for the bucket and spade brigade. Sad but inevitable.

What will change it? Maybe if the Chinese and middle east carriers create a few smoking holes, then the travelling public may reconsider their options, but even then most people's safety focus lasts right up to the point they have to pay for it, then it's Chopsticks Air to London via a 36hr layover at Fukutoo for $1200 return, with comments about why Qantas is so expensive.

The question that needs to be answered is "is it possible to get the Australian public to pay a premium to travel on Australian carriers". The resounding evidence seems to suggest that the answer is no.

It is no accident that the demise of Qantas has coincided with the rise of Emirates, China Southern et al. Sure we could have gone down the protectionist route and not given those carriers access, but the few Australian jobs that would have saved pale into insignificance compared to the millions of tourists those carriers bring to Australia.

The ending to this story isn't being written by Joyce or Clifford it is being written by Global Economics.

Wasathangi which is quite different to what you posted here:
which was in reply to Air Ace: Virginexcess

Not doubt higher costs are part of the problem but as has been pointed out in other threads labour costs etc are very often a smoke screen. I know the motor car industry is different from aviation, however Germany has high labour costs and a motor car manufacturing industry that are doing quite well. I think Lufthansa are doing OK too.

If you want to deal with labours costs you also need to deal with the excessive salaries of CEO's etc.

Wasathangi

The LCC model works on short sectors of around three hours or less but longer than this it hasn't been a roaring success. I'm not sure it it the way of the future for long haul.

virginexcess, following your logic to its ultimate conclusion is that all standards of living would equilibrate to the lowest common denominator. However, wages & conditions of the average workers in those LCD countries are supressed via authoritarian regimes. You are right, we can't compete with the Chinese worker as in all likelihood his ability to bargain is much lower. Without authoritarian rule would wages be as low as they are in China & the middle east? What is the legality of a strike in the Middle East? It is not a free true market, but one operating under severe wage control.

Globalization is as much about exposing western labour to a wages market that is artificially suppressed. In effect, transmitting this authoritarian wage control system back to the west through the market mechanism. In return we get a few cheap trinkets.

FYSTI
 

All true, but they are philosophical arguments. Management have to deal with the marketplace.

Management also need to think smart, which very often they don't.

virginexcess, the way management have dealt with it has actually made the cure worse than the disease. The international Jetstar franchises have been an unmitigated disaster. This has crippled the group financially reducing the time left to adapt, resilience has been diminished.
Management are now having to do insane things like park new aircraft at great expense against the fence or sell them (no doubt at a discount). There are another 70+ new A320 airframes on order yet to be dealt with. Its not the wages that have destroyed QF, its been the failed management strategy.

Wages only make up less than 4% of the operating costs.

The foreign labour differential is the differential embedded within in that 4%.

AJ would have you believe that wages will make or break the airline.

Yes. Wages are a factor.

However failed strategies are THE major cause of the groups losses.

About the last ones I recall were the poor b*ggars on the Board of the National Safety Council, Victoria Division, who paid the ultimate price for Freddo's foibles, but that was many years ago!!

Many of Australia's biggest swindlers get away Scot free! The rest of us carry fidelity insurance.

Please, not that old cherry again! Qantas gave away it's most profitable, near monopolistic air routes that did support it's cost base. Time and again proactive and innovate Boards address and overcome the alleged disadvantage of their Australian cost base. And other Boards throw up their hands and give up, the Australian car industry being one example. Honda build more cars in the USA than in any other country; BMW builds certain models only in the USA - I wonder how they manage with the high US cost base, versus China, Thailand or Vietnam?

With the mega millions being paid to Qantas elitist and out of touch executives and Board, I guess not unreasonably I expect far more initiative and innovation. If I were a Qantas major shareholder with no return on investment for many years, no dividend, no capital gain, that CEO and Board would be long gone.

Congratulations. I think that is your first correct statement in this thread. :ok:

Qantas has a major competitor that is eroding the profitability of it's air routes - and that libidinous and lecherous competitor is Jetstar! A full service airline and an LCC can successfully share common ownership, but will fail if one is established only to destroy the other on common air routes.

