Lower-cost subsidiary for Qantas?
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Lower-cost subsidiary for Qantas?
Just saw this on "the age online" website and also read something about this in this morning's paper. Anybody else have any ideas, information or opinions about the plan. It certainly has some merit, but whether it is able to be pulled off successfully or not is another thing.
Lower-cost subsidary for Qantas?
By MARK TODD
SYDNEY
Monday 13 August 2001
Qantas Airways' board will consider a detailed plan this week to launch a low-cost international airline as the company tries to identify ways of expanding in a fiercely competitive aviation market.
The new airline would target markets, mostly in Asia, that are unviable for Qantas to serve under its present cost structure.
It is believed the proposal calls for the creation of a new entity operating under a separate management team and using a fresh logo, leaving the flying kangaroo to the main brand.
Analysts believe Qantas could launch the airline for relatively little outlay. Aircraft leases will comprise the bulk of the costs, as the company already has all the requisite terminal and administrative infrastructure in place.
It is estimated Qantas could start a service of six Boeing 767s initially using only $400 million in capital. Qantas would inject as much as $100 million in equity into a new subsidiary company and raise $300 million in debt funding.
Qantas would put the new carrier's employees - most likely based abroad - on separate, presumably inferior, awards and conditions while the airline's planes would have only one class of seating.
Macquarie Equities suggested in a recent research note that Qantas needs to expand its international business away from the traditional routes of the US, Europe, and Japan to increase revenue at better than the 5 to 7per cent at which the market is growing.
A low-cost carrier could open "at least" another 10routes for Qantas. Potential routes include Malaysia, Greece, Vanuatu, Vietnam, Korea, China, United Arab Emirates, Sri Lanka, and secondary ports in Thailand and Japan. Macquarie estimated a low-cost carrier could break even with a load factor of only 54 per cent, or little more than half a plane load. Qantas' current threshold on its international business is 66 per cent, meaning it is restricted to flying the busier routes.
Earlier this year Qantas was forced to suspend uneconomical services to Canada and China.
Qantas' board will meet on Wednesday to discuss the proposal. Some analysts are expecting that a decision on whether to proceed will accompany the full-year financial results scheduled for issue on Thursday.
A year of tough domestic and international competition, spiralling fuel prices, and a weak dollar have taken a heavy toll on the company. On average, analysts forecast Qantas earned net profit of $320 million in the 12 months to June 30, 2001, down more than 25 per cent from a year ago.
On another front, Qantas remains busy trying to garner support for its proposal to take a substantial stake in Air New Zealand as a precursor to closer relations between the two carriers.
Late last week Qantas chief executive Geoff Dixon held talks with Rob Cameron, representing the joint committee established by the Australia and New Zealand Governments to consider the issue.
The fact that the Australian Government is pushing the merits of the Qantas proposal was a "surprise", Air NZ chief Gary Toomey said yesterday. "I mean, Ansett in Australia employs around 15,000 people directly."
Also, does anyone heard any whispers on what the new brand name and logo will be??
Lower-cost subsidary for Qantas?
By MARK TODD
SYDNEY
Monday 13 August 2001
Qantas Airways' board will consider a detailed plan this week to launch a low-cost international airline as the company tries to identify ways of expanding in a fiercely competitive aviation market.
The new airline would target markets, mostly in Asia, that are unviable for Qantas to serve under its present cost structure.
It is believed the proposal calls for the creation of a new entity operating under a separate management team and using a fresh logo, leaving the flying kangaroo to the main brand.
Analysts believe Qantas could launch the airline for relatively little outlay. Aircraft leases will comprise the bulk of the costs, as the company already has all the requisite terminal and administrative infrastructure in place.
It is estimated Qantas could start a service of six Boeing 767s initially using only $400 million in capital. Qantas would inject as much as $100 million in equity into a new subsidiary company and raise $300 million in debt funding.
Qantas would put the new carrier's employees - most likely based abroad - on separate, presumably inferior, awards and conditions while the airline's planes would have only one class of seating.
Macquarie Equities suggested in a recent research note that Qantas needs to expand its international business away from the traditional routes of the US, Europe, and Japan to increase revenue at better than the 5 to 7per cent at which the market is growing.