In the mean time those long term, loyal Qantas clients who are prepared to pay for a full service airline - and that is a significant percentage of the Australian travelling public - are voting with their feet and patronising other quality carrier that offer the service they expect, which is something other than cattle train class.

I remember a little Irishman at Ansett many years ago that had probably exceeded his then maximum level of incompetence. He has certainly now progressed way, way beyond his maximum incompetence level!

Please don't get so bitter and twisted wasathangi, after all this is only the internet! :ok:

Apparently some of these new LCCs are SO cheap to run they can offer flights as cheaply as 50p in the UK.



Your link doesn't work Pearly, but I think you are referring to the Wasathangi Trio rendition of Jetst* the musical comedy?



:}

Tail Wheel

Agree with Elzilcho,

The smart Airlines dont run a seperate LCC, and incur all the duplication.

EG Cathay Pacific have long said they will not run an LCC, they regard the back end of their A330s as their low cost airline!
Likewise the big American carriers have tried the seperate LCC model, eg United with TED, Delta with Song, and wound them up, now they operate just the mailine operation, the domestic USA version of which is like a low cost anyway.
SAS also tried the seperate LCC, Snowflake, wound that up, and they now run their domestic and regional operations as a dual full service/LCC on the one Aircraft.
They have Economy plus for full flexible Economy fares, and these passengers get all the normal frills.
The back end is called Economy, you get one freee checked bag and free tea and coffee, but pay for anything else.

The big advantage for all these airlines, is that as well as no duplication in management,Aocs, Aircraft types, they can run more frequency under their own brand in any market they serve, than if they were operating 2 brands in the one market!

So for example if Qantas restricted Jetstar to leisure routes, and took them off the primary routes, the Qantas group could then increase frequency on these routes, to better compete with Virgin Australia.

Jetstar operate 3 times daily Melbourne to Perth, those 3 A320 flights could be replaced by 2 Qantas A330s or 3 737s daily, maintaining the Qantas Group capacity on that route, but giving the high yielding passengers more Qantas frequency!

Thank you for the compliment wasathangi. I didn't realise my comments were in any way excessively articulate!

Off to work you go. I'll enjoy my self funded retirement! :ok:

wasathangi

Yes the posts were in reverse order and I think it is obvious that is the case. I did it that way on purpose to make it easier to follow the post trail.

Read my post carefully again and hopefully you will understand what I wrote.

However since your powers of comprehension seem to be impaired I'll re post in a different manner anyway. It has nothing to do with who mentioned Air NZ first.

Your wrote:Air Ace wrote in response: making the point that full service carriers are making money so it's not all about not being able to compete against the LCC business model

You replied: Your attempt to justify your point of view is is incorrect.

Air Ace pointed out Air NZ was operating in a market much smaller than 2 mill.

I made the comment that Air New Zealand didn't have a LCC arm.

You responded:No one was saying the airlines weren't different, just that they were full service airlines making money when Qantas wasn't.

Yes Air New Zealand might be different to those other airlines Air Ace referred to, it like Qantas is located at the end of a route (the end of the earth for those coming from the US or Europe) with a small domestic population. By your own admission making it harder to make a profit.

Air New Zealand like Qantas has LCC domestic competition and LCC competition on international routes including capacity dumping from one Middle East airline on the Tasman. Yet unlike Qantas, Air NZ has been able to make a profit. One major difference is Air New Zealand doesn't have a bastard child cannibalising it's routes.

i'm not sure that's accurate, what's your source?

How Airlines Spend Your Airfare - WSJ

According to the above article wages make up about 20% of an airlines costs? I think the 4% is accurate if you are talking just Pilot wages. The cost argument is a valid one, if you could say trim 5% off your wage bill you could potentially double profit for a given revenue.

Tailwheel, I like your sense of humour. :ok:

What a load of bollocks this thread has been.

1. Employee costs are typically around a third of the total. Fuel is roughly another third, and the galaxy of minor items rounds out the other third. Give or take, depending on fuel price de jour, which is the real elephant in the room.