A low-cost carrier could open "at least" another 10routes for Qantas. Potential routes include Malaysia, Greece, Vanuatu, Vietnam, Korea, China, United Arab Emirates, Sri Lanka, and secondary ports in Thailand and Japan. Macquarie estimated a low-cost carrier could break even with a load factor of only 54 per cent, or little more than half a plane load. Qantas' current threshold on its international business is 66 per cent, meaning it is restricted to flying the busier routes.
Earlier this year Qantas was forced to suspend uneconomical services to Canada and China.
Qantas' board will meet on Wednesday to discuss the proposal. Some analysts are expecting that a decision on whether to proceed will accompany the full-year financial results scheduled for issue on Thursday.
A year of tough domestic and international competition, spiralling fuel prices, and a weak dollar have taken a heavy toll on the company. On average, analysts forecast Qantas earned net profit of $320 million in the 12 months to June 30, 2001, down more than 25 per cent from a year ago.
On another front, Qantas remains busy trying to garner support for its proposal to take a substantial stake in Air New Zealand as a precursor to closer relations between the two carriers.
Late last week Qantas chief executive Geoff Dixon held talks with Rob Cameron, representing the joint committee established by the Australia and New Zealand Governments to consider the issue.
The fact that the Australian Government is pushing the merits of the Qantas proposal was a "surprise", Air NZ chief Gary Toomey said yesterday. "I mean, Ansett in Australia employs around 15,000 people directly."
Also, does anyone heard any whispers on what the new brand name and logo will be??
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hugh week for QFA its either fly or swim for the big joey, times are tuff but its good to spread the business around,look what has happen in asia, SQ and CX would not have grown as fast if QF had its act together 10 yrs ago, but thats the gov for u and the board have go to act now or stay a small airline, so on thursday news will break of this deal going ahead. Aust lags behind in the world, over in europe and the u.s low cost airlines have being a major winner.
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I can't believe that QF could consider a low-cost airline. Don't they realise that their cabin service is already atrocious..??!! What sort of gruel and cheap plonk do they propose to serve on these cheap flights?
They already have the oldest aircraft on the route to Australia with old clapped-out cabin equipment and tired staff.
The costs of living in Australia are wonderfully cheap compared to some of the places they propose to operate (HKG, Japan etc). Do they propose to base all the crew in Indonesia or Shanghai to take advantage of the Aussie dollars comparative strength...???
A breakeven load factor of 66% is a dream for the HKG airlines. We have a breakeven load factor in the 70's, so I can't see how QF can base crew here and do so cheaper than having them in Oz.
Qantas used to be one of the worlds premier carriers. This is just another step in the wrong direction. A good step toward becoming just another small regional airline.
SQ and CX haven't grown to their present size (with a fraction of Australia's population) by using retrograde marketing strategies...!!
They already have the oldest aircraft on the route to Australia with old clapped-out cabin equipment and tired staff.
The costs of living in Australia are wonderfully cheap compared to some of the places they propose to operate (HKG, Japan etc). Do they propose to base all the crew in Indonesia or Shanghai to take advantage of the Aussie dollars comparative strength...???
A breakeven load factor of 66% is a dream for the HKG airlines. We have a breakeven load factor in the 70's, so I can't see how QF can base crew here and do so cheaper than having them in Oz.
Qantas used to be one of the worlds premier carriers. This is just another step in the wrong direction. A good step toward becoming just another small regional airline.
SQ and CX haven't grown to their present size (with a fraction of Australia's population) by using retrograde marketing strategies...!!
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There are loads of places with cheaper labour than Australia. QFA already have BKK- and AKL-based cabin crews (local hires) on cheaper contracts than SYD-based. Who knows, they might be able to cheaply pick up, say, 50 wide-body drivers soon... It's not just crew costs - it's getting out of paying for add-ons like FFP miles, lounges, being able to park miles out & bus the punters in (or maybe doing a Ryanair & going to out-of-town strips), going for faster turnrounds (ie. higher a/c utilisation) - so it's not just crew costs... even then, if you don't have to paythe same levels of payroll tax, pension/super, workers comp insurance and all the other on costs, then even for the same salary, it can be cheaper to employ where the social costs are lower.
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Dixon made some comment on this a while ago. May be a good thing for low yield destinations like CNS and to compete in the region against asian carriers. There are obvious industrial issues although I don't think QF mainline drivers have too much to worry about, if it gets up it will probably be full wet lease, and if it makes the difference between a route being served or not, then employment opportunities will be expanded.
Nunc est bibendum
Orignally posted by wantme:
Qantas Pilots need to resist this proposal by every available means.
Employers can and will only ream you to the extent that you are prepeared to roll over.
Qantas Pilots need to resist this proposal by every available means.
Employers can and will only ream you to the extent that you are prepeared to roll over.
This one isn't over by a long shot!! QF delayed their business forum for employees due to all the twists and turns going on at the moment!
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Keg
I think Qantas will be looking to pay about half current main line pay levels.
Long term that will benefit neither the workers or the company.
The competition will only match it, with margins then returning to former levels.
I think Qantas will be looking to pay about half current main line pay levels.
Long term that will benefit neither the workers or the company.
The competition will only match it, with margins then returning to former levels.
Nunc est bibendum
wantme, strongish rumour suggests that the tech crew at least will be current QF crew on current pay and conditions (or what little we have left after the EBA! 
).
Scheduling issues (as to whether it is included in the current bucket of 767 flying or seperate) are still to be decided.
This is a rumour network after all!!
).Scheduling issues (as to whether it is included in the current bucket of 767 flying or seperate) are still to be decided.
This is a rumour network after all!!
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Keg I doubt very much it will be Qantas flight deck crew. Not when there are plenty of guys out there who would be willing to earn less than the pilots at Q. Anyway will be interesting to see what happens. Just got this off the Age web site:
Qantas confirmed today it was pushing ahead with plans to start a budget international airline, flying to seven regional ports by July next year.
Qantas chief executive Mr Geoff Dixon said the low cost carrier would have economy and business class seating only but would be linked to the airline's existing frequent flyer loyalty program.
The announcement came as the airline posted its lowest profit since its share market listing began. Its full year net profit was $415 million, almost 20 per cent less than last year.
Mr Dixon did not give details of how the low cost airline would operate, but it is likely costs will be kept down by using a heavily non-unionised workforce, some contract labour, basing flight stewards offshore and multi-skilling of employees.
The new airline would fly on routes including China, Canada, Korea, Malaysia, Greece, Tahiti and parts of Japan.
Qantas has pulled out of some of these routes in the past two years citing cost pressures.
The new airline will have a different name and a distinct livery which have yet to be announced, and will not duplicate routes served by Qantas' premium service.
Mr Dixon did not reveal how the startup airline would be funded but market analysts have indicated it would commence operations with an injection of $400 million. Some of the funds would come from Qantas and the rest from the market.
Qantas confirmed today it was pushing ahead with plans to start a budget international airline, flying to seven regional ports by July next year.
Qantas chief executive Mr Geoff Dixon said the low cost carrier would have economy and business class seating only but would be linked to the airline's existing frequent flyer loyalty program.
The announcement came as the airline posted its lowest profit since its share market listing began. Its full year net profit was $415 million, almost 20 per cent less than last year.
Mr Dixon did not give details of how the low cost airline would operate, but it is likely costs will be kept down by using a heavily non-unionised workforce, some contract labour, basing flight stewards offshore and multi-skilling of employees.
The new airline would fly on routes including China, Canada, Korea, Malaysia, Greece, Tahiti and parts of Japan.
Qantas has pulled out of some of these routes in the past two years citing cost pressures.
The new airline will have a different name and a distinct livery which have yet to be announced, and will not duplicate routes served by Qantas' premium service.
Mr Dixon did not reveal how the startup airline would be funded but market analysts have indicated it would commence operations with an injection of $400 million. Some of the funds would come from Qantas and the rest from the market.
Just announced on the ABC news "......there is also speculation that the carrier will be run by ex-Impulse boss Gerry McGowan......."
That should answer your questions.
That should answer your questions.
Geoff Dixon dropped that into conversation on Business Sunday almost exactly 6 months ago (possibly immediately after the last half year report!).
The comment indicated that QF was not able to compete as it had too high a cost base compared to its competitors.
I believe that they will expand the Impulse fleet to do the task, and keep pro rata Impulse rates of pay to employees involved in said operation.
Mainline QF (domestic and "local" international) would be allowed to shrink as natural attrition takes place and Impulse staff numbers slowly increase and start to share the workload of keeping mainline QF running.
Or is that too obvious?
The comment indicated that QF was not able to compete as it had too high a cost base compared to its competitors.
I believe that they will expand the Impulse fleet to do the task, and keep pro rata Impulse rates of pay to employees involved in said operation.