2. Employee costs are a function of legacy awards, which is not a pejorative phrase, by the way, and longevity of the business. LCC start-ups always age into a facsimile of what they once mocked. Just like my first wife. What was her name again?

3. There is nothing that our (what is the opposite of "learned"?) friend can say to twist the truth to suit: the part of the world which has money does not want to fly on a LCC, carry a Target bag or wear Adidas trousers. The part of the world that does is only occasionally relevant, and only sometimes cashed-up. Right now it is dwindling. The part of the world with money is the part that pays the bills, and is, generally speaking, more fun to take champagne baths with. Wheeee!

4. In a true LCC model, there is no natural floor to wages. If JQ was sold, or Tiger, the first thing on the agenda would be to ream out those pesky T & Cs of the staff. That means you, wasabi. Or whatever the hell your Qantas Angel screen name is.

5. Name me two LCCs that the above-average* punter would aspire to fly on again. One is Southwest, which perversely does not hate its staff. The other is a mythical being, like a unicorn.

6* above average was intentional. It means, by definition, the 3.7 Billion people who would prefer not to, thanks just the same, fly on your pathetic flying money-grab that is JQ, Ryan, etc.

7. My legacy brain can only fulminate for so long without a mandated drinking session. The rest of you can talk amongst yourselves for awhile and conjure up the other dozen reasons why I should be paid even more, and my LCC colleagues** should fund it.

8** yeah, right.

Oh, by the way...
 

The actual enemy of the traditional, full-service carriers is not the LCC horde, as I perhaps encouraged you to conclude above.

The actual enemy is the private jet. Prior to the hordes of Gulfstream this and Global thats, the wealthy had no choice but to buy first class tickets, and they in turn supported the economy cabin enough to drive down the Y prices into the realm of the reluctant tourist.

The exit of the significantly wealthy from the public transport nature of the airline business has stripped it of convenient patrons. What is left are the J class punters flying on employer's direction on employer's money. They do not in themselves contribute enough to underwrite the traditional Y class aspirational customer. The aspirational customer is, more and more, a bargain hunter. The rest of the world has bled him dry far more than the previous generation, so he has to endure **** in order to take his kids skiing in St Moritz. It ain't fair.

If you follow the LCC raison d'être logic to its logical conclusion there will eventually be no customer base for any but the Gulfstream. Everyone else will be too busy eking out a grubby existence to fly anywhere.

Yes, and that is only direct wages. Everything the business purchases has a wages component as well, from the ingredients to make the food to the fuel that is uploaded, and just about every single one of that myriad of expenses is dearer in Australia than just about anywhere else in the world, and most of that is due to the cost of labour in Australia.

Why is it so?
Because every unskilled labourer in this country is choosing to exercise their right to have a flat screen TV, V8 ute and a smart phone and uses unions to ensure that assumed birthright is at least keeping up with inflation, plus a bit.

Add to that Work Cover, superannuation, Long Service leave Holiday Loadings, public Holidays, 36 hr weeks, redundancy provisions, sick leave, carers leave, personal leave, smoking breaks, f@ck me its a wonder anything gets done.

Whether those "entitlements" are right or wrong is irrelevant, our competitors don't have them, therefore their cost base is lower therefore Qantas is not competitive and is unlikely to ever be again, on the international stage.

Full service airlines can try low cost fares with restricted economy tickets to fill up the back end. I recently enjoyed a weekend away on a legacy airline for a comparable fare to a low cost once baggage and extras were added in.

The ticket was non refundable, non changeable, accrued fewer miles, had min/max stay requirements and the only seats that could be reserved were at the rear of the aircraft, some airlines go further with reduced baggage allowance and no meal.

The price was half the normal, not the highest economy fare. Quite a comfortable journey on a wide body with good seat pitch, decent catering and IFE compared to being sardine canned into a narrow body and bringing my own sandwiches.

The cabin was full both ways but I wonder what the yield was like if most people had bought the cheap tickets, bearing in mind the cost base of the airline was at legacy level.