Mainline QF (domestic and "local" international) would be allowed to shrink as natural attrition takes place and Impulse staff numbers slowly increase and start to share the workload of keeping mainline QF running.
Or is that too obvious?
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This is a joke. How can it be cheaper to start up a new brand and separate company than to utilise current resources?
I can understand if QF wants to have a different standard of service (give ‘em a cut lunch) or cabin configuration (300 seats in a 767 has got to help) but where else are the savings coming from?
There will still be the same ‘lounges’ available in the terminals and the FF programs will still run whether these routes contribute to ‘mileage’ or not. The same people will still load the bags, here and overseas, as will the rest of the ground handling staff be the same. Where are the savings?
I have no doubt that the savings will be generated through tech and cabin crew, although this is prove to be a joke. Set up a new brand just to save on crew costs?
Keg, I think that you may be wrong about the company intending to use you guys. Just look at Impulse. How do your 737 drivers feel? QF have got away with it once and they will try and do so again.
I can understand if QF wants to have a different standard of service (give ‘em a cut lunch) or cabin configuration (300 seats in a 767 has got to help) but where else are the savings coming from?
There will still be the same ‘lounges’ available in the terminals and the FF programs will still run whether these routes contribute to ‘mileage’ or not. The same people will still load the bags, here and overseas, as will the rest of the ground handling staff be the same. Where are the savings?
I have no doubt that the savings will be generated through tech and cabin crew, although this is prove to be a joke. Set up a new brand just to save on crew costs?
Keg, I think that you may be wrong about the company intending to use you guys. Just look at Impulse. How do your 737 drivers feel? QF have got away with it once and they will try and do so again.
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The four major costs for any company, Wages and Salaries,Cosumables (fuel,tyres ect),maintenance of assets and Capital.
The only real variable cost is wages and Salaries. So it is inevitable someone will work out a way to cut the cost of the human resource.
It don't matter what industry you look at there are only 2 ways to fix the bottom line, increase full margin revenue or cut costs and maintan revenue.
QF are looking at Gerry M to run the new game , so I can guess the cost reductions will be in real wages. No need for a fancy education to work that out, cutting inflight meals or increasing the cost of Beer wont cut it.
Boys and Girls be ready for the "New" aviation renumeration structure, the engineers are the only group left with any bargainig power, there is a price for exclusivity.
The only real variable cost is wages and Salaries. So it is inevitable someone will work out a way to cut the cost of the human resource.
It don't matter what industry you look at there are only 2 ways to fix the bottom line, increase full margin revenue or cut costs and maintan revenue.
QF are looking at Gerry M to run the new game , so I can guess the cost reductions will be in real wages. No need for a fancy education to work that out, cutting inflight meals or increasing the cost of Beer wont cut it.
Boys and Girls be ready for the "New" aviation renumeration structure, the engineers are the only group left with any bargainig power, there is a price for exclusivity.
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Bidding on for no-frills Qantas HQ
17aug01
QUEENSLAND has entered an interstate bidding war to snare the Australian headquarters of a new, no-frills international airline being planned by Qantas.
Qantas confirmed last night it was already negotiating with Premier Peter Beattie and other state governments about where to locate the new company, which will fly to near-Asian cities at budget prices.
Mr Beattie is understood to be promoting Cairns and is preparing a range of incentives like tax breaks to attract Qantas, which expects to win board approval for the new airline in October and begin operating next year.
"We'd love to see it located in Cairns and it is a matter for discussion and negotiation," Mr Beattie said.
News of the Qantas plan came yesterday as Mr Beattie visited Melbourne to launch a $2 million television and newspaper advertising campaign to attract business immigrants to Queensland and visitors to the Goodwill Games later this month.
It also came as Qantas announced a $415.4 million after-tax profit for 2000-01 -- down $101.9 million, or 19.7 per cent on the previous year.
Qantas chief Geoff Dixon said he had spoken to Mr Beattie and representatives of other states about possible incentives.
"We'll pick the one that at the end of the day suits the network best," Mr Dixon said. "We really haven't decided."
Mr Dixon said the low-cost airline would fly two classes in Boeing 767 jets to seven Asian centres.
Destinations being considered included Kuala Lumpur, Fukuoka, Vietnam, Seoul, and Shanghai.
"This will be an airline that will have two classes, albeit a smaller business class," Mr Dixon said. "It will have different seating, slimline-type seating which is available around the world now."
The aircraft would be equipped with smaller galleys to allow more seats on board and reduce catering-related labour and handling costs and would
be staffed predominantly by Australians.
Mr Dixon said the new operation would be linked to the Qantas frequent-flyer program but would operate under another name, which would be "very Australian".
Industry sources said Queensland would have a strong chance of attracting Qantas because the company had already announced plans for a maintenance base in Brisbane for its Boeing 767 fleet.
Successive state governments have pressed hard in recent years to make Brisbane the aviation capital of Australia.
International aviation giant Boeing bases its regional operations in Brisbane and the Beattie Government scored a coup in 1999 by using investment incentives to entice Virgin Airlines to establish its Australian operation -- Virgin Blue -- in Brisbane.
17aug01
QUEENSLAND has entered an interstate bidding war to snare the Australian headquarters of a new, no-frills international airline being planned by Qantas.
Qantas confirmed last night it was already negotiating with Premier Peter Beattie and other state governments about where to locate the new company, which will fly to near-Asian cities at budget prices.
Mr Beattie is understood to be promoting Cairns and is preparing a range of incentives like tax breaks to attract Qantas, which expects to win board approval for the new airline in October and begin operating next year.
"We'd love to see it located in Cairns and it is a matter for discussion and negotiation," Mr Beattie said.
News of the Qantas plan came yesterday as Mr Beattie visited Melbourne to launch a $2 million television and newspaper advertising campaign to attract business immigrants to Queensland and visitors to the Goodwill Games later this month.
It also came as Qantas announced a $415.4 million after-tax profit for 2000-01 -- down $101.9 million, or 19.7 per cent on the previous year.
Qantas chief Geoff Dixon said he had spoken to Mr Beattie and representatives of other states about possible incentives.
"We'll pick the one that at the end of the day suits the network best," Mr Dixon said. "We really haven't decided."
Mr Dixon said the low-cost airline would fly two classes in Boeing 767 jets to seven Asian centres.
Destinations being considered included Kuala Lumpur, Fukuoka, Vietnam, Seoul, and Shanghai.
"This will be an airline that will have two classes, albeit a smaller business class," Mr Dixon said. "It will have different seating, slimline-type seating which is available around the world now."
The aircraft would be equipped with smaller galleys to allow more seats on board and reduce catering-related labour and handling costs and would
be staffed predominantly by Australians.
Mr Dixon said the new operation would be linked to the Qantas frequent-flyer program but would operate under another name, which would be "very Australian".
Industry sources said Queensland would have a strong chance of attracting Qantas because the company had already announced plans for a maintenance base in Brisbane for its Boeing 767 fleet.
Successive state governments have pressed hard in recent years to make Brisbane the aviation capital of Australia.
International aviation giant Boeing bases its regional operations in Brisbane and the Beattie Government scored a coup in 1999 by using investment incentives to entice Virgin Airlines to establish its Australian operation -- Virgin Blue -- in Brisbane.
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Sorry folks, I had to weigh in to this one...
QF is RS
Packet Managers on five year tenures, and continuous cost saving restructuring to meet their (managers) bonus points is the driving force of QF today.
Oh, poor darlings ONLY made $415 million dollars...DOWN 25%!!!!!!
How many airlines made a loss last year??????????????
This low cost airline is only a way for the management of QF to spurn their responsibility to a contracted offshore third world country's inhabitants to repair the aircraft which I trust my life to...FOR MORE PROFIT FOR THEM!!!!!!
Sorry folks, Ive seen the s**t turned out by Asian repair facilities and other less fragrant QF endevours in Vic..
ITS DONE TO A COST NOT A QUALITY.
This is the new QF motto for the future.
QF is RS
Packet Managers on five year tenures, and continuous cost saving restructuring to meet their (managers) bonus points is the driving force of QF today.
Oh, poor darlings ONLY made $415 million dollars...DOWN 25%!!!!!!
How many airlines made a loss last year??????????????
This low cost airline is only a way for the management of QF to spurn their responsibility to a contracted offshore third world country's inhabitants to repair the aircraft which I trust my life to...FOR MORE PROFIT FOR THEM!!!!!!
Sorry folks, Ive seen the s**t turned out by Asian repair facilities and other less fragrant QF endevours in Vic..
ITS DONE TO A COST NOT A QUALITY.
This is the new QF motto for the future.