Virgin...You might examine landing charges. It cost almost 3 times as much to turn around a B747 in Sydney than in Singapore and twice as much as Hong Kong. Brisbane is not far behind! :D Ask how much Emirates and Etihad cost to land in their home port and the answer will be very low($0).

The day China Eastern announced they planned to launch their LCC "China United" was the day AJ & JH should have realised JQ HKG will never fly.

Perhaps they do realise that (privately) hence the sale of more A320's.

Sorry about the thread drift:

Tigerair!

Having been a long time QF Platinum FF, there was a definite "not happy Jan" moment when my company booked me on Tigerair a few months back, but bugger me, the flight was on time, nice clean new aircraft, and great friendly happy cabin crew... and only $49 (plus an extra $14 to get a better seat)!

Flights since have been the same all good and nothing over $119.

I don't know what they are up to, but credit where credit is due, they certainly appear to have lifted their game.

Back to the thread...

It is interesting to compare Qantas with the American legacy carriers, that were forced into painful restructuring... their staff knew what the alternative was after the once mighty Pan Am disappeared, so mostly (even if begrudgingly) staff got with the programs... they were also forced to pull some capacity out of the market.

In the case of Qantas the changes have been too little, too late, and taken too long... ripping a Band Aid off slowly hurts!

Also the two brand strategy I don't think was a bad thing, but both brands needed sound strategies... containing Virgin was not strategy!!... the QF brand strategy defending 65% 'line in the sand", compared to say ANZ's focus on product with a close eye on costs, was insane.

ANZ is also keenly aware of its importance to its nation's economy... and it shows (as do EY, EK, SQ, CX, even take a look at how FJ has turned around). Somewhere along the way QF has lost sight of this.

Qantas' future? Bring on Chapter 11!!! [Oh wait that is America!]

Highwaytohell

It would not surprise me if the Unions were collectively canvassing potential new CEO's with a view to offering increased efficiencies in return for a potential change in "leadership".

The fact they may not be talking to the current CEO is probably a reflection of his previous form regarding prior "negotiations".

Tried back in 2010 or 2011 however the major shareholders stuck with the incumbents. Game set and match.

Dragon man.

The insto's weren't interested then.

Correct, we offered them a new Chief executive (American ) with a proven record plus chairman and board. No interest.

It is a shame to watch up the slow death spiral of Qantas.

Although the management must take some blame, surely the employees have had their snouts in the trough as well?

Folks seemed perfectly happy to accept the LWOP situation, if they could go off an fly someone else's shiny metal. Folks were happy to be cruise pilots, not building any "real" stick time.

And when redundancies are announced there is no suggestion of "hey let's all take a payout so that everyone can stay in a job".

Sadly it's not just AJ who is to blame.

Not sure if you were intending to support my argument or provide evidence of the other additional extortionate costs that Australian carriers face as a result of the cost of doing business in Australia. But those costs reflect the other end of the spectrum to the Flat Screen TV crowd, that is the big end of town ensuring they get their bonuses. So it is pretty clear that Australian businesses in general operate in a high cost environment. That is no threat to those who's market is entirely domestic, but every Australian business that has an overseas competitor is doing it tough.

Oh dear, Poppy,
Are you really criticising employees for taking LWOP?? It is important to spell out what those letters do stand for especially the 'W'.
Good grief man can't you imagine the disruption to both professional and personal life that such an action involves for what may well be a demotion as you pointed out? What a tough decision to have to make.
The LWOP pay option was put out there to the pilot body, by the company, as a strategy to reduce short to medium term pressure on operations. Some found work places where they were actually appreciated and respected and will be a loss to Qantas.
I think by "hey let's all take a payout so that everyone can stay in a job" you may have meant 'pay cut'?
Sound professional behaviour needs to be always modelled from the top down. Its a bit rich to blame people for not volunteering to take a pay cut while except, for a recent token effort, management have continued ceaselessly and regularly to reward themselves handsomely and amazingly, in inverse proportion to company earnings and way above parity for their peers OS.
LD